Spark Liquidity Layer - Disable Unused Products, Onboard Avalanche, Onboard Aave V3 Avalanche USDC - October 6, 2025

Spark's Operational Facilitator has placed a proposal into the voting system on behalf of nested contributor Phoenix Labs.

Review

The Spark community can hereby express support or opposition to the following changes, as described by the author of the proposal:

Disable Unused Products

Spark is no longer planning to allocate funds into JTRSY and BUIDL. Removing support of these assets from the Spark Liquidity Layer reduces risk by eliminating the possibility of accidental allocation to these products via a fault in the SLL or ALM Planner software, or the relayer safe.

Spark will continuously reevaluate existing SLL integrations and disable items that are no longer expected to be used in the future.

Parameter Summary:

• Centrifuge JTRSY
  • Disable support from Spark Liquidity Layer
  • Deposits
    • maxAmount: 0
• Blackrock BUIDL
  • Disable support from Spark Liquidity Layer
  • Deposits
    • maxAmount: 0

Onboard Avalanche

Avalanche is a high throughput EVM compatible blockchain based on a proof of stake consensus mechanism. It uses a sharding mechanism (individual shards are called subnets) to offer enhanced scalability, while keeping a consolidated UX by using AVAX staking for each shard. Staking and consensus operations take place on the P-chain (similar to the Ethereum consensus layer) while the vast majority of economic activity in the Avalanche ecosystem takes place on the C-chain, which is EVM compatible and hosts a variety of defi infrastructure. Spark will deploy and integrate the Spark Liquidity Layer on the Avalanche C-chain, which allows for using the same smart contract architecture and infrastructure in use on Ethereum mainnet and L2s. Liquidity will primarily be bridged between Avalanche and Ethereum via Circle CCTP and native USDC.

Deploying on Avalanche will allow Spark to access the AVAX defi ecosystem, which includes instances of Aave, Euler, Curve, and several other defi projects. Additionally, Avalanche has a growing ecosystem of RWA issuance which presents additional opportunities down the road for Spark to pursue RWA focused allocation strategies when conditions are favorable. Ava Labs also has a track record of providing strong support for the Avalanche defi ecosystem which is a positive factor supporting Spark’s decision to deploy on Avalanche.

Parameter Summary:

• SLL addresses
  • Spark Governance: to be provided when available, before executive vote
  • CCTP Messenger: address to be provided
  • ALM Controller: address to be provided
  • ALM Proxy: address to be provided
  • ALM Rate Limits: address to be provided
  • Relayer: address to be provided
  • Freezer: address to be provided
• CCTP initial rate limits
  • CCTP global
    • maxAmount: Unlimited
  • CCTP from Avalanche to Ethereum
    • maxAmount: 100 million
    • slope: 50 million per day
  • CCTP from Ethereum to Avalanche
    • maxAmount: 100 million
    • slope: 50 million per day
• Spark Savings USDC (spUSDC) on Avalanche
  • spUSDC address: address to be provided
  • Roles
    • Default admin: address to be provided (Spark Governance)
    • Setter: 0x2E1b01adABB8D4981863394bEa23a1263CBaeDfC (Spark operations safe)
    • Taker: address to be provided (ALM Proxy)
  • Yield
    • Max yield: 10%
    • Current yield (at launch): 0%
  • Supply cap: 50 million USDC
  • Rate limits
    • take (withdraw USDC from vault)
      • maxAmount: unlimited
    • transferAsset (deposit USDC to vault)
      • maxAmount: unlimited

Onboard Aave V3 Avalanche USDC

The USDC pool in Aave’s v3 instance on Avalanche will be Spark’s first capital allocation integration on the Avalanche c-chain. The market includes a fairly short list of collateral assets including AVAX (Avalanche native token), sAVAX (the primary AVAX liquid staking token, issued by Benqi protocol), BTC.B (Avalanche’s native wrapped BTC variant, using a TEE based bridging mechanism), ETH, AAVE and LINK tokens bridged using Avalanche’s native bridge with Ethereum, natively issued USDC, EURC, and USDT, and Agora AUSD (a fiat backed stablecoin with reserves managed and custodied by VenEck and State Street, respectively). Each of these collateral assets has reasonably robust fundamentals and liquidity profile, and the vast majority of them are already used within existing Spark Liquidity Layer allocations such as the Aave Core instance on Ethereum mainnet.

