Spark Liquidity Layer Records Negative $810,000 in Q2 Net Returns

Spark Liquidity Layer (SLL) averaged $2.56 billion in allocated capital during the second quarter, but the decentralized finance (DeFi) system recorded negative $810,000 in net protocol returns. Funding costs associated with the expansion of Spark Savings’ USDT market were the primary driver of the negative result.

Gross returns totaled $35.50 million, and the average gross yield was 5.6% for Q2. The captured spread was negative 0.13%, down from 0.64% in Q1. SLL carried the USDT market’s funding costs within the layer, contributing to the gap between gross returns and the net result.

SLL’s average allocation rose from $1.93 billion in Q1 to $2.56 billion in Q2. Separately, its tracked total value locked (TVL) was about $2.8 billion on Oct. 16. The figures cover different periods: allocated capital is a quarterly average, while TVL is a dated reading.

The TVL measure includes assets held by SLL allocator contracts, excludes some Sky-minted assets and counts certain SparkLend and Morpho positions only to the extent that third parties have borrowed against them. The Anchorage custody allocation is also tracked using off-chain data.

At Q2’s end, about $1.20 billion was allocated to SparkLend markets, up from $688 million at Q1’s end. That quarter-end amount is separate from the $2.56 billion average across all of SLL during Q2.

Spark Institutional Lending, an over-the-counter lending structure, had about $261 million deployed at Q2’s end, compared with $150 million at Q1’s end. It generated $3.16 million in gross returns during the quarter.

Anchorage Digital serves as collateral agent for institutional lending with Spark, with collateral held in its custody. Its role includes monitoring loan-to-value ratios, processing payments, issuing margin calls and executing liquidations.

SLL launched on Base in November 2024. Its automated system allocates capital within governance-defined risk parameters; the ALM Proxy holds funds, while controllers enforce rate limits on operations.

Spark’s third-quarter net returns topped $4 million as returns linked to Spark Savings’ USDT growth moved above funding costs.