Dear Spark community,
Below is the Q4 2025 financial report.
Spark closed Q4 in a strong financial position, based on internal estimates derived from onchain data and governance-defined mechanisms. The quarter reflected sustained yield generation and efficient capital deployment across Spark’s core protocol components, with distribution rewards, the Spark Liquidity Layer, and SparkLend representing the primary contributors to protocol-level returns despite a more challenging market environment in the latter part of the period.
Q4 Financial Highlights
Gross protocol returns: $45.4M (aggregate returns across all protocol components)
Net protocol returns: $9.87M (gross returns less cost of capital)
Net protocol surplus: $6.57M (gross returns less operating expenses)
Spark Protocol treasury (end of quarter): $43.22M
All figures represent internal, non-GAAP, protocol-level estimates and do not represent profits of Phoenix Labs or any legal entity.
Overall, Q4 demonstrated Spark’s resilience and scalability as an onchain protocol infrastructure. The protocol remains well positioned under the potential of improving market conditions while preserving capital efficiency and balance sheet strength going into the next quarter
Spark comprises several protocol components that generate protocol-level returns accrued to the treasury pursuant to governance-defined mechanisms.
These are (i) Spark Liquidity Layer (ii) distribution rewards (iii) SparkLend (iv) Treasury Management & Financial Operations.
The Spark Liquidity Layer is a smart-contract system in which assets are allocated in a programmatic and non-custodial manner into yield generating opportunities. Thanks to this sophisticated system, the protocol may generate returns subject to market conditions, smart-contract execution, and governance-defined risk parameters.
Revenue model: The protocol captures spread between the investment’s APY and the SSL’s borrowing cost, subject to market conditions.
Q4 highlights: During Q4, Spark was able to capture the highest spread on the Morpho Spark USDC vault on Base, where it deployed $594M, allocated via protocol mechanisms to support Bitcoin-backed lending activity for Coinbase users and made $6.1M in gross protocol returns.
KPIs:
Average deployment: $2.818B
Average APY: 5.9%
Gross returns: $40.48M
Gross revenue: $4.95M
Captured spread: 0.7%
Spark functions as a governance-approved distribution mechanism within the SKY ecosystem, allowing users to get exposure to USDS, and the SKY savings rate,
Revenue model: The protocol accrued a 0.6% accessibility reward on all USDS routed through its distribution channels, via onchain referral codes.
Q4 highlights: During Q4, Spark saw a substantial increase in USDS distribution, driven primarily by the continued expansion of the Spark sUSDC vault. Total USDS distribution grew to $2.071B by quarter-end, up from $773M at the start of the quarter. sUSDC increased from $452M to $1.385B, while sUSDS expanded from $184M to $305M. In parallel, Avalanche supply grew to $225M, reflecting broader multi-chain adoption across Spark’s distribution channels. StakedUSDS distribution generated $1.208M in revenue during the quarter.
KPIs:
Distributed supply at end of Q4: $2.07B
Distribution reward rate: 0.6% APY
Q4 revenue: $4.472M
SparkLend is a core lending protocol within the Spark ecosystem, operating as one of the largest and most secure lending platforms in DeFi, with only blue-chip collateral. It supports institutional borrowing activity, with liquidity supplied through the SLL as the governance-approved protocol mechanism.
Revenue model: Spark collects a reserve factor on interest accrued by borrowers.
Q4 highlights: During Q4, SparkLend total value locked peaked at $6.4B, reflecting continued usage of the protocol despite a more challenging market environment for lending markets. Activity and utilization metrics trended lower over the course of the quarter in line with broader market conditions, while SparkLend maintained its position as one of the largest and most liquid money markets in DeFi, supported by governance-defined conservative risk parameters and blue-chip collateral.
KPIs:
Total deposits: $6.4B
Q4 revenue (reserve factor on yield, excluding SLL): $215k
Spark’s treasury represents the DAO’s protocol-controlled operational capital. It both pays for the operational expenses as well as acts as junior capital required by SKY to fulfill the risk-required capital needs for accessing the SKY credit line.
Revenue model: The protocol may generate returns on treasury assets through SKY’s savings rate and other financial operations.
Q4 highlights: During Q4, the protocol experienced losses arising from volatile asset exposure, which was offset by the USDS yield generated by the treasury balance. Overall, Spark realized $117k in net positive returns during Q4.
Summary of Spark’s total revenues, costs, and net results across all product lines for the quarter. It combines investment returns, treasury operations, distribution rewards, SparkLend reserve factor, net of the cost of capital, curator fees, grants and operating expenses, to illustrate Spark’s protocol-level net results for the quarter.
