Sam MacPherson on Why Spark Benefited So Much From the KelpDAO Hack

**Sam MacPherson** (0:00)
I would say, so like right now, we are probably in like a peak sort of danger zone, but I feel like we're going to move actually to a better place ultimately because AI, although it can be used on the offensive, it can also be used on the defensive.

**Laura Shin** (0:14)
Hi, everyone. Welcome to Unchained, your NoHype resource for all things crypto. I'm your host, Laura Shin. Before we dive into today's interview, we'll take a quick word from the sponsors who make the show possible.
This episode is brought to you by Oneinch Aqua, the shared liquidity layer from Oneinch. Back multiple liquidity positions with one wallet balance and keep your tokens in your wallet until a swap fills. See how it works at oneinch.com/aqua.
Today's guest is Sam MacPherson, co-founder and CEO of Spark. Welcome, Sam.

**Sam MacPherson** (0:47)
Yeah, thanks for having me.

**Laura Shin** (0:49)
Heads up, everyone. I'm on vacation, so by the time you hear this interview, it will be a few weeks after this interview was actually recorded in mid-July. Just in case something major blows up in DeFi between now and then, and you're wondering why Sam and I don't discuss it.
So Sam, Sky is the oldest stablecoin, it's the true OG, and it started as MakerDAO, and your DeFi protocol Spark is built on top of it. Tell us what Spark does and explain its relationship to the Sky protocol.

**Sam MacPherson** (1:21)
Yeah, sure.
So Sky, formerly MakerDAO, was originally launched in 2019 with the DAI stablecoin, and there was two restructurings that happened around the 2022 period. First was the rebrand from MakerDAO to Sky, and then the stablecoin became from DAI to USDS. Then the second piece was a restructuring of the governance, so that the first iteration of DAOs were not really working that well at scale, managing large amounts of money. So it was decided to restructure into this SubDAO model. So now the way things sit is that Sky functions more like a central bank and wholesale liquidity issuer. So the SubDAOs, Spark being one of these, functions more as a commercial bank that is able to draw on the liquidity reserves of Sky and then deploy it to commercial lending activities. And so primarily this is a mix between real world assets to get the base yield usually from treasury bills and then crypto over collateralized lending, primarily like Bitcoin and ETH back loans.

**Laura Shin** (2:35)
OK. And so what are the main products that Spark has?

**Sam MacPherson** (2:41)
So Spark started out with an internal lending market. So this is an on-chain money market, similar to Compound Aave, these types of things. And this is the crypto backed loans section of the balance sheet. It is focused on lending against Bitcoin, ETH, and these types of loans had been around. It is similar to the CDP model that Maker originally had. Since then, Spark has expanded to cover a lot of the different verticals. So we have launched what is called Spark Savings, which is a vault product that will allocate. It sits on top of USDC and USDT, and this provides a yield on top of these stable coins. And so what Spark functions as is a allocator across the space. So you as a depositor into Spark Savings, Spark will allocate the capital on your behalf and allocate the opportunities between DeFi, CFI and TradFi with RWAs to optimize the risk-adjusted yield into that product. So currently we're offering 3.6% on USDC and the USDT rate is 2.75%.
So other products like we've recently also expanded into institutional lending. We do custodial Bitcoin back lending through Anchorage.
So this is institutions who want to get financing against their Bitcoin on their balance sheet usually. And so they will borrow from us. And this is facilitated by Anchorage, the qualified custodian.
And another thing that we've recently got into is Spark Prime. This is CD5 Prime brokerage. We're still in the preliminary phase of scaling this up. But the idea here is that we do lending and hedge funds primarily are able to margin their positions across DeFi as well as CFi. And now actually there is support for TradFi venues, which is very interesting, especially with the uptick in more like traditional stocks becoming the big hype cycle right now. So this can provide hedge funds with coverage in TradFi venues, connecting it to modern DeFi venues like Hyperliquid to provide liquidity.

**Laura Shin** (5:04)
Okay. So you kind of were getting a lot of buzz in the wake of the KelpDAO hack.
You know, basically when you look at the TPL of Spark.Fi on DeFi Lama, it's very clear that, you know, something happened around mid-April. And basically, you know, Spark ended up kind of being a big beneficiary of that hack. The TPL in ETH is up about 50% from that time today. And even in early July, it was up about 80% from that point. And, you know, this is a moment where Spark kind of, I would say, differentiated itself from the rest of DeFi, because obviously the rest of DeFi took a big hit. So why do you think Spark was an exception?