SAEP-09: Adjust SubDAO Proxy Management - January 26, 2026

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 outlines adjustments for Spark governance to consider regarding parameters associated with the previously approved SubDAO Proxy reserve plan (SAEP-06).

Background

The initial parameters for SAEP-06 were set conservatively to avoid overutilizing Spark’s subDAO proxy reserves. With the benefit of additional data on protocol activity and fluctuations in risk capital requirements, we would now propose that governance consider adopting expanded parameters to allow for Spark protocol to begin the allocation of excess subDAO proxy reserves more efficiently compared to the parameters passed in SAEP-06.

Proposal Details

We propose for Spark governance to adopt the following adjustments to the SubDAO Proxy Reserve Plan:

• Reduce the RRC lookback period from 12 months to 3 months
• Reduce the Spark product backstop from 5 million to 1 million USDS
• Reduce the target runway from 24 months to 12 months
• Increase the standard buyback rate from 10% to 25%
• Create a new parameter buyback recipient to specify where SPK purchased by the buyback executor are sent

These changes will have the effect of reducing the target subDAO proxy value, allowing Spark protocol to begin using reserves in excess of the target value for buybacks more efficiently compared to under the parameters passed in SAEP-06. This increased agility will allow Spark to respond more rapidly to protocol needs.

Justification

After reviewing protocol activity and risk capital data since passage of SAEP-06, we would submit that Spark protocol can remain sustainable while targeting lower buffers against historical opex and RRC levels. Adjusting these buffer parameters will result in a lower target subDAO proxy value, but based on available data we expect this will remain more than sufficient to ensure protocol resilience and operational continuity during low protocol revenue periods.

The below chart shows a simplified example of how buybacks would work under the proposed parameters, assuming current pace of net protocol revenue, subDAO proxy expenditures, and historical RRC remain unchanged (note that this assumption will not hold in practice as RRC and Spark protocol revenue vary with operational changes and demand, so the below values are for illustrative purposes only and should not be relied upon for investment decisions). Once the USDS in the SubDAO Proxy exceeds the target value, buybacks gradually increase proportionally to monthly net protocol revenue after opex, converging with 100% of monthly net results over time.

Data reference: [Ext] Spark Buyback Analysis

We anticipate Spark protocol will have additional options to meet increasing risk capital requirements beyond just retained capital in the subDAO proxy, including the ability to rent risk capital from other subDAOs, external users, and Sky core protocol itself. The necessary features to support external or rented risk capital are still being developed but are expected to be live in 2026. Having flexibility to rent risk capital will allow Spark governance to quickly deploy into promising allocation opportunities without needing to maintain as much excess value in the subDAO proxy.

Finally, the proposal adds a parameter for SPK buyback recipient, which initially will be set to the Spark SubDAO Proxy as it is now, which will allow for future flexibility on where the buyback proceeds are directed. Any proposed change in where buyback proceeds may be directed would be determined by governance.

The proposed Spark Artifact changes can be found in the following pull request: https://github.com/sky-ecosystem/next-gen-atlas/pull/171

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.