Accounting note:
The consolidated statement of earnings represents Spark’s internal, accrual-based estimation of revenues, costs, and net results for the quarter, based on protocol-level data and internal calculations. Actual cash settlements received from SKY may differ in timing or amount and are reconciled over subsequent settlement periods.
Snapshot of assets held by Spark’s protocol-controlled smart contracts and treasury addresses at quarter-end, expressed in USDS terms across treasury and deployed positions.
A snapshot of Spark’s assets and liabilities at quarter-end, based on onchain balances and settlement determinations by SKY, the parent protocol.
Growth drivers
Q4 was characterized by continued expansion of Spark’s institutional-grade protocol infrastructure and strong growth across its distribution business. During the quarter, USDS distribution scaled significantly and emerged as one of Spark’s key revenue drivers, supported by sustained demand across multiple chains and products.
Alongside this growth, the Spark Liquidity Layer reached $2.022B deployed across multiple stablecoins into SparkLend, reinforcing its role as the primary liquidity mechanism within the system. Spark governance approved additional institutional-focused lending strategies, including tri-party lending via Anchorage-supported custodial workflows. These initiatives marked an important step in broadening Spark’s exposure beyond on-chain money markets while maintaining a conservative risk profile. Additionally, Spark seeded one of the largest and highest-volume Curve pools, supporting pyUSD liquidity and further strengthening Spark’s role in stablecoin market infrastructure.
Challenges
Market conditions during Q4 were less favorable than earlier in the year, with reduced activity and softer yield environments across DeFi. Despite this backdrop, Spark maintained a high level of deployed liquidity, preserved capital efficiency, and closed the quarter with a healthy profit. Yield compression and utilization changes were reflected through governance-defined allocation parameters and disciplined cost control, allowing the protocol to remain profitable without loosening risk parameters.
Risk management
Throughout Q4, Spark continued to prioritize security and capital preservation. SparkLend maintained a high-quality collateral mix, while the Spark Liquidity Layer remained predominantly allocated to over-collateralized lending strategies, both on-chain and through carefully selected institutional counterparties. All new deployments and asset listings underwent rigorous governance-defined screening criteria to meet institutional-grade standards.
Spark’s treasury was maintained during the quarter and continues to serve as junior capital for the system, providing an additional buffer against adverse market conditions. Audited, non-custodial smart contracts and conservative risk parameters remain central to Spark’s approach as it scales into institutional lending and active liquidity provision strategies.
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Glossary
Spark addresses:
Spark Treasury: 0x3300f198988e4C9C63F75dF86De36421f06af8c4
Spark Liquidity Layer:
Ethereum: 0x1601843c5e9bc251a3272907010afa41fa18347e
Base: 0x2917956eFF0B5eaF030abDB4EF4296DF775009c
Unichain: 0x345E368fcCd62266B3f5F37C9a131FD1c39f5869
Arbitrum: 0x2B05F8e1cACC6974fD79A673a341Fe1f58d27266
Optimism: 0xe0F9978b907853F354d79188A3dEfbD41978af62
Avalanche: 0xecE6B0E8a54c2f44e066fBb9234e7157B15b7FeC
Dune queries:
https://dune.com/sparkdotfi/spark-accessibility-rewards
https://dune.com/queries/6517419/10313178
https://dune.com/queries/5441979/9493327
https://dune.com/queries/6517340/10313028
https://dune.com/queries/5449746/8891165
This communication is provided for informational purposes only, without warranty of any kind, express or implied, including but not limited to implied warranties of merchantability, non-infringement, or fitness for a particular purpose. This communication has been prepared based on data and information that has not been independently verified and Phoenix Labs makes no representations about the accuracy of the information or appropriateness for a given situation. This content is not intended or offered as advice of any kind including financial, investment, legal, regulatory, or tax advice, and users should seek qualified professional advice where appropriate. References to assets or protocols are provided for informational purposes only, and this communication is not an offer to sell, solicitation of an offer to buy, or inducement or recommendation to engage with any asset or protocol. For the avoidance of doubt, Phoenix Labs prepares this report solely in its capacity as a nested contributor and does not control, own, or operate Spark or its protocol treasury. This communication has not been prepared by a professional accounting service provider, and figures and calculations may not conform to GAAP or other international standards for financial reporting. This communication is not intended for residents or nationals of the United Kingdom, or for other prohibited or restricted jurisdictions and persons including those listed on US, EU, UK, or UN sanctions lists.