How institutions will shape stablecoins and DeFi lending

Transcript

We know that like every institution, every bank has some degree of a stable coin plan at this point that they would be negligent uh if they didn't have some sort of plan about how to get involved. >> Stable coins moved tens of trillions of dollars on chain last year, but according to a new report from Catrini Research, only a tiny sliver of that was people actually paying for things. So, what are stable coins if they are not payment rails? And what do investors need to know about all of this? Hello and welcome to Milk Road Crypto, the show that always brings the spark even when the markets don't. I'm your host, John Gill, and today is Tuesday, October 20th, and today we are joined by Sam McFersonson. Sam is the co-founder and CEO of Spark, the biggest capital allocator in the Sky ecosystem, formerly Maker Dow. Sam is one of the best people

to talk to about all things crypto. So, he's going to share a ton of alpha with us today. If that sounds good to you, make sure you like and subscribe. Share this episode with somebody who's going to enjoy it. We don't have any sponsors today, so I'm just going to say thank you all so much for watching and supporting the show. It means a lot to us. If you like what we do here, share the episode and make sure somebody you know knows about us. Uh but without further ado, welcome to Milk Road Crypto, Sam McFersonson. Welcome, sir. How are you? >> Yeah, I'm doing great. Thanks for having me. >> Well, Sam, I'm really excited to talk to you today. You are one of the the oldest and most vetted builders in all of crypto. Um, so I'm excited to get some wisdom from you today. I thought a good

place to start the show would be with just telling us a little bit about Spark because for people who are new to crypto, they may not be familiar. What is Spark and where does it sit in the Sky ecosystem? So Sky uh which is a rebrand from Maker DAO uh has existed since basically the beginning of DeFi uh originally launched in 2019 even part of this is there was a rebrand to Sky uh but part of the upgrade that occurred starting in about 2022 was a restructuring of the governance such that Sky sits um I think this is a useful analogy um Sky sits as like more like a central bank uh that issues wholesale liquidity to subdows of which Spark is one of those. Spark sits as

more of a like similar to a commercial bank in that we take in deposits and then we are lending our book uh mostly against overcolateralized crypto. Yeah, this restructuring has a has a number of uh benefits both from the governance side uh but as well as uh sort of scaling the system as a whole. So a little bit about Spark. SparkCC um is a capital allocator across DY, CFI, tradi. And so we have a number of products. We have uh Sparkland which is our uh poolled lending market uh which uh lends against crypto, Bitcoin, ETH, LSTs, these types of things. It is the second largest poolled lending market at 5 billion in TVL as of as of today. And um

yeah, it's been growing quite a bit over the fast past few months. Spark also has another product called Spark Savings which allows you to earn uh on your USDC USDT and increasingly we're supporting uh newer stable coins that are coming to market. This is basically a treasury management product that's designed to be highly liquid with the underlying so that people can get institutions in particular can get in and out of uh uh the spark savings uh at large size hundreds of millions even. Uh we also have institutional OTC crypto uh lending product. uh this is uh loans through uh qualified custodians such as Anchorage uh against Bitcoin and we also uh more recently launched a product called the stable coin FX layer where uh we

facilitate clearing between stable coins especially the smaller ones who need liquidity with um mainly like USDC USDT um so we'll do market making there on chain through unis swap and provide large amounts of uh liquidity so that people who are using these newer stable coins such as PayPal, PIUSD, RLUSD, USDG, etc. can swap with the uh other more larger stable coins. >> You guys are one of the oldest projects in DeFi as you said, but you're also still innovating. Um, you guys have called yourselves the largest capital allocators on chain with over $3 billion deployed. And as you referenced this stable coin FX layer, which is a relatively new product, has done over $15 billion in volume since June. Talk

to me about how the the bare market versus bull market dynamics work for your business. Do these product lines tend to perform better in a bull or a bear? Does it not matter? And what are those dynamics like that drives this this huge growth in Spark? >> Yeah, I would say increasingly we have uh coverage AC across a like wide range of the market conditions and sort of diversifying away from the crypto uh bull cycles, but we still do make a fairly large return. uh the core business is allocating the uh USDS balance sheet into opportunities across uh primarily like D5, C5, these types of things and then earning a net interest margin on that. So during uh bullish conditions like the revenue can be

three four times higher than it is uh during bare conditions. Um so there is still this uh cyclicality to it but increasingly we see a lot of growth in uh with with what I think is really driving the fundamental growth of crypto right now which is stable coin adoption. So we see, you know, initially it was exchanges uh that are are launching stable coins, but now we see fintexs, more tradey players coming into the space. Uh Robin Hood being a good example of this and now increasingly we're talking to even uh banks as well. And I think this is going to really accelerate uh as genius comes into effect at the beginning of next year.

