About Spark
- TVL: $3, 107B
- Number of pools tracked: 13
- Average APY: 1.45%
- Top 5 competitors: Maker DAO, AAVE V3, Compound V3, Liquidity, Morpho Aave V2
Spark is on a mission to empower the DAI ecosystem. As part of the MakerDAO community.
DeFi Infrastructure
- SparkLend: The DAI centric money market protocol. Combining the best liquidity directly from Maker and vertically integrating with the best DeFi protocols;
- sDAI is a yield bearing stablecoin, representing DAI in the Dai Savings Rate (DSR) module, which distributes revenue from the Maker protocol to DAI holders;
- SparkConduits allow for direct liquidity from Maker to protocols as part of the overall Maker Allocation System.
Source: Spark website
SparkDAO is a Maker Allocator subDAO that owns and manages Spark through decentralised governance. Its launch, alongside the other subDAOs, is scheduled for May 2024.
SPK token
The SPK token is not released yet, please beware of scammers. The SPK token is the governance token for SparkDAO. The SPK token has not been launched, it is scheduled to be released alongside the launch of SparkDAO on May 2024. The subDAO launch will be accompanied by the launch of the token farming program, for more information please the following forum post SparkDAO SPK pre-farming airdrop; general SubDAO farming overview.
There is an airdrop incentive program currently running for SparkLend users that either deposit ETH and/or borrow DAI, for more information please see the following forum post Proposed Spark Pre-farming Airdrop Formula.
Please be aware that details of the airdrop and token farming may change.
Find the current balances of users eligble for the airdrop through depositing ETH and/or borrowing DAI in the BlockAnalitica's website.
SparkLend
SparkLend is decentralised non-custodial liquidity protocol where users can participate as suppliers, borrowers or liquidators. Suppliers provide liquidity to a market and can earn interest on the crypto assets provided, while borrowers are able to borrow in an overcollateralized fashion. Borrowers can also engage in one-block borrow transactions (”flash loans”), which do not require overcollateralization.
Spark allows users to optimise their assets supplied to the SparkLend in terms of yield generation and borrowing power.
SparkLend Features
Efficiency Mode (eMode)
The High Efficiency Mode or eMode allows borrowers to extract the highest borrowing power out of their collateral when supplied and borrowed assets are correlated in price, particularly when both are derivatives of the same underlying asset (eg. stablecoins pegged to USD).
This can enabling a wave of new use cases such as High leverage forex trading, Highly efficient yield farming (for example, deposit ETH staking derivatives to borrow ETH), Diversified risk management etc.
Isolation Mode
New assets can be listed as isolated. Borrowers supplying an isolated asset as collateral cannot supply other assets as collateral (though they can still supply to capture yield). Borrowers using an isolated collateral can only borrow stablecoins that have been permitted by the Maker Governance to be borrowable in isolation mode, up to a specified debt ceiling.
Siloed Borrowing
Siloed borrowing allows assets with potentially manipulatable oracles to be listed on Spark as single borrow asset i.e. if a user borrows siloed asset, they cannot borrow any other asset. This helps mitigating the risk associated with such assets from impacting the overall solvency of the protocol.
Risk Management
SparkLend brings a greatly improved set risk parameters and new features to protect the protocol from insolvency.
Supply and Borrow Caps
The Maker governance can now configure Borrow and Supply Caps.
- Borrow Caps: allow to modulate how much of each asset can be borrowed, which reduces insolvency risk;
- Supply Caps: allow to limit how much of a certain asset is supplied to SparkLend. This helps reducing exposure to a certain asset and mitigate attacks like infinite minting or price oracle manipulation.
Granular Borrowing Power Control
In SparkLend, it will be possible to lower the borrowing power of any asset to as low as 0% without any impact on existing borrowers (it’s still possible to use the old approach - liquidating existing users - if deemed necessary)
DSR & sDAI
Dai Savings Rate (DSR) is an addition to the Maker Protocol that allows any Dai holder to earn savings in Dai.Dai does not automatically earn savings, rather you must activate the DSR by interacting with the DSR contract pot of the Maker Protocol. This means transferring Dai from your wallet to the Maker Protocol.
It is important to note that the Dai can always be redeemed immediately (within a block), as there are no liquidity constraints, and can ONLY be retrieved to the depositing account.Therefore it can be beneficial for any custodian of Dai to integrate functionality to activate the DSR on Dai in their custody. Similarly, any decentralized exchange, wallet or dapp in general can enable anyone to earn the DSR by integrating the functionality as well.
What is EDSR?
Enhanced Dai Savings Rate (EDSR) is a system to temporarily increase the effective DSR available to users in the early bootstrapping stage when DSR utilization is low. The EDSR is determined based on the DSR and the DSR utilization rate, and decreases over time as the utilization increases, until it eventually disappears when utilization gets high enough. EDSR is a one-time, one-way temporary mechanism, which means that the EDSR can only decrease over time, it cannot increase again even if DSR utilization goes down.
Other parameters and mechanisms that are dependent on the DSR, such as certain stability fees, are not affected by the EDSR, but only by the underlying DSR. This means it is possible that stability fees can be lower than the EDSR when it is in effect.
EDSR Upper Limit = 5%
| Tier | Utilization | Multiplier | Effective DSR |
| 1 | 0% - 35% | 1.75x | 5.00% |
| 2 | 35% - 50% | 1.15x | 4.83% |
| 3 | >50% | 1x | 4.20% |
What is sDAI?
Savings Dai (sDAI) is an ERC-4626 representation/wrapper of DAI in the Dai Savings Rate (DSR) module. sDAI allows users to deposit DAI to receive the yield generated by the Maker protocol while still being able to transfer, stake, lend and use it in any way you want.
“Swapping” between DAI and sDAI does not need to be done via a DEX but can be achieved by depositing and withdrawing from the DSR module. You can interact with sDAI through the frontend at SparkLend.
How sDAI Works
The DAI stablecoin is minted by MakerDAO using USDC, ETH & other digital assets as collateral. The Dai Savings Rate (DSR) enables any DAI holder to earn savings. To activate the DSR, users must interact with the DSR contract transferring DAI from their wallets to the contract. There is no lock up and DAI can be redeemed immediately.
The Enhanced Dai Savings Rate (EDSR) is a system designed to temporarily increase the DSR for early adopters during the early bootstrapping stage. EDSR decreases over time as the utilization rate increases.
Spark Protocol are taking advatage of this product and have created an ERC4626 vault token called sDAI (Savings Dai) which represents a position of DAI in the DSR module.
By depositing DAI, users can earn yield generated by the Maker protocol and simultaneously retain the ability to transfer, stake, lend, and use sDAI in any way they see fit. Interchanging between DAI and sDAI can be accomplished by depositing and withdrawing from the DSR token contract via the app at https://app.sparkprotocol.io/sdai/
Source: Spark app
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Disclaimer: Notum does not provide any investment, tax, legal, or accounting advice. This article is written for informational purposes only. Cryptocurrency is subject to market risk. Please do your own research and trade with caution.