SparkDeFi White Paper
SparkPoint Decentralized Finance Platform
Table of Contents
- Market Opportunities
- SparkDeFi Ecosystem Security and Architecture
- Regulatory Risk or Compliance
- Technical Issues with Smart Contracts
- Network Security
- SFUEL Token Economics
- Moving Forward
There is a significant paradigm shift that is happening now in the financial world. Banks have traditionally always been the money guardians of the people. However, the events that transpired during 2020 has shown that various transactions in people's lives can be simplified and moved online. Some new innovative technologies and tools were developed recently that can meet the financial needs of the people. One of these new technologies is DeFi, which has the potential to disrupt the function of banks as middlemen.
Decentralized Finance (DeFi) is the future of banking. DeFi is a type of money market that can provide the user with income through interest, or the user can borrow assets against collateral. These are products or services that aim to mimic the products and services that already exist in the traditional financial world. So far, DeFi's Total Value Locked (TVL) has reached 12B USD in assets. These assets are called cryptocurrency assets because it is in the form of digital tokens.
DeFi is a type of futuristic economical management system that supports and delegates full financial control to its users, without the need for financial intermediaries. It seeks to transform the current financial management model’s intensive reliance on centralized fiscal authorities. Moreover, DeFi advocates for the creation of transparent and accessible banking tools for the inclusive and encompassing usage of those seeking to avail of financial services.
Considered by financial experts as innovative, DeFi seeks to further consolidate the financial products and services offered by centralized banking authorities for the people seamlessly.
One of the online platforms that offer Decentralized Finance solutions is SparkDeFi. SparkDeFi operates with the notion that not every person is skilled in yield farming. Decentralized Finance and yield farming go hand in hand because the latter is the most familiar approach that makes DeFi trustless and high-yielding.
SparkDeFi utilizes computer programs for yield farming, otherwise known as “liquidity mining.” These programs make it easy for beginners in cryptocurrency and more convenient for the experienced ones. The user can reap rewards by locking up cryptocurrency.
SparkDeFi is a governance token-based DeFi platform that empowers individuals to unlock the true value of their cryptocurrency assets. It offers a Decentralized Exchange (DEX), Multi-Staking, P2P Lending and Borrowing, and DeFi Assets Protocols Management in a seamless, transparent, secure, inclusive, and interoperable approach.
With DeFi having the potential to disrupt the future of the global economy, here are some of the revolutionary concepts of the SparkDeFi platform that could catapult the world of finance management to new heights.
1. SparkSwap Decentralized Exchange (DEX)
SparkSwap Decentralized Exchange (DEX) has a “one-stop-shop” DeFi experience. Instantly swap multiple cryptocurrencies in a trustless and decentralized manner. Earn from the transaction fees when the user provides liquidity.
A. Liquidity Staking
Staking using cryptocurrency is one of the methods to gain more rewards using digital assets. This is the reason why liquidity staking made a name in cryptocurrency mining and trading. It allows purchasing and permits the user to hold cryptocurrency that guarantees profits and rewards.
Necessarily, the changes brought by cryptocurrency are adapted and practiced in this modern world. Cryptocurrency technology illustrates and exposes the borderless distributions of a blockchain product. Related to this is the occurrence of Proof of Stake (PoS) coins that the user can earn without having the Proof of Work (PoW).
Yield farming is a recommended practical and functional use case in DeFi. Knowledge can also be gained from participating in this activity. For instance, in liquidity staking, users can learn about different decentralized finance protocols and supported cryptocurrencies.
B. Pool-Based Staking
In SparkDeFi, users are encouraged to participate in the SRK and SFUEL staking pools and earn SRK or SFUEL rewards. By participating, users can stake SRK tokens or SFUEL in the regular pool-based staking and collect SRK or SFUEL rewards regularly.
Staking pools are safe. All the user needs to do is a stake. It is considered profitable as mining and trading cryptocurrency. This indicates that the profits the user will earn will be paralleled to his money and how long he has been engaging in the staking pool. The more the user stake, the more massive profits he can look for.
The pool operator manages the staking pool by having chosen a specific pool. This specific pool might have stakeholders who desire to participate in the pool and invest their coins in a particular blockchain address or money. However, there can be an appearance of a third network. This makes it possible for some pools to require their users to participate in their staking process while regulating their wallet-coin consistently.