>> This pullback on Bitcoin is scaring a lot of people and I am not one of them. So, if you want to see what I'm not selling and why, what's on my watch list and when I'm going to be deploying more capital into these markets, you can join Milk Road Pro today. It's just a dollar. The link is in the description. I answer questions day and night in Discord. I'll see you there. Okay, so there's a lot to unpack here. Uh, one of the things I wanted to ask you about before we get into, you know, what next year looks like. Um, when the the Kelp Dow exploit happened earlier this year in April, um, I what stood out to me a lot was that Spark had already dropped Kelpdow and and the collateral that that was the contagion uh, in this attack um, back in

January, months before the attack happened. And it seems like you guys identified a risk before others did. Talk to me about that process because I think security concerns, you know, because of AI and quantum, many other things are a growing concern in DeFi. seems like you guys were early to catch this this risk here. How did you do that? What were others missing? What was that like? >> Yeah. Uh so this is a product of just having gone through many cycles. Uh especially during the bull periods, there was sort of this like pressure uh competitive pressure to risk on and we've always taken this more conservative tack where you know we don't necessarily get the most explosive growth during the bull market uh periods but we also are durably growing uh the balance sheet and deposits over time. So

this is just sort of our general posture uh posture but like as to get into specifics about the RS ETH incident. So we do uh list a number of collateral on on spark lend. This is our poolled lending market. Uh we did list RS at one point but it was under very conservative uh limits. We had nowhere near as much exposure uh as as a did. They were the big uh target during that incident. And so really what happened was uh we saw this wasn't we routinely take looks at uh the collateral that is allowed on sparkland and we'll remove them uh if they're not if the risk adjusted return is is not favorable. So we offboarded this in uh January of this year just as

part of a regular derisking uh process. So like we do not have a crystal ball into what particular failure will happen. All we know is this space is is very new and as you say AI is accelerating the hacks and so we are just taking uh very defensive posture de-risking removing as much tail risk as we possibly can and just focusing on the highcale collateral. So a part of some of the uh features that we have in sparkland that we differentiated ourselves pretty early on. We have um rate limits in the amount of supplies and borrows that can go into the market.

If you have even an institutional borrower, they often do not need to put up one billion in collateral and then borrow 500 million in one go. They'll move it up in in chunks. And so they're perfectly okay to have, you know, do this over the course of several days. And so rate limits are an extremely important factor which uh is a big deterrent for hackers for using lending markets as an escape hatch for getting into more decentralized assets such as the RS to ETH was the trajectory that went through a so this is one of the features we've had in Sparkland from the beginning. Additionally, we have a triple redundant oracle uh that is resilient uh to Oracle failure of any single infrastructure. But in general like we are this is like our always our

biggest concern especially in the age of AI is removing these risks where we see them updating our threat models and just making sure we keep a very defensive posture. Now uh we have a very limited set of collateral that we allow. So we're allowing ETH lost ETH uh EtherFi WE uh WBTC and CBBTC. So these are the five collateral that we allow to uh borrow stable coins on Sparkland. We also are very limited in sort of this uh high leverage uh rehypothecation of collateral. Some other lending markets out there allow you to uh do looping is usually what it's called with uh ETH with many different uh LSTs and we are limited to just lido uh staked ETH for

looping uh with ETH because we think these types of activities need to be done uh in a very conservative fashion. They are useful. People do like to earn yield on their ETH while they're borrowing stable coins, but we really take a lot of time and sort of like look at what the actual uh scalable uh use cases are, focus on them, and then eliminating all the tail risk to the best of our ability. >> Okay. That's very helpful, and I think it puts a lot of investors minds at ease to hear that you're taking sort of like a belt and suspenders at the same time approach to risk management and security here. And it seems like that's definitely paid off so far. So, congratulations on that. Um Sam, I want to talk a little bit about something that I've seen you discussing a lot recently, which is Catrini Research's

