DeFi Lender Spark Pitches Safety-First Strategy to Investors Concerned by Hacks

It refers to $6.41bn in total value locked in its "institutional-grade" savings product, compared with $3.38bn in lending, according to its website. Some $355mn in over-the-counter (OTC) crypto loans have been deployed for institutional platform users.

"We're building the most scalable, robust, risk-adjusted yield in the space," Sam MacPherson, co-founder and CEO of Phoenix Labs, the developer of the Spark protocol, said in an interview with Sandmark. "We've been doing this since the beginning of DeFi."

Built on stablecoins

While Spark's blockchain-based settlement processes differ from those of traditional lenders, its business model is familiar. The platform rewards depositors with a share of yield earned from investing in a mix of onchain DeFi strategies and conventional assets such as US Treasuries. Customers can also post crypto assets as collateral to borrow the USDS stablecoin. What sets Spark apart from a conventional bank is its dependence on stablecoins – the fiat-pegged tokens used widely in crypto markets – rather than fiat currency directly.

MacPherson argues that the broader stablecoin market, currently valued at about $300bn, is poised for tenfold growth, a figure consistent with estimates circulating at industry events in recent weeks. New holders, the Canadian-born entrepreneur says, will naturally seek yield on those stablecoins – and that's Spark's core pitch.

A sector under scrutiny

DeFi lending has come a long way since MakerDAO introduced the first decentralized, collateralized lending system in or around 2017. The movement exploded through protocols such as Aave (AAVE), with total value locked reaching tens of billions of dollars. This growth occurred before the catastrophic collapse of Do Kwon's Terra/Luna in 2022 – which wiped out retail investors, including Korean retirees – and before the subsequent implosion of Sam Bankman-Fried's FTX shook confidence across the crypto world.

The DeFi sector is now facing its most intense scrutiny since that period. DeFi protocols have lost more than $840mn to hacks and exploits so far in 2026. The most damaging single incident was the $292mn exploit of KelpDAO in April, which spread contagion to Aave and other interconnected protocols.

Against that backdrop, Spark's pitch is one of relative safety. MacPherson, a former protocol engineer at MakerDAO (later renamed Sky) notes that neither platform has suffered a major publicly reported exploit. The closest Maker came to a crisis was during the COVID-era "Black Thursday" crash of March 2020, when Ether's (ETH) price fell so rapidly that Maker's liquidation auctions malfunctioned and some investors lost their collateral.

"We've been operating without a major incident since 2019, when Maker originally launched. We've been through bull markets, bear markets, the collapse of FTX and Terra/Luna, and all this stuff. One thing we've done consistently is not to get swept up in whatever the narrative of the bull market is. It always changes, but it rhymes."

Conservative by design

MacPherson describes Spark's sustainable edge as a "conservative approach to risk," grounded in a preference for blue-chip collateral: Bitcoin (BTC), Ether (ETH) and highly liquid staking protocols such as Lido. He characterizes Spark's "DeFi prime lending" offering as "quite safe."

The platform's OTC lending book targets crypto hedge funds that use borrowed capital to seek alpha in the market. Crucially, MacPherson distinguishes this from unsecured lending. "It's not an unsecured loan to a hedge fund," he said. "It's prime brokerage" – meaning Spark retains the right to liquidate a borrower's position if it becomes too risky. The company is targeting several billion dollars in capacity for this offering.

That conservatism has not always been commercially convenient. "[It's] not always the most popular thing in a bull market when everybody's screaming that competitors are beating us, but we've stuck with this, and we just get this compounding lead over the years," MacPherson said.

The caution appears to be paying off. Spark's total value locked in loans stands at around $3.6bn, with a further $6.4bn in savings deposits. The protocol's governance token (SPK), launched in mid-2025, has struggled to gain sustained traction despite strong underlying growth in deposits and lending. It reached almost 19 cents in July 2025 before slumping below two cents. A 190% rebound after the KelpDAO hack wasn't sustained. MacPherson attributes recent total value locked growth to the market's recognition of Spark's risk management approach, rather than token price movements.

DeFi needs to mature

Not everyone's keeping pace with Spark's track record, according to MacPherson. The KelpDAO attack, he argues, should serve as "a wake-up call" for larger DeFi players to implement the operational security methods already available to them. "It's very important for the industry to mature as a whole. These types of hacks need to be eliminated."

He's not alone in that view. Within days of the KelpDAO attack, Standard Chartered said it was maintaining a bullish outlook on DeFi, framing the incident as an "antifragile moment" that exposed vulnerabilities but prompted swift structural responses.

On regulation, MacPherson is cautiously optimistic. While the US's main crypto market structure legislation is stuck in draft form, Congress passed the stablecoin-focused GENIUS Act last year. He expects DeFi to be incorporated into the rule-making that follows. "We want to be in compliance, we want to grow the industry and merge TradFi and DeFi," he said. "This requires proper regulation in this space."

Looking further ahead, MacPherson sees two additional catalysts for the market: a growing stablecoin supply and efficiencies unlocked by agentic AI. Whether the sector can clean up its security record before the next wave of institutional capital arrives may determine which vision prevails.