SAEP-04: Strategic Investment in Arkis - November 10, 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:

Summary

This proposal is submitted by Phoenix Labs in its role as a nested contributor, as defined in section A.6.1.1.1.2.2.2.2.1.2.1.1.1 of the Spark Artifact. The proposal recommends that Spark governance ratify and fund a strategic investment into Arkis.

Background

While defi lending infrastructure is now reaching feature parity vs centralized counterparts in many respects, with defi loan volumes outpacing cefi volumes by a wide margin, certain types of financing activity may continue to rely on connectivity to cefi. Chief among these is prime brokerage, a service which allows asset managers and institutions to cross margin an entire portfolio of assets and derivative positions within a unified account and risk management framework.

Using a unified margin engine and account structure increases both operational and capital efficiency for borrowers, which can provide a critical edge for funding rate arbitrage (delta neutral) or long/short (beta neutral) strategies. The improved efficiency gained from financing via a prime broker (vs a overcollateralized defi lending protocol) results in a higher willingness to pay for credit; in many cases the going rate for prime financing can be more than twice as high as standard onchain borrow rates.

Arkis is a technology and infrastructure provider in the prime brokerage industry. While it is relatively small compared to peers such as Hidden Road or FalconX, it offers unique value via deep integrations in both defi and cefi. Arkis accepts funding from lenders directly onchain, with deposits and withdrawals handled via liquidity pools to allow for seamless integration into the Spark Liquidity Layer. Moreover, the Arkis prime accounts have both an onchain, smart-contract based component as well as the ability to trade on leading centralized exchanges via subaccounts, allowing users to pursue advanced cedefi strategies that are not available anywhere else. Examples of this include using liquid restaking tokens or Pendle PTs as the spot leg of a delta neutral strategy to enhance yield. Holding defi and cefi positions within the unified Arkis margin engine allows for proper risk weighting of offsetting long and short positions, offering a capital efficiency boost that is unmatched in the crypto prime brokerage industry.

Proposal Details

We propose that Spark governance ratify and provide funding for a strategic investment by Spark Foundation into Arkis with the following terms:

• Investment amount: $4 million paid in USDS
• Recipient: PRM LBS LTD, at address 0xD5FF8bdeF23fc3C8Ff6815C6B4051F9809C877a5
• Arkis post-money valuation: $45 million
• Deal structure:
  • Simple Agreement for Future Equity (SAFE) substantially mirroring the Ycombinator SAFE format
  • Token warrant providing for token ownership share equal to at least 50% of Spark's share of equity ownership at the time of token launch
  • Side letter providing for most favored nation rights, pro rata rights, information rights, major investor rights, and right to elect one director
• Fee reduction: Spark to pay reduced fees for use of Arkis protocol for 5 years with Spark Foundation holding option to extend by 2 additional years, assessed as 50% reduction vs the lowest rate of fees paid by any other user

From an operational perspective, if Spark governance approves this proposal, the next following executable Spark proxy spell will include a transfer of the investment amount from the Spark proxy to PRM LBS LTD, at address 0xD5FF8bdeF23fc3C8Ff6815C6B4051F9809C877a5.

Justification

By undertaking a strategic investment into Arkis, Spark gets preferential access to high value lending infrastructure that will complement Spark's existing financing mechanisms within SparkLend and Spark Liquidity Layer. A 50% reduction in Arkis's fee vs the next lowest fee gives Spark significant cost savings and a material advantage over competitors while using the Arkis infrastructure.

Additionally, Spark's use of Arkis infrastructure can help bootstrap Arkis's overall market size and competitive positioning, which may have a constructive impact on Arkis's valuation. By helping to bootstrap liquidity and market size within the Arkis protocol, Spark may materially increase the value of Arkis. Spark Foundation holding an interest in PRM LBS LTD will allow Spark to capture part of the upside created by its participation within the Arkis protocol.

Phoenix Labs, as a service provider to the Spark Foundation and contributor within the Spark ecosystem, is actively undertaking risk and technical reviews of the Arkis protocol to enable capital allocation via Arkis within Spark and Sky's risk tolerance. We anticipate favorable outcomes to these due diligence efforts, which will enable Spark to begin capital allocation within Arkis and benefit from the fee reduction specified in the strategic investment agreement.

Conflicts

Phoenix Labs contributors have undertaken private investments into PRM LBS LTD on substantially equivalent terms to the proposed Spark strategic investment described above. The aggregate amount of funds invested by Phoenix Labs contributors is $495,000. Alongside this investment, contributors will be providing advice to Arkis on how to best align the protocol with the risk profile and preferences of defi protocols like Spark.

The proposed Spark Artifact changes can be found in the following pull request: https://github.com/sky-ecosystem/next-gen-atlas/pull/109

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.