Clearpool PYTs as a new yield source for BY - Folkvang

[Biaf]

Author

Treasury League

Summary

A proposal to add the Folkvang Clearpool DAI Senior tranches as a new yield source for the idleDAI Best Yield vault.

References

• Clearpool PYTs as a new yield source for BY - Wintermute
• Leagues M3: Resurrection (M2 Report + M3 Structure, Goals & Budget)

Background

As @Teo reported in the Mandate 3 post, one of the goals of Leagues for the July - September period is to add new yield sources to the Best Yield strategy

@Teo

Prepare BY/PYTs next iteration

Simplify the product offering. Continue iterating, testing, and experimenting with the new PYTs design (like the Adaptive Yield Split), taking new yield sources into production (DeFi uncollateralized loans or decentralized options strategies), and ultimately implementing into the current BY a wider yield spectrum with PYTs Seniors (which will maintain BY’s high-security standard).

New Best Yield Architecture:

Other yield sources for PYTs like uncollateralized lending protocols, Decentralized Option Vaults, and more AMMs will be taken into consideration as new PYTs yield sources.

In general, this means a higher APY for Best Yield, and even more, boosted APYs for Junior PYTs.

Proposal

After the successful integration of the Wintermute Clearpool PYTs, today we want to open the discussion on a new integration: the Folkvang DAI Clearpool tranches.

• Clearpool DAI (Folkvang) PYTs, with specs available on GitHub here

Similar to Wintermute’s integration, Folkvang’s one would benefit doubly the DAI token holders

@Biaf

By integrating Clearpool USDC (Senior) tranches as a new yield source for the USDC BY strategy, we can create a two-side benefit for the Idle protocol:

1. The USDC BY strategy can add a new yield source, besides the usual Aave and Compound, able to offer an average APY in the 5% to 10% range.Currently, Aave and Compound offer APYs lower than 1%. This significant increase in yield can benefit current BY LPs and attract new users to the protocol.
2. The USDC BY funds flowing to the Senior side of Clearpool PYTs can create a stable source of funding for the Senior tranches and consequently incentive new Junior liquidity deployments thanks to the boosted APYs available (with an expected average APY in the range of 10% to 20%).

Perpetual Yield Tranches are live since December 2021 holding a cumulative TVL of up to $50m.

Clearpool (Folkvang) pool is open since May 2022 and it has been part of the PYTs offering since October 2022. The Folkvang pool has a size of $9m with an average utilization rate of 84%. Folkvang has a borrowing capacity on Clearpool of up to $151m, i.e. the second largest borrower on Clearpool.

To provide a wider stablecoin offering, users can deposit DAI into the Folkvang PYTs. This smart contract will leverage the Peg Stability Model (PSM) of Maker DAO to swap 1:1 DAI to USDC, avoiding any slippage or impermanent loss risk.

Currently, Folkvang pool provides 8.88% APY with an 84% utilization rate (source). Thanks to Clearpool’s first-of-its-kind formula, APYs can be maintained stable by high pool utilization up to borrower capacity - equal to $151m for the Folkvang pool.

Clearpool details

@Biaf

Clearpool developed an interest curve mechanism that encourages borrowers to optimally utilize liquidity in their pools while increasing lenders’ compensations.

Clearpool’s smart contracts have been developed to incorporate a number of safety measures which protect both borrowers and lenders during black swan events. Clearpool’s pools have a default mechanism based on each pool utilization rate which forces borrowers to repay loans if the pool’s utilization rate is too high.

Utilization rate	Pool status	Time limit
< 95%	Active	No time limit
> 95%	Warning	Until UR = 99% or < 95%
> 99%	Provisional default	120 hours

The underlying yield generated by Clearpool is mainly composed of organic lending returns, limiting APY dilution with liquidity growth.

Next steps

We are going to leave this thread open for comments regarding this change, and in about 72 hours, if there are no objections, we will proceed with the Temperature Check.

[Biaf]

Here’s a Medium article overview about the PYTs integration as yield sources into BY

Take a look

Beyond The Yield Spectrum: bringing aggregation to PYTs

[Biaf]

Update

The bootstrap liquidity phase for this pool is taking longer than expected, hence we have decided to delay the voting phase.

Once successfully bootstrapped, we will open the pools

Feel free to share anyway any feedback you might have about this pool.

[Biaf]

Update #2

With the aim to speed up and facilitate liquidity deployment and make BY and PYTs ready to onboard new capital, we will open today the temperature check for the integration of the Folkvang DAI (Senior) PYTs into BY.

The Governance vote (from proposal discussion to IIP execution) can take up to 15 days and could end up being a blocker for new liquidity deposits. Opening sooner the Temperature Check could let the DAO share his preferences about a new integration while Leagues are working to develop and bootstrap a new pool.

A positive integration vote would not mean that the pool will be receiving BY funds right after. Some minimum requirements will still be needed:

• A minimum liquidity threshold in the pool.
• Sufficient coverage from Junior funds to Senior ones.

We are also working to provide a concise and common framework of minimum requirements to have Senior PYTs integrated as yield sources of BY to be used in future votes.

[Biaf]

Temperature check voting

The voting phase for the Folkvang Clearpool DAI PYTs integration as a new yield source for BY starts now

• For - Agree with the Folkvang Clearpool PYTs listing as a new yield source for BY
• Against - Disagree with the Folkvang Clearpool PYTs listing as a new yield source for BY

Poll for $IDLE holders: HERE
Poll for $IDLE stakers (stkIDLE holders): HERE

Polls will close on 2022-11-10T14:30:00Z

The final $IDLE voting weights will be calculated using the approved calculator.

Looking to delegate your vote on Snapshot? Follow the official Snapshot guide.

Let your vote count!

[Biaf]

Temperature check results

Temperature Check passed

The proposal for integrating Clearpool’s Folkvang’s PYTs to the idleDAI BY vault is now ready to hit the on-chain phase!

[Biaf]

The official IIP-27 has been published → Forum post

Visit the forum post, to find the links to the voting pools for IDLE and stkIDLE holders.