Working or staking coins alone would not help the stake grow. If a block requests to get the user’s stake, the blockchain will find a suitable staking wallet to do it. Therefore, the user’s staking wallet has a small number of chances to be chosen and get validated by the block. Hence, a single staking pool can only receive not more than 1.0% of the total staking rewards. After splitting the rewards among participants in the pool, some charges will be counted and deducted after the final payout.
If the user genuinely understands the staking pool and consistently take a part in it by contributing coins, there is a high chance for the staking pool to be chosen and get block verification. It gets a higher value than their wallets/pool. This means that the user is more primed for obtaining more rewards.
3. P2P Lending and Borrowing
In SparkDeFi, it is allowed to use altcoins and Non-Fungible Tokens (NFTs) or cryptocollectibles such as game items, virtual estate, and digital artworks as collateral. The platform enables microlending to democratize finance and promote financial inclusion. This ensures that the user consistently generates a stream of cash flow through the liquidity savings pool.
Read The Growing Popularity of NFTs section to learn why SparkDeFi is supporting NFTs.
Aside from pioneering a new system for finance management, DeFi also establishes a system of money lending and borrowing with a ton of upside packaged into the deal.
For instance, the demand and further growth for lending services propel DeFi’s service capability and ensures hassle-free debt systems. The growth of the DeFi lending-borrowing system comes, in part, with the constant marking-down of technological fees. This in return makes the revolutionary debt model to be further inclusive and non-punitive to borrowers.
Substantiating the previously-raised point, DeFi’s debt set-up typically has lower overhead costs. In comparison with the traditional system, DeFi indeed has the cost advantage. This is due to the widespread usage of tech and data, accustoming the new system to have less “brick and mortar” results. Thus, the yielding of the capability to work for lower interest returns.
Similarly, the DeFi-jointed loan-borrow structure gives greater access to capital. This is especially helpful for borrowers who are not yet credit-rated by traditional financial authorities. In a way, DeFi helps these small and medium-sized enterprises (SMEs) to gather capital by providing seamless and relevant methodologies.
Unlike the prevalent traditional system in place, DeFi’s way of loaning relies on the market-driven sphere of the consumers. Operating on the dogma of transparency and market opinion, the supporters of the said DeFi institutions have the final say whether a start-up business is worthy to receive funding. In this regard, the progressive orientation of lending and borrowing outright challenges the quo of traditional institutions to provide financial aid.
4. DeFi Assets Protocols Management
Users can seamlessly access and connect to various SparkDeFi projects for an end-to-end DeFi experience. Furthermore, the user can easily manage assets portfolio and collateralized debt positions (CDPs) in a simple and user-friendly dashboard.
Bitcoin and many other digital-native assets stand out from traditional digital payment methods, such as those run by Visa and PayPal, in removing middlemen from the transaction. Also, when the user pays with a credit card for the coffee bill a financial institution sits between the user and the business. This provides control over the transaction, retaining the authority to stop or pause it and record it in its private cut out of the price.
Applications in cryptocurrency or blockchain technology lean towards disrupting financial intermediaries. DeFi is the term that draws from the blockchain technology behind the digital currency yet very famous “Bitcoin”. DeFi is distinct because it expands the use of the blockchain from very simple to more complex financial use cases.
Also, the protocol aims to introduce a novel incentive structure that promotes holding the token and providing liquidity on exchanges.
5. Decentralized Governance
Governance in a DeFi platform is achieved through a Decentralized Autonomous Organization (DAO). It is an organization that is governed by computer code and programs. DAO can function anonymously, without the need for central authorities. It is operated by a community of stakeholders incentivized through a token mechanism.1
In SparkDeFi, SFUEL holders will decide the trajectory of the SparkDeFi platform through voting power on certain economic factors such as interest rate, collateral, Loan-to-Value (LTV) ratio, inflation, and liquidity pool rewards. SFUEL holders who participate in SparkDeFi governance for its continuous improvement will be rewarded with SFUEL rewards.
