A proposal to add Clearpool USDC Senior tranches as a new yield source for the idleUSDC Best Yield strategy.
- Leagues M3: Resurrection (M2 Report + M3 Structure, Goals & Budget) by @Teo
- Strategies Revamp: unused assets wind down by @Teo
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
Leagues (cheers to our devs) have worked on this and today we would like to discuss the first new yield source integration to the Best Yield strategy:
- Clearpool USDC (Wintermute) PYTs, with specs available on GitHub here
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:
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.
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 (Wintermute) pool is open since May 2022 and it has been part of the PYTs offering since July 2022. The USDC Wintermute pool has a size of $18m with an average utilization rate of 85%. Wintermute has a borrowing capacity on Clearpool of up to $760m.
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.
Currently, Wintermute pool provides 9% APY with an 80% - 85% 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 $746m for the Wintermute pool.
We are going to leave this thread open for comments regarding this change, and in about 24 hours, if there are no objections, we will proceed with the Temperature Check.