new paper called Breaking the Wall. And this this paper is all about the wall between Wall Street and crypto coming down. And before we get into the paper itself, I'm really curious your perspective on on institutions coming to crypto and what that has been like um from your perspective at Spark um and and how how this wall is coming down and what's happening as these two worlds are starting to collide. So I would say that like really the most important thing when it comes to either tribey or crypto is where is the liquidity? This is what drives uh people to use particular venues and it's it's sort of a universal reality. And so really if you want to have if you believe in the thesis sort of that uh trady will eventually all come on chain you have to look very critically at what what is driving that

and this is this is quite clearly uh there is the store value use case with bitcoin e wherever you want to draw the line but stable coins are are the the strong product market fit that is that is fundamentally driving a lot of this and so why is that um stable coins are quite useful for crossber payments instance settlement there's and like it just optimizing fees in general um you know not having to pay these banking fees like with wires whatnot stable coins just like completely eliminate the friction of that and so this is this is fundamentally why you see institutional adoption coming but we're still very early days and it's because although we have the regulatory clarity we know the

path we're on right now with Genius it's not yet come into effect it will come into effect at the beginning of next year and then you'll see a lot of the the bigger players. Uh there's sort of the very innovative uh forward one companies that are coming in right now. Uh but you'll see a lot of the bigger players coming in after that. And so that is sort of the the wedge that will drive uh Trodfy to increasingly use onchain rails. And then you can layer in all the utility on top of that. And that's really where Spark sits is enabling utility on on top of stable coins. So you have um you know an institution who wants to launch a stable coin. You know, that's all well and good, but then like people have the stable coin. What do you do beyond that, right? You want to earn a yield. You

want high liquidity with the assets that you care about. And so, Spark is really the liquidity plumbing that uh supports these newer stable coins. And even so, though some of these institutions, they have larger balance sheets, they would prefer to work with a DeFi native uh protocol um to bootstrap this liquidity just because it's very unfamiliar territory uh for them. And so this is where we view a lot of product market fit with uh with Spark in dealing with these institutions that they want to use the USDS balance sheet to uh grow their stable coin uh liquidity on chain.

>> Okay. I think you're getting to something that I wanted to ask you about as well because you've talked about this before. There's going to be two layers of money in this new world. One is going to be where the stable coins sit and where they move. And then bu below that is going to be this credit layer where Sky and where Spark are. talk to me about a little bit more of like what falls into each bucket, what differentiates the two of them and then you know how do you see spark in terms of uh competition or differentiation? What makes it attractive to institutions in that in that reality? >> Yeah, this is kind of an interesting differentiation point between trady and crypto in that uh crypto at least with genius compliance stable coins function as as narrow banks. they're just like uh deposited into treasury bank deposits

like just very lowrisk stuff and then you can have this uh credit layer on top which is uh providing uh yield on top of the the sort of the money layer. So I view in the money layer this is more like uh your USDC USDT to a certain degree although it's a little bit more mixed uh with with USDT but I would say like with the emergence of onshore stable coins uh you know your PIUSD RLUSD like USDG OSD etc etc um these serve as sort of the money layer where it's it's for payments it's for high liquidity these types of operations and then you have the credit layer which is which is splitting out sort of the lending side of what what banks uh normally do uh within Tradfi. These are

now kind of two separate things. So USDS is uh is is a fractional reserve. It's not running a full reserve. And so there are certain trade-offs with that. But this the the upside is that you earn this sort of uh relatively safe yield on your stable coins. And through Spark savings, we can make that available uh to USDC USDT holders and uh package it up in a in a nice way. >> Gotcha. Okay. So I'm curious about what makes this distinct and attractive. um uh just from like a a yield perspective, right? Because the sky savings rate is around 3.8% right now. This is about what you could get from a T- bill. Um what makes this attractive as opposed to just going into T bills or or bonds? Um talk to me about the differentiation

there and why someone would choose your your rate over other rates they can get other places in the market. Yeah, I think this is a great question because if you just look at it, it's like yeah, you know, obviously like a if you go into a money market fund or you know some treasury bill product, it's it's a it's a lower risk. I I would not uh say otherwise. Um what is the important differentiating factor? It's not the yield, it's the liquidity with the onchain environment. So we do see users coming into Spark savings. Uh USDS uh balance sheet has been growing um even during the bare market. It's up to past 10 billion now. And where the users, there are a number of users that need high liquidity with USDC and USDT in particular. So th this is where we see