The Rise of DeFi
The great potential of DeFi bloomed in 2020. The cryptocurrency world welcomed the wave of DeFi applications in blockchain technology. With this, it has exploded in popularity since cryptocurrency users around the globe can make use of traditional financial services with just an internet connection and a cryptocurrency wallet.
However, the rise of DeFi did not start with the decentralized applications. DeFi started with the forerunner of blockchain technology and cryptocurrency, Bitcoin. It was the first implementation of DeFi because it enabled people to make financial transactions with other individuals without the need for banks in the digital age. Bitcoin and other cryptocurrencies were the first waves of DeFi.
The second wave of DeFi was actualized by the Ethereum blockchain which added another layer of programmability on top of it. This led several individuals and businesses to develop their decentralized applications on the said blockchain.2
In November 2020, investments in DeFi had reached $12.86B from the previous $690M in January 2020.3 In 10 months, DeFi showed exponential growth.
The Growing Popularity of NFTs
Non-fungible tokens (NFTs) are cryptographically secure tokens, featuring unique properties and data within the smart contract of the token.4 An NFT is a tokenized version of an asset, digital, or otherwise. It is similar to stablecoins, for example, but is used to represent non-fungible assets like artwork, real estate, or collectibles instead of a fiat currency.5
It all started with the rise of CryptoKitties, a blockchain game developed by Axion Zen on Ethereum. The hype developed a substantial following, and at one point, even reached a skyrocketing $100,000 for a single digital feline collectible item. However, with the recent developments, NFTs have become more than just a feline gaming currency. It has become more diverse. And with the integration of Kakao into the said crypto-token, we could only theorize what could be the future of NFTs. If anything else, the bright history of the NFT is an indication of what it could be, if it is to be further expanded soon.
NFTs have all the characteristics of the other cryptocurrencies, e.g. Bitcoin, Ethereum, Dogecoin, with one distinct feature—its unique identification. This stark attribute prevents the token to be interchanged with an identical one. This, in return, creates an effect of scarcity and digital ownership.
Likewise, the said token is ERC-721 compliant. This outlines that every token birthed by the crypto is said to be unique. To exemplify, it can be likened to a one-of-a-kind collectible memorabilia.
Compared to the regular ERC-20 compliant cryptos, NFTs, with their ERC-721 compliance, could pave the way for acquiring significant assets through tokenization. Moreover, the ERC-721 label allows users to trade in market exchanges.
A decentralized exchange (DEX) is a peer-to-peer (P2P) online service that allows direct cryptocurrency transactions between two interested parties.6 It is similar to the stock exchange of its centralized counterpart, however; some of the differences are it is operated by a smart contract which allows a DEX to function without central authorities and, it enables its users to trade cryptocurrencies instead of fiat currencies and without central authorities.
P2P Lending and Borrowing
By 2022, the global peer-to-peer lending market is estimated to increase by almost 52% per year, reaching $460 billion in value. This is according to the 2017 report of Allied Market Research.
One of the advantages of peer-to-peer or “P2P” is that its financing may be obtained from many different investors or lenders ranging from individuals to institutional investors.
P2P is beneficial because of the low cost of technology. The platform uses such technology in several ways. One example is when an internet interface could be used to onboard borrowers and lenders. The algorithms could automate the assignment of credit scores, and algorithms could automate the selection and diversification of loan investments by the lenders.
The P2P lending platforms prioritize SMEs and start-ups. These businesses are traditionally served by banks, as well as consumers, to attract capital more quickly.
The post-crisis environment of low-interest rates and very low or even negative yields on sovereign bonds has led investors to look for alternative investments with potentially higher yields. Loans facilitated by P2P lending platforms typically offer those higher returns, though they may come with higher risk.
The P2P lending allows individual investors to invest in, or extend P2P loans, a segment previously limited to primarily institutional investors, or holders of lending licenses. This is what you call risk diversification.
The P2P lending can provide credit to borrowers, especially SMEs, that do not have access to bank loans. This, in effect, increases the total loans provided to the small business sector. The same lending platforms have cost advantages compared to banks. Their overhead costs are low since they leverage technology and data, and have less “brick and mortar” related costs. As a result, they can work with low-interest margins.
