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Spark delisted rsETH and several other low-utilization assets from its platform in January, months before a security incident involving rsETH surfaced in the broader DeFi market. While the decision drew criticism from Ethereum loopers, it has since helped keep SparkLend free of fallout. Aave, meanwhile, is experiencing growing liquidity pressure across multiple networks, drawing renewed attention to collateral risk practices in decentralized lending protocols.
Spark removed rsETH from its approved collateral list in January, alongside several other low-usage assets. The protocol described the move as a deliberate effort to narrow its collateral scope and reduce risk.
The team also referenced ongoing efforts to keep the platform’s feature set streamlined, saying it was not a reaction to any emerging security event at the time.
Spark Strategy Lead MonetSupply.eth said the team placed user safety above business growth when making the call. In a post on X dated April 18, 2026, he explained that rsETH was deprecated to protect users across the product suite, even though the change led to lost users and lower 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 … it's also why we have continued to set a high max-rate on our…” — MonetSupply.eth (April 18, 2026)
Ethereum loopers, who rely on tighter borrow costs for leveraged strategies, began moving to Aave after the change. Aave had cut its maximum ETH borrow rate to 10% or below, making it more appealing for yield strategies, while Spark retained a higher rate ceiling on its ETH market during that period.
That approach kept rate-sensitive users away but left SparkLend’s risk profile more controlled. Over time, the protocol’s tighter collateral framework helped maintain steady ETH withdrawal liquidity, a position now drawing attention as conditions across competing platforms deteriorate.
Aave is currently facing ETH liquidity shortages across five major networks: Mainnet, Arbitrum, Plasma, Mantle, and Base. All of these markets are running at or near 100% utilization. Under those conditions, ETH withdrawals from these platforms are no longer possible.
MonetSupply.eth addressed the risk directly in his post on X, warning that a 15–20% drop in ETH prices could result in bad debt under current Aave conditions. He also noted that any losses from the rsETH exploit could add further strain on existing liquidity problems.
When markets reach 100% utilization, liquidations of ETH-collateral positions cannot occur. This exposes lenders to growing losses if ETH prices decline. Bad debt can build up quickly in this environment with no mechanism to clear it in real time. Protocols at full utilization also face reputational risk, as users may lose confidence in the platform’s solvency.
SparkLend, by contrast, continues to support ETH withdrawals without restriction. The protocol’s approach—once criticized as too conservative—has held up under genuine market pressure.
Spark has made no public announcement on future changes but signals a tighter product direction going forward.
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