strong product market fit with something like Spark Savings where yes, it's generating basically a sofa yield, but the it has a lot of the liquidity. USDS is is one of the largest holders of USDC on chain and at now over like four billion in USDC that Sky holds that can be immediately swapped for USDS and so this high liquidity provides a lot of benefit for you know maybe funds want to be uh there's value in being liquid with USDT for doing some trading strategy or there is uh some like major institution that has their own liabilities in USDT or USDC and they need to be extremely liquid like able to swap hundreds of millions in a moment's notice. And

really, this is where something like Spark Savings is one of the few products on the market that's available. And so really, you need to think about it like are you in on chain land or are you in Tradfi? And if you're in Tradfi, you're you have high liquidity with money market fund. So you'll use that. But if you're onchain, there is a gap between tradfi and uh and uh like DeFi onchain finance. Uh and so this is where Spark uh savings sits. as a as a compelling product. >> Okay. Interesting. I I think that makes a lot of sense. I want to ask you about the the asset classes that are moving on chain and how this potentially changes your business because Satrini pointed out that tokenized treasuries are about three and a half times bigger than

tokenized stocks right now and tokenized stocks are the ones that are getting all of the headlines. Uh and I'm curious your thoughts on this. Like is your focus more on the the huge amount of tokenized treasuries and and that growing? Are you more interested in tokenized equities as they start to come on chain? Uh what's the opportunity for Spark? What's your focus? Tell me about that is as these different asset classes starting to come on chain. >> Yeah. Uh so the reason that's driving a lot of the growth of tokenized treasury is who who are the biggest buyers of these and it is uh yield bearing stable coins such as Sky. So Sky is a large holder of uh treasury bills as as part of its backing assets to generate yield.

One of the issues with it uh for as from a user perspective is again this liquidity issue. If it's packaged up where you're fully liquid with USDC for example, but you can still earn the treasury bill rate, this is a very compelling product. And then on the back end, these yield bearing stable coins that balance between liquidity and yield can provide this yield with well-maintaining high liquidity with the more established stable coins. This is where the strong product market fit is. So where and again I'll go back to where what is the driver behind everything and it's stable coin adoption and so it's it's it's only natural that uh USD denominated products such as treasury bills and I think uh AAA corporate debt is another good example of where you

have an investment grade uh product but it's USD denominated it's stable against USD and so you get a lot of uh backend growth from stable coin growth now where the we're entering is the next phase which is uh more assets coming on chain And what what is driving that is the access to cheap liquidity, lots of excess liquidity, which is the case for stable coins. There's a there's a large amount of excess liquidity, a little bit less so since uh the bare market and the hacks going on, but there still is an excess of liquidity within uh the Sky Protocol. And so being able to issue loans, cheap loans against um equity, tokenized equities is sort of the the next stage. And it's just like this process of bringing things on chain one piece at a time and things need to grow

with where there's the demand side for the borrowers and that is being driven by cheaper rates being made available due to global competitive markets on chain and uh with the yeah with the uh stable coin growth side which is uh yeah it it comes back to stable coin growth with that. >> Okay. At the risk of having you repeat yourself, I I'd like to understand this idea a little bit more because I haven't heard anyone else make this connection before. You gave a presentation at token 2049 recently and you said that tokenized stocks and other assets will follow onchain um once borrowing gets cheaper on chain. Why is that such such a key bottleneck here? And because I haven't heard anyone else say that.

Explain that bottleneck to me and why you think that's the big hurdle to get over to bring a lot of these assets on chain. Yeah. So if you look at um if you have stocks uh most people have stocks in their brokerage and they can borrow against them there. So really um but there are decently sized margins uh attached to that say on like interactive brokers or something. So what needs to ultimately drive this is uh competition. So a race for better rates. And this is really the big unlock that blockchain and uh like crypto provide is that instead of having like you know a handful of companies that are uh you know can charge high margins you now have a global market you're competing on in DeFi. So if you have say uh some

isolated market in morpho this is now opened up to people on the LPing side on the borrowing side it is and it can be um made into a nice wrapper like such as uh the case of like Robin Hood and Coinbase where they use their own uh consumer apps to expose this to their users in a nice interface but then the rates are ultimately going to be what's makes people take this seriously and actually move their capital over. They need to be getting a better deal. they're not going to be doing it for the idealism of DeFi. Um, so this this is really like how I see this this playing out. And yeah, I I think we're just at the beginning stages like I I foresee like a lot of growth in stable coins at the starting at the beginning of next year. And so then the the cheap the

