[Ethereum] SparkLend - Add LBTC to Oracle Kill Switch - January 5, 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:

SparkLend accepts Lombard LBTC as a core collateral assets. In 2024, Spark introduced an oracle kill switch mechanism to limit risk to the SparkLend protocol in case a collateral asset faces a significant downward price deviation. Initially this was implemented for Lido wstETH and Bitgo WBTC with a deviation threshold of 0.95, with the WBTC kill switch later being deactivated after WBTC had LTV set to 0.

In practice, the kill switch mechanism allows for anyone to permissionlessly put SparkLend into lockdown mode where no new borrows can be initiated if a covered asset falls below the deviation threshold. Adding LBTC to the kill switch mechanism will reduce the risk of incurring bad debt or insolvency losses if either of these assets incurs a haircut or experiences significant depegs. There is some risk of a false positive oracle print setting the market into lockdown mode unnecessarily, but this can be rectified via governance action in a matter of days and would only prevent new borrows, with no negative impact on existing user positions or increase in risk to the protocol.

We will also plan to add additional collateral assets using fundamental oracles to the killswitch mechanism in the future to further mitigate peg risk.

Parameter summary:

• LBTC
  • Add asset to oracle kill switch mechanism
  • Market price oracle: Chainlink LBTC/BTC
  • Deviation threshold: 0.95 BTC per LBTC

The proposed Spark Artifact changes can be found in the following pull request: https://github.com/sky-ecosystem/next-gen-atlas/pull/145

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.