The P2P lending platforms have provided individual investors with a new assets in the form of uncollateralized debt. Individual investors can spread small sums of money across many loans at a low cost. This is one of the features that can be obtained in SparkDeFi.
Forwarding a new type of loan and debt system, DeFi pushes to fill the gaps of the traditional system—which is especially found in the lend-borrowing system by mainstream financial models.
Lack of Interoperability
The gap in interoperability is one of the challenges present in DeFi. This challenge stems out from the siloed ecosystem created by blockchain technology. Different blockchain networks have different communities, consensus, and hashing algorithms which make standardization and collaboration tricky.7 In short, blockchain networks are highly fragmented and disconnected. Each of the blockchain networks specializes in different capabilities making communication among the blockchain networks non-existent.
The lack of interoperability with blockchain networks creates a clumsy user experience. For example, the user is planning to transact on the Ethereum network with his Bitcoin but to use Bitcoin on the Ethereum network he needs to convert his Bitcoin to Ether using a cryptocurrency exchange. This method is not only time-consumptive but expensive and frustrating for the user. With this, creators of DeFi platforms must create interoperable solutions to fully unlock the true value of DeFi.
Non-inclusive Approach to P2P Lending
More than two billion people remain financially excluded in the world.8 In most developing countries, more than two-thirds of the adult population has no access to formal financial services, and in sub-Saharan Africa, financial exclusion is as high as 76%.9 This means that these excluded people have limited access or no access at all to the services offered by traditional finance.
These people are usually situated in rural areas or they have limited sources of income thus most of the banks opt not to work with them as clients. One of the primary reasons often given by banks is that these customers would not be profitable. According to one study, it costs a bank $250-$400 to open and maintain a bank account for a person.10
Due to this limitation of being unbanked, those excluded do not have access to credit facilities of traditional finance because they do not have the financial track record or credit-worthy assessment associated with them. Furthermore, the high collateral requirement of traditional financial services inhibits them from applying for loans. So, every time they encounter cash flow problems the financially excluded people resort to highly volatile loans.
Limited Crypto Assets as Collateral
Most of the DeFi lending platforms available today utilize altcoins or governance tokens as a form of collateral for loans, leaving Non-Fungible Tokens(NFTs) and other crypto-collectibles like game items, virtual estate, and digital as untapped digital assets for collateral.11, 12
Hence, the meager selection of crypto assets available for collateral in current DeFi lending vehicles limits the usage and maximization of the user’s digital portfolio.
Costly and Inefficient Credit Risk and Assessment
Peer-to-peer lending also attracts borrowers who, because of their credit status or the lack thereof, are unqualified for traditional bank loans. Because past behavior is frequently indicative of future performance and low credit scores correlate with a high likelihood of default, peer-to-peer intermediaries have started to decline a large number of applicants and charge higher interest rates to riskier borrowers that are approved.13
Over-collateralization of loans exists in DeFi platforms due to the high market price volatility of cryptocurrency assets. Therefore, the biggest factor in obtaining a loan in a DeFi platform is how much cryptocurrency the borrower can provide.14 To safeguard the lenders from the price volatility of cryptocurrencies, most of the loans are over-collateralized. As of July 2020, the standard collateral ratio size in DeFi borrowing or lending services is 300%. 15 The high collateral ratio hampers the goal of DeFi which is to make financial services to everyone.
During the Ethereal Virtual Summit 2020, many high-profile panelists proposed that having a low collateral ratio will solve the issue of over-collateralization which in return will result in a higher adoption rate of DeFi. 16
SparkDeFi addresses the lack of interoperability by choosing Binance Smart Chain to power its platform because it can support users across multiple blockchains. Binance Smart Chain is a blockchain that runs parallel to the Binance Chain. Binance Smart Chain has cross-chain compatibility that allows users to smoothly transfer assets from one blockchain to another. 17 Thus, SparkDeFi through the cross-chain architecture of Binance Smart Chain allows the transfer of cryptocurrency assets among blockchain networks seamless.
Innovative P2P Lending
SparkDeFi revolutionizes P2P Lending by allowing various cryptocurrency assets like altcoins, Non-Fungible Tokens (NFTs), and crypto-collectibles like game items, virtual estate, and digital art as collateral which are currently untapped by the existing DeFi lending protocols.
