A major decentralized finance (DeFi) lending platform has abandoned its plan to compete directly with consumer apps like Coinbase and Robinhood, instead positioning itself as the hidden infrastructure layer that connects competing stablecoin networks. Spark, an affiliated lending and liquidity unit of Sky (the DeFi ecosystem formerly known as MakerDAO), shelved its consumer-facing application indefinitely and pivoted to a business-to-business-to-consumer model, supplying yield and liquidity to established fintech giants rather than fighting them for users.

The shift reflects a fundamental change in how DeFi protocols are approaching profitability during a challenging market. Spark's annual revenue fell from approximately $80 million during the bull market to roughly $20 million today, according to Sam MacPherson, CEO of Phoenix Labs, the development team behind Spark. Yet the company is betting that fragmentation in the stablecoin market creates a valuable opportunity for a neutral intermediary that can move money between competing networks.

Why Are Stablecoins Fragmenting Across So Many Networks?

The stablecoin landscape is splintering as major financial institutions and tech companies launch their own dollar-linked tokens. Each issuer wants to keep users, reserves, and transaction activity within its own network to maintain control and competitive advantage. PayPal has PYUSD, Circle has USDC, and Tether has USDT. Robinhood recently joined the Global Dollar (USDG) consortium and is building its own blockchain, while Stripe and Coinbase support the OpenUSD (OUSD) consortium. Beyond these giants, hundreds of other stablecoins exist, including Ethena's USDe, World Liberty Financial's USD1, and Sky's USDS.

The result is liquidity scattered across an expanding number of tokens and networks. MacPherson noted that the stablecoin market "is about to fragment more and more," creating a structural problem: institutions need to move money between these fragmented networks, but no single issuer wants to facilitate that movement for competitors.

How Is Spark Positioning Itself as the Connection Layer?

Spark's strategy centers on becoming the neutral infrastructure that connects these fragmented stablecoin networks without competing for end users. The platform has deployed approximately $150 million into Uniswap v4 pools pairing USDS against USDT and PYUSD, creating concentrated liquidity in yield-bearing pools designed to help institutions switch between stablecoins. In its first 30 days, the system routed roughly $1.5 billion in stablecoin-to-stablecoin swap volume and accounted for about 30 percent of stablecoin-to-stablecoin swap volume on Uniswap.

The mechanism underlying this approach is a Uniswap v4 hook called DualPool. This tool keeps liquidity earning yield in Spark's vaults while idle and pulls it into the pool only when a swap needs it, settling the transaction within a single block. This design allows Spark to provide liquidity services without requiring institutions to move their capital out of yield-generating positions.

Spark has also struck direct infrastructure deals with stablecoin issuers. PayPal teamed up with Spark last year to boost the liquidity of PYUSD as it competes with Tether's USDT and Circle's USDC. These partnerships demonstrate that issuers recognize the value of having a neutral party manage cross-network liquidity.

What Does Success Look Like? The Robinhood Earn Case Study

Robinhood's Earn product provides a concrete example of how Spark's backend model works. Launched with an annual percentage yield (APY) of roughly 7 percent on USDG deposits, the product routes users' funds into a Morpho onchain vault curated by decentralized advisory firm Steakhouse Financial. The vault allocates funds across lending markets involving Ethena's USDe, Maple's syrupUSDG, and Spark's spUSDG. Within just 24 days of launch, the vault had drawn more than $200 million in deposits.

This arrangement gives Spark exposure to retail deposits without requiring it to own the app or the customer relationship. MacPherson pointed to Robinhood Earn as evidence that the model is working, noting that "Robinhood is quite large, and so we expect this to grow to billions in size." The structure also demonstrates how multiple protocols can work together in a stack: Morpho provides the credit network, Steakhouse curates the vault, and Spark supplies one of several collateral sources.

"Robinhood is quite large, and so we expect this to grow to billions in size," said Sam MacPherson, CEO of Phoenix Labs.

Sam MacPherson, CEO of Phoenix Labs

How Is Spark Diversifying Beyond Stablecoin Liquidity?

While stablecoin infrastructure is central to Spark's strategy, the platform is also pursuing direct institutional lending. Bitcoin-backed over-the-counter (OTC) loans issued through Anchorage currently stand at approximately $260 million in outstanding balance, with roughly $400 million originated to date. Spark is targeting $1 billion in outstanding balances by year-end, a goal that would require outstanding balances to nearly quadruple in about six months.

Demand for these loans comes partly from borrowers such as bitcoin miners, who need to fund operations regardless of market conditions. MacPherson acknowledged that market conditions had "lowered the demand a little bit," but identified onboarding speed as the primary bottleneck. Spark Prime, a hybrid prime brokerage combining centralized and onchain financial services, holds about $20 million in outstanding loans and remains in deliberate beta, with most major crypto funds currently onboarding.

Steps Spark Is Taking to Build Institutional Trust

• Credit Ratings: Spark is pursuing credit ratings from traditional agencies S&P and Moody's alongside assessments from crypto-native agencies such as Credora. These ratings could help institutional risk teams assess Spark before approving it as a counterparty.
• Infrastructure Partnerships: The platform is striking direct deals with major stablecoin issuers and fintech platforms, demonstrating its value as a neutral intermediary that can move capital between competing networks without favoring any single issuer.
• Regulatory Clarity: MacPherson framed the current bear market as manageable, noting that "the fundamentals, adoption, the regulatory clarity, it's all systems go on the institutional side," suggesting that improving regulatory environment supports institutional adoption of DeFi infrastructure.

What Is Driving Spark's Long-Term Bet on Fragmentation?

MacPherson sees payments as the catalyst that will turn stablecoin fragmentation into transaction volume. With the GENIUS Act coming into force next year and the Clarity Act potentially advancing, he projects that onchain payments could reach $3 trillion by 2030. However, he cautioned that adoption may appear slow until it suddenly accelerates, stating that "it's going to seem like nothing's happening, and then all of a sudden a lot is going to happen at once".

The strategy grew from Spark's decision late last year to shelve its consumer-facing app, which would have placed it in direct competition with Coinbase, PayPal, and Robinhood for distribution. MacPherson explained that consumer apps are "extremely hard to compete in," and that shelving the app was "definitely the correct decision." Rather than build its own customer relationships, Spark started supplying yield and liquidity to apps consumers already use, doubling down on a business-to-business or business-to-business-to-consumer model.

"It's going to seem like nothing's happening, and then all of a sudden a lot is going to happen at once," said Sam MacPherson, CEO of Phoenix Labs.

Sam MacPherson, CEO of Phoenix Labs

Spark's pivot reflects a broader lesson for DeFi protocols operating in a fragmented market: attempting to compete directly with established consumer platforms for users may be less profitable than providing the infrastructure those platforms depend on. By positioning itself as a neutral intermediary, Spark is betting that fragmentation creates a valuable role that becomes harder to justify if stablecoin issuers keep their liquidity inside their own networks. As institutional adoption of onchain payments accelerates, protocols that control the rails connecting competing networks may prove more valuable than those trying to own the customer relationship.