Spark, a DeFi lending protocol built on Ethereum, removed rsETH and several low-utilization assets from its platform in January 2025. The decision was made months before rsETH became the subject of a major security incident, ultimately shielding Spark and its users from exposure to the asset’s subsequent vulnerabilities.
Spark adopts user-first risk management
Spark’s leadership emphasized that the January delisting of rsETH reflected a broader strategy prioritizing safety above aggressive business expansion. Other low-activity tokens were also dropped from the approved collateral list in the same update, as the team aimed to streamline operations and reduce systemic risk.
The move drew criticism from some Ethereum users who preferred a wider range of collateral for complex trading strategies. Despite this, Spark’s decisions have kept its lending platform isolated from developing DeFi risks.
Strategy lead MonetSupply.eth noted on social media that the choice to remove rsETH, even before the asset’s security concerns emerged, helped protect users across Spark’s ecosystem—despite reducing platform activity and revenue.
Spark is focused on maximizing user safety across our product suite. This is why we deprecated rsETH (alongside other low-usage assets) in January, and continue to tighten the collateral and feature set over time.
Particularly, Spark kept its ETH borrow rate ceiling higher than competitors during this period, which deterred rate-sensitive loopers seeking leveraged yield. As a result, those users migrated to rival platform Aave, attracted by its lower borrowing costs.
By maintaining a stricter risk framework, Spark managed to preserve strong ETH withdrawal liquidity even as other decentralized lending markets became more vulnerable to market shifts.
Aave reaches full ETH utilization, stoking risk concerns
In contrast, major lending protocol Aave is currently operating at or near 100% ETH utilization across Ethereum Mainnet, Arbitrum, Plasma, Mantle, and Base. Under these conditions, all liquid ETH on those networks is lent out, meaning withdrawals by lenders are not possible until utilization drops.
The situation has amplified market anxieties around platform solvency and collateral risk management among decentralized lenders. MonetSupply.eth pointed out that if ETH were to fall by 15–20%, Aave markets could rapidly accumulate bad debt, given there would be no liquidity to execute liquidations of undercollateralized positions.
Further, any losses related to the rsETH exploit may exacerbate existing strains, as positions linked to the exploited asset remain stuck on over-extended platforms.
Spark’s earlier decision to limit exposure has so far allowed the protocol to support ETH withdrawals without interruption, in contrast to Aave’s current withdrawal restrictions. The developments are causing some traders and observers to reconsider the value of conservative risk management in DeFi, even when such policies are initially unpopular.
Spark: Ethereum-based DeFi lending protocol
Spark (often known as SparkLend) is a decentralized, Ethereum-based protocol offering lending and borrowing services for various crypto assets. Its risk framework and active risk management approach have been central features, drawing attention especially during periods of high volatility.