SparkDeFi supports financial inclusion by offering a more all-encompassing approach in terms of lending. These approaches include a lower barrier to entry, minimal loan-to-value (LTV) ratio, and microlending which serves as another provision in solving over-collateralization through small, low-interest loans to borrowers. Furthermore, the adoption of a trust score enabled by smart contracts is considered to eventually forego the need for collateral in P2P Lending.
SparkDeFi Ecosystem Security and Architecture
SFUEL Token Economics
The SFUEL is SparkDeFi’s governance token with a total supply of 150,000,000.00 (one hundred fifty million) tokens. The SFUEL will be launched as a BEP20 token on the Binance Smart Chain in Q4 of 2020. For the sake of proper structuring, the governance of SparkDeFi will be delegated to SFUEL holders. The Decentralized Autonomous Organization (DAO) members are responsible for the direction of the protocol via systematic voting.
Utilities and Use Cases
1. SparkDeFi DAO
Decentralized governance is one of the most important aspects of the SparkDeFi ecosystem. SFUEL holders can govern and decide the trajectory of the SparkDeFi platforms by giving them voting power on certain economic factors such as interest rate, collateral, Loan-to-Value (LTV) ratio, inflation, and liquidity pool rewards. This keeps the platform more secure, flexible and continuously evolving. Each SFUEL token is equivalent to one vote, so owning more SFUEL tokens entitles holders to more votes.
2. Mode of Payment
SFUEL tokens will be used for paying the platform’s fees in SparkDeFi either in the form of interest income for the lenders and savers or interest payments from the borrowers.
3. Staking Rewards
SFUEL tokens will be used as rewards in our Liquidity Mining or Savings Pool when users stake either SFUEL or SRK pairs.
4. Governance Incentives
SFUEL holders who participates in SparkDeFi governance for its continuous and sustained improvement and growth are entitled to SFUEL rewards.
|Private Sale||28,333,350||18.8889%||6 months vesting and 16.67% monthly distribution|
|Early Supporters||1,666,650||1.1111%||3 months vesting and 33.33% monthly distribution|
|Liquidity and Staking Rewards||75,000,000||50%||In accordance with staking rewards program schedule|
|Team||15,000,000||10%||2 years cliff and 5 years vesting with 20% yearly distribution|
|Marketing and Community Airdrops||15,000,000||10%||Locked at TGE and distribution details will be announced|
|Reserve||15,000,000||10%||Locked up for the next 5 years|
Token Distribution Plan
Expected Use Of Funds
Initial Market Cap
Our team is looking to raise funding this year to be able to focus on the development and launch of the SparkDeFi platform in 2021. SparkDeFi’s various products will be launched in stages starting with the SFUEL and SRK Liquidity Mining which will launch before the end of this year.
Next is our own DEX, SparkSwap, which will launch in Q1 2021. Then our P2P Lending and Borrowing platform will launch in Q3 2021. Our fourth and final SparkDeFi product is our DeFi Protocols Management platform which has a target testnet launch of Q4 2021 and a mainnet launch in 2022.
One of the biggest pain points that we’ve learned in DeFi is the cost and speed of transactions. Because of this, our team has decided to launch SparkDeFi on Binance Smart Chain to take advantage of its speed and lower cost. Our team will also benefit from Binance’s strong support of the developer community. In this regard, we’ve submitted our interest to apply for a slice of their $100M Support Fund.
SRK holders will benefit from the SparkDeFi platform because the SRK token will also be utilized in its staking, swapping, and P2P lending solutions. As early supporters of the SparkDeFi platform, SRK holders will be given priority in the private sale. They are entitled to a quarterly airdrop distribution beginning this Q4 2020. Deflationary token model.
Revenue from transaction fees.
- Andy Agnas, CPA - CEO
- Rico Zuñiga - CTO
- See Team Page
Official Support Channels
8 Robert Cull, Asli Demirguc-Kunt, Jonathan Morduch, ‘Banking the World: Empirical Foundations of Financial Inclusion’, Massachusetts Institute of Technology, 2013.
9 Klapper and Demirguc-Kunt, ‘Measuring Financial Inclusion: The Global Findex Database’, World Bank Policy Research Paper 6025, 2012.