Spark avoids KelpDAO exploit losses through early collateral de-risking
Spark avoided losses from the April 2026 KelpDAO exploit by removing RSEth collateral in January. The protocol's conservative risk management strategy prioritizes balance sheet durability over growth.
Spark, a DeFi capital allocator and sub-DAO of Sky, avoided losses from the KelpDAO exploit in April 2026 by off-boarding RSEth collateral in January 2026. Sam McPherson explained that Spark routinely reviews collateral for risk-adjusted returns and removes assets that do not meet conservative criteria. Unlike Aave, which suffered significant exposure, Spark had limited RSEth limits and implemented rate limits on supplies and borrows to prevent hackers from using lending markets as escape hatches. The protocol also employs a triple-redundant oracle system resilient to single infrastructure failures.
Currently, SparkLend, the second-largest pooled lending market with $5 billion in total value locked, allows borrowing against only five collateral types: ETH, LidoStake ETH, EtherPhi, WETH, WBTC, and CBBTC. McPherson advocated for a conservative, defensive risk management approach in DeFi, prioritizing balance sheet durability over explosive growth during bull markets. He noted that the protocol maintains a defensive posture to eliminate tail risk, particularly as AI accelerates hacking capabilities. McPherson stated that the team does not have a crystal ball into what particular failure will happen, but acknowledged that the space is very new.