Summary
This proposal recommends listing Spark’s sUSDC and sUSDS on Euler’s Arbitrum market as both collateral and a borrowable asset. Enabling these assets expands Euler’s suite of offerings for blue-chip stablecoin yield and aligns with Euler DAO’s strategy to partner with Sky and its Stars. Spark’s assets introduce a liquid, blue-chip source of yield to Arbitrum users and directs borrowing demand to the other stablecoins in the market.
By integrating sUSDC and sUSDS, Euler captures the strategic benefits of the Spark Liquidity Layer on Arbitrum and ensures stablecoin suppliers can earn Spark’s native yield even if prevailing market rates fall. Recently sUSDC was successfully listed on Euler Unichain, gathering >35M in supply over 3 weeks. Given prudent risk management, onboarding sUSDC and sUSDS on Euler Arbitrum is both safe and beneficial to the market’s growth.
Fundamentals
sUSDS and sUSDC are yield-bearing stablecoins issued by Spark that acts as a savings token earning the Sky Savings Rate (SSR). It is an ERC‑4626 vault token that allocates capital across DeFi through the Spark Liquidity Layer (SLL) in DeFi strategies such as lending protocols, tokenized T-bills, and other low-risk yield sources.
The underlying stablecoin, USDS, is overcollateralized by a mix of assets. Spark’s Peg Stability Module (PSM) allows USDS to maintain a stable 1:1 redemption path to USDC, acting as source of onchain redemption liquidity without fees or slippage. Spark currently maintains $10 million in PSM liquidity on Arbitrum to support instant redemptions.
Combined, sUSDS and sUSDC account for more than $1.6B in total deposits, with the SSR standing at 4.5%. Its growth reflects increasing user preference for stable, low-risk yield within Spark’s multichain savings layer. sUSDS has active deployments across Ethereum, Arbitrum, Base, and Optimism.
There are no other significant yield-bearing stablecoins active on Arbitrum at this time, positioning sUSDS to capture a first-mover advantage in this category. Additionally, sUSDS’s predictable yield structure makes it well-suited for looping strategies on Euler DAO’s Arbitrum market, offering users stable passive income with minimal exposure to fluctuating returns.
Liquidity
Current on-chain data shows that sUSDS does not have significant external DEX liquidity on Arbitrum. Instead, sUSDS’s primary liquidity is managed via Spark’s Peg Stability Module (PSM), which currently holds $10 million in USDC reserves on Arbitrum (based on Spark’s Savings dashboard) to directly support 1:1 redemptions of sUSDS to USDC. A review of recent Arbiscan transactions confirms that most sUSDS redemptions are actively processed through the PSM, with frequent rebalancing and redemption flows between the PSM and Spark’s sUSDC vaults. Given the limited DEX liquidity and consistent PSM activity, it is clear that the PSM serves as the primary redemption path for sUSDS on Arbitrum.
Risk Recommendations
Based on the fundamental and economic indicators of sUSDS we would like to recommend the following risk parameters for its integration on Euler Arbitrum.
Caps
| Asset | Supply Cap | Borrow Cap |
|---|---|---|
| sUSDC, sUSDS | 10M | 8M |
These caps are within the current $10M PSM liquidity buffer, ensuring that redemptions can be comfortably serviced even under high utilization. This allows for early growth while mitigating systemic exposure in the event of large redemptions or whale movement. Caps can be reviewed and increased as holder distribution improves and market demand grows. With the right IRM we observe that borrowers sometimes choose sUSDC (e.g. on Euler Unichain) as their debt asset because of the more stable borrow rate.
LLTVs
| Collateral | Debt | LLTV |
|---|---|---|
| sUSDS, sUSDC | WETH | 84% |
| sUSDS, sUSDC | wstETH | 82% |
| sUSDS, sUSDC | weETH | 81% |
| sUSDS, sUSDC | WBTC | 84% |
| sUSDS, sUSDC | USDC | 96% |
| sUSDS, sUSDC | USD₮0 | 94% |
| sUSDS, sUSDC | ARB | 65% |
| WETH | sUSDS, sUSDC | 84% |
| wstETH | sUSDS, sUSDC | 82% |
| weETH | sUSDS, sUSDC | 81% |
| WBTC | sUSDS, sUSDC | 84% |
| USDC | sUSDS, sUSDC | 96% |
| USD₮0 | sUSDS, sUSDC | 94% |
| ARB | sUSDS, sUSDC | 65% |
| sUSDC | sUSDS | 94%* |
| sUSDS | sUSDC | 94%* |
In line with the rest of the market, Objective Labs recommends that the borrow LTV should be set to two percentage points less than liquidation LTV.
*Table amended on 07 July 2025 for completeness.
Interest Rate Model
| Vault | Base rate | Kink | Rate at kink | Rate at 100% (max) |
|---|---|---|---|---|
| sUSDC, sUSDS | 0% | 80% | 1.5% | 40% |
Following the successful onboarding of sUSDC on Unichain, we propose the same IRM configuration on Arbitrum. The kink is intentionally lowered to 80% (from the standard 90%) to minimize tail risks associated with PSM liquidity crunches during periods of high utilization.
Oracles
We propose using an exchange rate oracle via sUSDS’s ERC-4626 convertToAssets method, by setting sUSDS as a resolved vault in the Euler oracle router. This configuration ensures that the price ultimately resolves down to USDC, leveraging the same oracle source used for USDC across Euler markets. This oracle strategy is sound as the convertToAssets method continuously applies the Sky Savings Rate (SSR), is not vulnerable to donation attacks due to its synthetic exchange rate calculation, and is not constrained by the PSM’s instantaneous liquidity. This approach follows the same structure as the sUSDC oracle setup on Unichain and maintains consistent pricing integrity for sUSDS within the Euler system.
References: