Clearpool PYTs as a new yield source for BY

Author

Treasury League

Summary

A proposal to add Clearpool USDC Senior tranches as a new yield source for the idleUSDC Best Yield strategy.

References

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

Proposal

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:

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 (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 details

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.

Next steps

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.

5 Likes

Glad to see this proposal starting the governance process!

As you correctly pointed out, the introduction of Clearpool Senior PYT brings several benefits to both Best Yield and PYTs.

With the implementation of new underlying sources that outperform lending market returns, existing and future integrators can access improved Best Yield performances with no effort required.

4 Likes

Adding Clearpool Senior PYTs to BY makes complete sense, and it’s the first step towards the vision of an improved yield spectrum for our Best Yield.

BY allowed to create yield-bearing tokens that adapts to market conditions by adding and rotating underlying yield sources. In my opinion, the value of abstracting a user/integrator from yield sources is understated. Integrators started to build awesome stuff on top of BY’s idleTokens as a reliable yield source and are now a huge percentage of its TVL.

BY is a proven product. It just needs to continue doing what it does, better. Senior PYTs are the perfect element for this evolution. Junior PYTs will allow advanced users to provide first-loss capital to specific strategies, getting part of their profit while allowing BY’s idleTokens to keep a solid risk profile. And the amount of first-loss capital provided to one idleToken can also be used to determine the risk of the strategy, further down the road.

I’m glad to see two great products combining together and continuing doing what they do best but in a way that can improve our user experience and the yield profile of our product suite.

Great proposal, and thank you for getting the ball rolling @Biaf :muscle:

4 Likes

Temperature check voting

The voting phase for the Clearpool PYTs as a new yield source for BY starts now :ballot_box:

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

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

:alarm_clock: Polls will close on 2022-09-16T15:00:00Z

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! :writing_hand:

5 Likes

Temperature check results

Around 505k IDLE’s token holders voted in favour of the Clearpool integration into the Best Yield strategy.

We can then move to the formal on-chain voting phase.

3 Likes

The official IIP-26 has been published → Forum post

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

4 Likes