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%).
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.
No time limit
Until UR = 99% or < 95%
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.
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