It’s fundamentals season, and Spark is in an uncommon position where it is cash flow positive at launch. I’ve written a blog post to cover how Spark makes money and how things relate to the Sky ecosystem. Below is a summary. Let’s dive in. 🧵👇

Spark has deployed 3.4b into yield-generating strategies split between SparkLend, Coinbase (Morpho), Ethena, and Maple. This strategy is yielding ~7% APY, and after paying Sky's "Base Rate" of 5.05%, Spark is retaining a 2% net-interest margin or ~68m / year.

The Sky ecosystem is attempting to do DAOs for real by outsourcing all growth-oriented decision-making to a competitive marketplace of subDAOs (aka Stars). Rather than have an entrenched group of insiders deciding what to do, Sky has subDAOs compete to deliver the best yield.

It does this by having a market-driven "Base Rate" which goes up or down based on balance sheet utilization. Similar to the Compound-style utilization rate curve, but covering the entire balance sheet instead of just one asset.

Stars can deploy into many opportunities, but not everything is of equal risk. To account for these differences in risk, Sky requires Stars post junior capital to cover any potential losses. This puts the Star’s equity at risk for every decision, so they have skin in the game.

You can think of a Star as a machine that converts undifferentiated yield into benefit for sUSDS holders because the Savings Rate is anchored to be 0.3% below the competition-driven Base Rate. The structure of the system ensures that Stars can be successful, but they need to find unique differentiation and keep innovating.

Spark's long-term differentiation comes from SparkLend, Savings, Brand, and some soon-to-be-announced products. 2025 is shaping up to be a big year. LFGT Read the full post:

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