cheap rates that are available because of this global market, global competitive market is really what's going to drive people on chain on the borrowing side for like something like tokenized equities. >> Okay. So, build a better product, offer a better deal. It's more attractive. The capital follows. Makes sense to me. Um, another thing that I've heard a lot of people saying, and Satrini argues this, too, is that AI agents are going to need to move money 24/7, and that is what's finally going to break the wall, so to speak, and bring all this capital on chain. Um, I have heard you say this too. How far away in the future is that in your mind? And and what does that look like right now in terms of adoption of AI agents of stable coins and and things like like DeFi? Yeah, it's it's a very interesting thing like now we're uh

you know everyday people like I think this AI hasn't really we're in like a tech bubble so we we see all the adoption um I mean we're using it like extensively within our company but like I think the average person is still just like just barely starting with AI but now you can ask your agent say like you know here's like my accounts like optimize optimize them for me how can I be this is a very like strong driver of the individual that'd be like make give me more money. So ultimately like this this will just uh break the break down some of these uh frictions that we've had within the banking and actually I would say is even uh propping up the banking system to a certain degree is uh just this friction where users will

people just sit their money in a checking account that pays zero. You know they're taking on the risk of of the bank runs and stuff like that but they're not being paid anything for it really. They're being taken advantage of by the banking system. And so having this hyperconnected uh you know blockchain environment where you know movement is is as easy as talking to your AI agent like what you know what should I be doing here's my risk profile we'll be breaking down a lot of these barriers and ultimately I think this is a good thing I think the you know the traditional banking system uh taking advantage of people effectively it's like a tax on people who are you know not as nimble with their money and this is like uh this is bad for the economy I think I money should like fully empower like the individual

should be empowered as much as possible to do with their assets what they want to do. And I I really truly believe we're going to move away from this world where it's predicated on frictions basically and trying to capture consumers. And I I think this is a much much better world to live in. >> An analyst who I've had on this channel several times, Jordi Viser, recently said on a podcast that friction is the opportunity now. It's like Amazon used say your margin is my opportunity. the friction is now the opportunity that the crypto is coming for. So that's really encouraging to hear. Um I'm excited to see how that plays out. I know it's early days, but the AI agents changing things, the the efficiency, this is going to be really exciting. Okay, I want to ask you a question about this is because a lot of people have have looked

at this landscape of DeFi and said there's clearly a huge opportunity here, but banks are going to just build their own versions of these products as opposed to plugging into DeFi that we've already built. Uh Catrini in his paper says that he thinks banks aren't going to build that they are going to plug into DeFi and yet a lot of banks are still kind of building their own things, their own stable coins, their own chains, things like that. How do you see this playing out? Do you think we're going to get into a world where the legacy incumbent players build their own versions of these things and keep ownership of them? Or do you think eventually that capital does come to public infrastructure and existing DeFi projects? Uh what does that look like in your mind? Yeah, I think it's going to be a mix of things where I see I I think

it makes a lot of sense for these like how I view it is there's sort of the distribution channel and so this can be uh exchange fintech uh you know whatever so you for example like you have Robin Hood Robin Hood chain you have coinbase base chain you have a stripe tempo I think this pattern will will remain where you have the chain that is essentially an extension of the uh distribution channel whatever that may be but uh the liquidity uh I believe is going to continue to consolidate on um I would say Ethereum specifically maybe Salana but like yeah these public blockchains I do see like a consolidation because like again like liquidity is the whole thing and so if you have a competitor that like you're not going to use your competitor's chain

and so where is the place that everybody's going to like just consolidate and build network effects around whether they want to or not is going to be public infrastructure that's neutral and so I think we're still early stages so everybody's trying to take a crack at this and maybe they're successful. Uh, you know, we're fairly agnostic as to the how how how how this all ends up. We want to support everybody. But how I see it kind of playing out is uh Ethereum is the RWA uh lead right now and just due to network effects that that effect just tends to compound.

>> This is a safe place, Sam. You it's okay to say Ethereum here. We we can all say Ethereum. It's fine. Um I'm I'm bullish, too. But that makes a lot of sense. And I I think that those those gravitational poles will be effective for that capital at some point soon too. Um you have been talking to a lot of these major institutions about coming on chain. What are those conversations like? Have you seen like any particular sections of the market like more excited to to come in into this opportunity, other people being more hesitant? Where have those conversations been in 2026 and and what's that been like at the at the moment? Yeah, our interaction with uh institutions is is primarily through our uh liquidity allocation service. So this I kind of was mentioning this before. We will do uh market making with our own uh

balance sheet uh with the USDS balance sheet through in unis swap. We will deploy into sparkland morpho uh we can onboard these new stable coins and do uh swaps of our own inventory as well. So uh we see extremely strong product market fit here. If you're um a new issuer, issuing a stable coin is the easy part. That's that's not difficult. Building sort of the network effects around that stable coin is is the more difficult part. And we we uh we're able to help out with this. Um yeah, and maybe I'm repeating myself a bit, but these institutions, this is the wild west to them. They don't know what's going on. And we are uh industry experts. We've been around since the beginning of DeFi, so we know it extremely well. And so for the path of

them getting involved, it makes much more sense for them to partner with somebody like Spark versus trying to roll everything themselves and build out their own in-house team. So we see basically with every conversation we're having and you know these are some major names that are coming uh soon. It it's it's quite positive. They're extremely uh happy to work with us. We've we're already working with major players like uh PayPal, Ripple um you know we have the integration like uh the Robin Hood earn product with Spark Savings USDG um as well as other exchanges and so this uh this is this is sort of the inroad that we've had and we we see a very strong product market fit here.

>> Okay. I want to come back to something that you said earlier which is that the Genius Act goes fully into effect in January of 2027. Talk to me about what happens at that moment. Do we just see this huge, you know, land grab in the wild west or um is it sort of like an orderly takeover by the banks and institutions? Um what's Spark's strategy in that environment? What do you expect to happen on you know once January gets here? Talk to me about what that looks like as we get into into a fully genius uh uh effective world. >> Yeah. So where we sit um much like I was mentioning sort of public infrastructure sits as like the neutral ground that I think is going to be used for a lot of the where the a lot of the liquidity consolidates. We want to be this neutral

sort of more active liquidity deployment layer uh within sort of this multi- uh stable coin environment. And I think we're going to see right now we're seeing the beginnings of like uh and it's primarily onshore uh stable coin growth. Tether is still very dominant in offshore and I don't think that's going to change but for the onshore landscape u we uh want to sort of sit neutral and provide uh support for all the stable coins as they come on chain and really uh provide a lot of our expertise uh for helping them to grow themselves and yeah that really like as the neutral layer we are not we do not have our own like you know genius compliance stable coin we firmly position ourselves as the credit layer that's sitting on top of that and

so with this positioning I think it's going to grow uh quite naturally uh with the market you know we view stable coins right now as about 300 billion uh the reports that are looking at like around 3 trillion by 2030 we completely agree with those and we want uh Spark um and sort of the USDS balance sheet to grow alongside this uh growth of this multi-stable coin world >> I'm curious your thoughts on stable coin growth because uh we've seen stable coins not shrinking but more or less plateauing and kind of going sideways throughout 2026. What do you attribute that to? Do you think it's just a bare market symptom? Do you think it's something else that needs to happen to really bring more capital on chain or into stable coins specifically? Um, what do you see as the next catalyst for the

growth of adoption of stable coins specifically? >> Yeah. So, this has been quite uh like bullish, I would say. I know the the the market cap hasn't been increasing of stable coins for the past year or so, but the fact that it's not decreasing is is a step up from previous bare cycles. So why is it it's it's flat but we've been through a bare market for the past year and this tends to coincide with stable coins decreasing. So the fact that they're flat I think is quite positive. And then the other big catalyst I think is going to be uh genius coming into effect next year and these much bigger players uh getting involved in like full force. So we know that like every institution, every bank has some degree of a stable coin plan at this point that they would be negligent uh if they didn't have some sort of plan

about how to get involved. And this is going to be the starting gun that really gets this. And so where we exist like, you know, a year, two years from now where there's, you know, maybe tens of difference of major stable coins that are all competing, I think they're they're all going to ultimately need uh defragmenting the liquidity. And so this is, yeah, again, where Spark sits is boosting these stable coins liquidity with all the others and really sitting as a hub for them to be able to have institutional swaps. So yeah, like so something that's kind of missing right now uh is that there is stable coins used for uh payments in the offshore. I think this is Tether's big use case, but we don't really see it for uh payments uh coming in like for onore uh stable

coins yet, but I think that's going to change and AI agents will help here just because a lot of the fees and frictions that exist in the banking system, settlement is is is extremely slow. It doesn't operate on weekends like people have to hold balances uh to facilitate uh you know crossber remittance this type of stuff. uh the international banking system is like a very uh janky system and extremely out ofdate. Once you eliminate all that, this is the compelling use case for stable coin payments. And we see it, you know, not only like on the consumer side, but institutions. Um, you know, I'm having conversations with major institutions where like, you know, I was spending, you know, hundreds of thousands of dollars a day paying wire payment fees

and then I switch to stable coins and all that goes away. So this these are the optimizations that even exist uh for institutions and then that's that's that's the initial piece. We need to get them using stable coins and there is a natural economic driver to do that and then once everybody's using stable coins all the utility attached to that um just just sort of compounds with the liquidity coming on chain. >> Got okay. Yeah, that that makes a lot of sense and that that vision of the future I think is is coming quickly. Uh Sam, I know we're getting close to time here, but I want to ask you just a quick question about um the the Spark token, the SPK token, where that sits in this ecosystem, and then relate that to me or for me to sky and the sky token because

I think this gets confusing for a lot of people who even are like native DeFi users. Talk to me about the relationships between these tokens, what roles they play in the ecosystem, and just what an audience should know about these things. >> Right. So these entities are related but these are uh separate businesses as I mentioned before. You could think of it uh I want to say these things are not banks but I think it's a very useful analogy. You have Sky as a as a central bank and so there's a certain they'll earn uh you know NIM on uh their deposits versus lending out to the subdows and Spark has its own business line. So we're generating our own money.

We have our own treasury. Uh the protocol has been profitable non-stop pretty much even even during the most bearish periods. we are able to maintain profitability growing the treasury and so as uh the the protocol increases its revenue its different business lines grows its revenue this goes into the spark treasury and the and excess capital beyond that is returned to SPK holders in the form of uh currently it's a buyback but we will move to more towards like you know buyback burn buyback distribute so that the it's naturally sort of the incentives are all aligned for SPK being belief in sort of the growth of of Spark as a protocol.

>> Gotcha. Okay, that's helpful. Yeah, I had Jeff Kendrick from Standard Charter on the show a couple weeks ago and he referred to Sky as the federal bank of DeFi and I think that that helpful distinction of federal commercial banking. It can help people sort these things out in their minds. Um Sam, this has been really helpful. I I appreciate you coming on Milk Crypto and sharing your thoughts on all of these things. Um before I let you go, is Bitcoin over or under 100K by the end of the year? >> Over. >> Oh, let's go. All right, >> let's go. >> All right. I'm going to hold you to that. Uh Sam, thank you so much for being on Milco Crypto. I learned a lot from this. I'm really glad we could get you on to talk. Where can we send people to find more of you and your work

online? >> Yeah. So, uh you can I'm on Twitter x hexonaut. Um I'm also on LinkedIn. Uh you can there's the website spark.inance. Uh you can get all the information there. >> Yeah. >> One question. Hexonaut's not related to Hexchain at all, is it? >> No, no, no. Actually, I got that. Uh, some people get confused with that sometimes back in the day, but I see a lot less hex chatter these days. >> Yeah. Yeah. No relation. >> Oh god, I just wanted to clarify that. Yeah, some things have changed for the hexac.

Uh, all right, Sam. I'll end it there. Thank you so much for being on Milco Crypto. I hope we can catch up again soon, but thanks for being here and sharing your wisdom with our audience. >> Yeah, thanks for having me. >> And thank you all for joining us. I hope you all learned something today. This was a fun one. So until next time, stay safe, stay educated, stay bullish, and we will see you all on the next episode of Milk Road Crypto. Thanks for being here, everyone. Bye. Thanks for listening to Milk Road. If you enjoyed the show, make sure you like and subscribe. And if you're struggling to find winners in the market, that's exactly what Milkroad Pro is built for. Our analysts have called some of the biggest winners early, and Pro lets you see what they're buying next, every trade they make, and the research behind

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