Traditional finance (TradFi) and decentralized finance (DeFi) have been separate entities for a while now. And while DeFi was steadily growing, TradFi had all the power. However, Sky’s new innovation might just have switched the power dynamics here. Who knew the day would come when traditional finance would be seeking to get a seat at the DeFi table?
Sky Protocol dropped an announcement in a press release on June 5th. The protocol has launched Grove, a new institutional-grade credit protocol designed to be a capital routing layer between traditional asset managers and on-chain protocols. Grove will get TradFi into the crypto groove by giving crypto-native protocols and asset managers access to real-world asset (RWA) investments.
Grove’s parent protocol, Sky, really believes in its child. Sky has made a $1 billion commitment to the project. Sky also has expert groups in both TradFi and DeFi, such as Citigroup, Deloitte, BlockTower Capital, and Hildene Capital, to work on the protocol project with Grovelabs.
The Grove protocol is a win-win for both TradFi and DeFi. It helps crypto-native protocols and asset managers put their idle reserves to work and earn a yield completely independent from crypto markets.
Grove Is Part Of The Endgame
Grove might be a big project on its own, but it’s only part of an “Endgame” strategy the Sky ecosystem is building. Sky is aiming to reorganize its protocol into independent units over a period of time. According to its plan, each of these units will be responsible for its governance and innovation. These independent units have been named “Stars.” Grove is only the latest star to join Sky’s big plan. It seems Grove could not have come at a better time, as experts say demand for such projects is rising. Anil Sood, Centrifuge's Chief Strategy and Growth Officer, has said:
"While tokenized treasuries have paved the way, there's a growing demand for more diversified, high-quality assets on-chain."
There is no doubt that demand for tokenized fixed-income DeFi products is through the roof. The tokenized U.S Treasury market has seen serious growth, skyrocketing from $500 million to over $7.3 billion since 2023. This new protocol, Grove, has been lauded as a big problem-solver. Sam Paderewski also said:
“With the launch of Grove, for the first time, protocols can access liquid, institutional-grade CLOs while maintaining the flexibility to pivot between DeFi and TradFi yield environments."
As it stands, Project Grove is already locked and loaded. Sky has allocated $1 billion to Grove in the Janus Henderson Anemoy AAA CLO Strategy, a fully tokenized fund created by Sky and Centrifuge. Sky co-founder Rune Christensen believes Grove advances Sky’s mission “to build an open decentralized capital network.”
There are probably not many people who saw this coming, but it’s safe to say Grove is a very welcome development. A protocol that caters to both TradFi and DeFi institutions a few years back sounded like a fairytale, but here it is, and we can’t wait to see what Grove will achieve.
Matvii Diadkov
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