Spark has shifted from a consumer app to a B2B model as revenue plummets from $80 million to $20 million, aiming for $1 billion in OTC lending by year-end.
Spark pivots from consumer app to B2B focus as revenue drops significantly
The decentralized finance platform Spark has announced a strategic shift from its consumer application to a business-to-business (B2B) and business-to-business-to-consumer (B2B2C) model. This decision comes as the platform faces intense competition from established players like Coinbase and PayPal, leading to a substantial decline in revenue from $80 million to $20 million.
- The consumer app has been put on indefinite hold, allowing Spark to concentrate on partnerships with firms such as Robinhood.
- Robinhood's Earn product utilizes Spark's services, contributing to its onchain vault and facilitating liquidity.
- Despite the revenue drop, Spark aims for its outstanding OTC lending to reach $1 billion by year-end, with current loans at approximately $260 million.
In the current fragmented stablecoin market, where various fintech companies are launching their own dollar-pegged tokens, Spark is positioning itself as a key intermediary to enhance liquidity across these networks. Sam MacPherson, CEO of Phoenix Labs, noted the ongoing fragmentation in the stablecoin sector, with major companies like PayPal and Tether expanding their offerings.
Spark, an offshoot of Sky and issuer of the USDS stablecoin, has recently moved around $150 million into Uniswap v4 pools, enabling significant stablecoin swaps. Additionally, partnerships with PayPal aim to boost the liquidity of PYUSD.
MacPherson expects the onchain payment space to grow significantly, projecting payments could reach $3 trillion by 2030 due to upcoming regulatory initiatives like the GENIUS and Clarity Acts.
Strategic Shift to Institutional Lending
The decision to pause the consumer app was driven by the realization of the challenges in competing for retail users. Instead, Spark is focusing on providing yield and liquidity to existing applications, such as Robinhood, which has seen over $200 million in deposits through its Earn product.
This new approach allows Spark to tap into retail deposits without directly managing customer relationships, thereby streamlining operations and enhancing scalability. The firm is also exploring direct lending to institutions, despite facing a challenging market environment.
With about $260 million in Bitcoin-backed loans and an ambitious target of $1 billion in outstanding balances, Spark is navigating a complex landscape. While the market's current conditions have tempered demand, there remains a strong need for liquidity from borrowers like bitcoin miners.
In addition, Spark Prime, a hybrid prime brokerage, is in beta testing with $20 million in loans outstanding. As institutional interest in crypto trading increases, Spark is in discussions with traditional finance firms to expand its partnerships. The company is also seeking credit ratings from agencies like S&P and Moody's to enhance its credibility in the institutional sector.
Amid the bear market, MacPherson remains optimistic about Spark's potential, emphasizing strong fundamentals and regulatory clarity as key factors for resilience in the evolving decentralized finance landscape.
