Spark Protocol has released a series of proposed changes slated for an upcoming executive mandate on Ethereum, covering treasury operations, token buybacks, reserve management, and liquidity layer adjustments.
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The February 26, 2026 proposal outlines actions covering the Spark Foundation grant for March, the transfer of SPK redemptions for February 2026, a request for SparkLend reserves, and increasing rate limits for USDT on the Spark liquidity layer.
The proposed spell consolidates multiple governance actions into a single on-chain execution – a standard practice within the Sky (formerly MakerDAO) ecosystem that allows stakeholders to simultaneously review and vote on a set of protocol changes.
Each element of the proposal addresses a distinct operational need within Spark’s growing infrastructure on Ethereum.
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Spark Foundation grant and SPK buyouts
The first element of the proposition is the Spark Foundation Scholarship for Marcha disbursement from the executive level treasury intended to fund the ongoing operations of the foundation.
These periodic grants have become a recurring feature of Spark’s governance rhythm, providing the foundation with the capital needed to support development, ecosystem growth, and operating overhead on a monthly basis.
Besides the grant, the lot includes the Transfer of SPK redemptions for February 2026. This action transfers funds intended for the purchase of SPK tokens on the open market – a mechanism designed to create consistent buy-side demand for the protocol’s native token.
Buyback programs in DeFi serve a similar function to share buybacks in traditional finance: they reduce circulating supply and signal the protocol’s confidence in its own token economy.
The combination of a March prospective grant with a February buyout settlement reflects Spark’s approach to cash management: keeping funding operational while simultaneously executing its tokenomics strategy.
Both actions require executive level approval through the governance process before on-chain execution.
SparkLend Reserve Claims
The proposal also includes a Claiming reserves execution for SparkLend, Spark Protocol’s lending and borrowing platform. Reserve requests allow the protocol to collect accumulated fees and excess capital from SparkLend’s lending pools, redirecting these funds to the treasury for reallocation.
SparkLend generates revenue from interest rate spreads between borrowers and lenders, with a portion of this revenue returning to protocol reserves. Periodic claims ensure that these reserves are actively managed rather than remaining unused in loan agreements. Claimed funds can then be deployed toward buyouts, grants, liquidity provision, or other governance-approved uses.
This reserve management cycle – accumulate, claim, redeploy – is a critical part of how Spark maintains its financial viability. This also ensures transparency of the protocol’s revenue generation, as every claim is visible on-chain and subject to governance oversight.
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Increased USDT rate limit on liquidity layer
Perhaps the most operationally significant change in the proposal is the rate limit increase for SparkLend USDT on the Spark liquidity layer. In this context, rate limits govern how quickly USDT can enter or exit SparkLend via the liquidity layer, effectively controlling the pace at which liquidity can be added or withdrawn.
The increase in the USDT rate limit suggests growing demand for Tether-denominated lending and borrowing on SparkLend. As USDT remains the largest stablecoin by market capitalization and trading volume, increasing its throughput capacity on the liquidity layer allows Spark to capture a greater share of stablecoin lending activity on Ethereum.
The Spark Liquidity Layer serves as the infrastructure connecting diverse sources of liquidity to SparkLend’s lending markets, and rate limit adjustments are a key lever to manage risk while increasing capacity.
Rate limits function as a risk management tool: they prevent sudden, large-scale movements of liquidity that could destabilize loan pools or create exploitable conditions. By gradually increasing these limits, Spark governance can scale USDT capacity in a controlled manner, balancing protocol growth and security.
The proposal also references additional changes to the Spark Liquidity Layer, although full details are contained in the governance forum post.
Broader context within the sky ecosystem
The Spark protocol functions as a key sub-protocol within the larger network. Sky ecosystem (the renamed MakerDAO). Since its launch, Spark has played an important role in DeFi lending, particularly for DAI and USDS-denominated markets.
The protocol’s governance structure mirrors that of Sky: proposals are posted to the forum, discussed by delegates and community members, and finally executed via on-chain spells. Consolidating treasury, redemption and infrastructure changes into a single fate is characteristic of how the Sky ecosystem manages governance overhead.
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Rather than conducting separate votes for each action, bundling reduces voter fatigue and streamlines execution. However, this also means that stakeholders must evaluate the entire project, as individual elements usually cannot be separated during the voting process.
Spark’s continued investment in its liquidity layer and lending infrastructure comes at a time when competition among DeFi lending protocols remains intense.
Aave, Morpho and Euler are all competing for market share, making operational efficiency and speed of capital deployment key differentiators. The increase in the USDT rate cap, in particular, signals Spark’s intention to remain competitive in stablecoin lending markets.
What to watch
The proposed changes are currently being discussed on the forum and will need to go through the standard governance voting process before being implemented. Key things to watch out for include:
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Timing and outcome of the governance vote — If the batch spell succeeds and when the execution takes place in chain.
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SPK Buyback Execution Details — The size and timing of the February buyback transfer and its impact on the SPK token markets.
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Using USDT on SparkLend — Whether increasing the rate cap results in measurable growth in USDT lending and borrowing activity.
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Amounts of reserve requests — The total value of claimed reserves, which provides an indication of SparkLend’s recent revenue performance.
Stakeholders and SPK holders can follow the discussion and voting progress on the Sky Governance Forum. The execution of the spell will be publicly verifiable on Ethereum once the governance process is complete.
