ON–337: Zoomed-in on Spark 💥

📝 Editor's Note:

Welcome to OurNetwork's Zoomed-in edition on Spark, a project for which analytics platform DefiLlama created a new category — Onchain Capital Allocator.

Because that's what Spark is, at least partially — the project, in case it needs introduction, launched in 2023 from the MakerDAO (now Sky) team and with a total value locked over $5B, is now the eighth largest protocol in DeFi, according to DefiLlama.

Spark's most recent move has been the development of the Spark Liquidity Layer (SLL), a product with over $2B in total value locked. The SLL automatically allocates stablecoins, primarily from Sky, into major DeFi protocols across multiple networks. This allows the SLL to both generate a high risk-adjusted return to users of Spark’s saving product, while also producing revenue for the protocol.

As you'll read below, a key element to appreciate is Spark’s sheer sheer size — no protocol has  been in a position to, for example, take advantage of opportunities like providing USDC for Coinbase's new collateralized loan product.

Let's get into it.

– ON Editorial Team

• Through the first quarter of Q1, Sparklend, Spark's lending platform, was driving total value locked (TVL) for the protocol. On Apr. 7 however, the Spark Tokenization Grand Prix, a nine-month-long competition, was launched. Over the next month, the Spark Liquidity Layer (SLL) allocated $1B in stablecoins to three partners — Blackrock, Superstate, and Centrifuge.

• The Tokenization Grand Prix, and SLL more broadly, has been paying off so far. Spark is projected to generate over $130M for the protocol. Over 43% is projected to come from the three partners of the SLL. Spark's number one source of revenue is BlackRock, which is projected to generate $35.1M in the next 12 months.

• At $3.0B, the lending protocol still constitutes over half of Spark's overall TVL. The liquid staking token stETH comprises over 42% of the total value of assets deposited on the liquidity market protocol. The next highest deposited assets are DAI, the stablecoin, ETH, and cbBTC, the Coinbase wrapped version of BTC.

• The SLL has designated over $800M to BlackRock's BUIDL fund, which invests in U.S. treasuries, repurpose agreements, and cash. The SLL has also directed $300M to Superstate and $200M to Centrifuge which both have U.S. treasury bill-backed funds.

• In its search for yield at scale, SLL has also made a $100M allocation to Maple Finance, a finance platform offering lending solutions. This was the SLL’s first allocation outside of treasury bill-backed products and diversified Spark’s yield engine into real-world, overcollateralized lending markets.

• Flying under the radar, SLL has also moved to supply over $150M USDC to Morpho, the lending protocol, on Base, the Layer 2 The demand for USDC is actually coming from Coinbase users, who are borrowing against their BTC, which the crypto-forward company is then collateralizing on Morpho. The SLL is supplying the USDC to Morpho, for which it earns a return. The stablecoins are then routed to Coinbase users.

• Looking forward Spark has announced plans to allocate another $1B to real world assets.

• Earn 4.5% on stablecoins
• Borrow USDS at 5.12%
• Follow Spark on X