With respect to net-new collateral risk factors, the key sources are the Avalanche Bridge (including both Bitcoin and Ethereum), AVAX, sAVAX, and AUSD.

The Avalanche bridge uses a permissioned set of actors called wardens to verify transactions into and out of Avalanche. Computation for verifying bridge transactions takes place in trusted execution environments (TEEs), currently this uses Intel SGX. To date, the Avalanche bridge has not faced significant technical faults or exploits resulting in loss of funds for either Ethereum or Bitcoin routes. The bridge has operated safely with 9 figure+ TVL for over 3 years, and currently holds over $500 million bridged from the Bitcoin network alongside over $300 million bridged from the Ethereum network. The bridge has also demonstrated a strong track record for uptime, availability, and speed. More details about the Avalanche native bridge can be found here.

AVAX is the native token of the Avalanche network. The Aave Avalanche instance features a 73% liquidation threshold, which is reasonably conservative considering the maximum observed daily drawdown of AVAXUSD was roughly 30-35% (experienced on 19 May 2021). AVAX collateral usage is fairly concentrated in a single user address (0xaf63ae8b29b4a48e28b9892f019187d88f69923c) but we note that this user has historically maintained a healthy overcollateralization level. Onchain liquidity for AVAX is also fairly healthy with $5-10 million easily sold onchain with less than 1% market impact.

sAVAX is a liquid staking token issued by Benqi protocol. While Benqi also features a native lending market, their LST product is by far the largest part of the protocol and is the market leader for AVAX liquid staking. Roughly 90% of sAVAX collateral usage is for looped borrow positions of AVAX, which can use an efficiency mode of up to 95% liquidation threshold. Generally, this is within reasonable bounds considering sAVAX onchain liquidity can accommodate swaps of up to $10 million before beginning to incur material market impact. Benqi has operated the liquid staking protocol for over 3 years without loss of funds and while holding significant and steadily growing TVL, currently over $500 million.

AUSD is a fully reserved, fiat backed USD stablecoin issued by Agora. Reserve assets are made up of cash equivalents including US treasury bills and overnight repo, managed by large asset manager VanEck. Reserve assets are held in custody by State Street, one of the world’s largest custody banks. While overall circulating supply and market liquidity are somewhat low with less than 200 million of AUSD supply at the time of writing, liquidity is supported by robust primary market mint and redeem capabilities that are natively available on Avalanche, so AUSD is considered to be an acceptable collateral asset.

The Aave Avalanche instance is governed by Aave DAO via cross chain messaging over the Avalanche native bridge. Aave service providers including ACI, Chaos Labs, and Llama Risk have additional maintenance and security responsibilities over the market including operating the risk steward role (ability to update parameters such as supply and borrow caps, within governance defined bounds and rate limits), and security council role (ability to freeze certain market functions in an emergency). Overall Aave has demonstrated robust governance and operational security with respect to the Avalanche instance, and there has never been a shortfall event resulting in the loss of user funds.

Given the above factors, we consider the Aave v3 Avalanche instance to have an acceptable safety profile to support integration into the Spark Liquidity Layer. We propose adopting a maxAmount of 20 million alongside a slope (pace of replenishing the rate limit) of 10 million per day, which is expected to meet Spark’s liquidity and deployment needs for the integration while limiting maximum value at risk in case of an issue with the underlying market or SLL infrastructure.

Parameter Summary:

• aAvaxUSDC address: 0x625E7708f30cA75bfd92586e17077590C60eb4cD
• Underlying asset: USDC
• Deposits
  • maxAmount: 20 million
  • slope: 10 million per day
• Withdrawals
  • maxAmount: unlimited

The proposed Spark Artifact changes can be found in the following pull request: https://github.com/sky-ecosystem/next-gen-atlas/pull/72

Outcomes

• If "For" receives the most votes, the proposal will be approved. The associated pull request will be merged into Spark's artifact. When required, the listed changes will proceed to implementation by the relevant actors.
• If "Against" receives the most votes, the proposal will be rejected. No changes will be implemented.