# Euler staking PYTs as new yield sources for BY **URL:** \ **Category:** 📑 Formal Proposals\ **Created:** [January 18, 2023, 4:53pm UTC](https://gov.pareto.credit/t/euler-staking-pyts-as-new-yield-sources-for-by/1105 "2023-01-18T16:53:20Z")\ **Posts on this page:** 1\ **Showing post:** 1
**Author:** ![Biaf](https://yyz1.discourse-cdn.com/flex031/user_avatar/gov.pareto.credit/biaf/32/213_2.png) [@Biaf](https://gov.pareto.credit/u/Biaf)\ **Post date:** [January 18, 2023, 4:53pm UTC](https://gov.pareto.credit/t/euler-staking-pyts-as-new-yield-sources-for-by/1105/1 "2023-01-18T16:53:21Z")
### Author Treasury League ### Summary A proposal to add the Euler staking Senior tranches as new yield sources for the Best Yield strategy. ### References - [Clearpool PYTs as a new yield source for BY - Wintermute](https://gov.pareto.credit/t/clearpool-pyts-as-a-new-yield-source-for-by-wintermute/1056) - [Clearpool PYTs as a new yield source for BY - Folkvang](https://gov.pareto.credit/t/clearpool-pyts-as-a-new-yield-source-for-by-folkvang/1066) ## Background As stated by @Teo in the [M3-2022’s post](https://gov.pareto.credit/t/leagues-m3-resurrection-m2-report-m3-structure-goals-budget/1028) and in the [M1-2023 roadmap presentation](https://gov.pareto.credit/t/leagues-m1-2023-milestones-m4-2022-recap/1099), Leagues are focusing to add new yield sources to the Best Yield strategy > [@Leagues M3: Resurrection (M2 Report + M3 Structure, Goals & Budget)](https://gov.pareto.credit/t/leagues-m3-resurrection-m2-report-m3-structure-goals-budget/1028/1): > > _New Best Yield Architecture:_ > > ![image](https://canada1.discourse-cdn.com/flex031/uploads/idle/original/1X/adba2471ef5f4c94d48b5c1c20cde5ba88122e7a.png) > > 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. > [@Leagues M1-2023: Milestones & M4-2022 Recap](https://gov.pareto.credit/t/leagues-m1-2023-milestones-m4-2022-recap/1099/1): > > #### Keep evolving BY+PYTs > > […] > > For M1-2023, we are going to focus on building the segregated pools layer and, when we see a fit, we will be moving up to the other layers. > > ![](https://canada1.discourse-cdn.com/flex031/uploads/idle/original/1X/17aae13cbd67beb24ce10f428332a6906deaf203.jpeg) Following this roadmap, in 2022, the DAO agreed to add two new yield sources to the BY strategy, specifically - The Senior Tranche of the [Clearpool USDC (Wintermute) PYTs](https://app.idle.finance/#/earn/protected-yield/0xb86264c21418aa75f7c337b1821ccb4ff4d57673) through [IIP-26](https://gov.pareto.credit/t/iip-26-clearpool-pyts-as-a-new-yield-source-for-by-wintermute/1057) - The Senior Tranche of the Clearpool DAI (Folkvang) PYTs through [IIP-27](https://gov.pareto.credit/t/iip-27-clearpool-pyts-as-a-new-yield-source-for-by-folkvang/1079) Funds were successfully routed to the Clearpool uncollateralized lending markets and generated more performing yields. With [IIP-30](https://gov.pareto.credit/t/iip-30-assets-by-delisting-by-yield-sources-update-governor-update/1098), the DAO voted to delist these two Senior tranches as BY’s yield sources after the market makers closed their borrowing positions on Clearpool. This action aimed also to reduce the computational burden on the BY strategy. > [@\[IIP-29\] Assets BY delisting, BY yield sources update, Governor update](https://gov.pareto.credit/t/iip-29-assets-by-delisting-by-yield-sources-update-governor-update/1096/1): > > ### 2. Update the yield sources of the Best Yield strategy > > Through [IIP-26](https://gov.pareto.credit/t/iip-26-clearpool-pyts-as-a-new-yield-source-for-by-wintermute/1057/3) and [IIP-27](https://gov.pareto.credit/t/iip-27-clearpool-pyts-as-a-new-yield-source-for-by-folkvang/1079/11), Idle DAO approved the Clearpool Senior PYTs as new yield sources, in addition to Aave and Compound, for the BY’s USDC and DAI markets > > > [@\[IIP-26\] Clearpool PYTs as a new yield source for BY - Wintermute](https://gov.pareto.credit/t/iip-26-clearpool-pyts-as-a-new-yield-source-for-by-wintermute/1057/1): > > > > IIP-26 actions: > > > > - Add Senior tranche of cpWIN-USDC PYT as a new yield source for idleUSDC Best Yield strategy > > > > Together with the above action, IIP-26 will set a new wrapper contract for the Clearpool USDC pool: `0xdb1b149177b5819cf467ad6519cf55416789300a` > > > [@\[IIP-27\] Clearpool PYTs as a new yield source for BY - Folkvang](https://gov.pareto.credit/t/iip-27-clearpool-pyts-as-a-new-yield-source-for-by-folkvang/1079/1): > > > > IIP-27 actions: > > > > - Add Senior tranche of cpFOL-DAI PYT as a new yield source for idleDAI Best Yield strategy > > > > […] > > > > Together with the above action, IIP-27 will set a new wrapper contract for the Clearpool Folkvang DAI pool: `0x67e78ED1cC4732816816A62F2e99CDC5CfaAc06E` > > Following the FTX collapse, both borrowers, i.e. Wintermute for the USDC market and Folkvang for the DAI one, fully repaid their loans to reduce their market exposure (i.e. utilization rate = 0%). > > Removing these two markets from the Best Yield strategies yield source base will reduce computational complexity and gas costs in managing the allocation, harvesting and movement of funds. These markets could be later added again to the Idle Best Yield if the utilization rate will increase. ## Proposal Today we want to open the discussion on some new integrations: the **[Euler staking](https://app.euler.finance/staking)** PYTs - [Euler staking PYTs for the USDC, USDT and WETH markets](https://app.idle.finance/#/earn/protected-yield), with specs available on GitHub [here](https://github.com/Idle-Labs/idle-tranches/blob/master/contracts/strategies/euler/IdleEulerStakingStrategy.sol) Similar to previous integrations, Euler staking ones would benefit doubly the Idle ecosystem > [@Clearpool PYTs as a new yield source for BY - Wintermute](https://gov.pareto.credit/t/clearpool-pyts-as-a-new-yield-source-for-by-wintermute/1056/1): > > 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](https://app.aave.com/reserve-overview/?underlyingAsset=0xa0b86991c6218b36c1d19d4a2e9eb0ce3606eb48&marketName=proto_mainnet) and [Compound](https://compound.finance/markets/USDC) 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%). Currently, the Euler staking markets offer the following returns | Token | Supply APY | Staking APY | Base APY | | --- | --- | --- | --- | | eWETH | 1.59% | 1.96% | 3.55% | | eUSDC | 1.84% | 4.24% | 6.08% | | eUSDT | 2.05% | 2.84% | 4.89% | We could then expect to have Senior PYTs returns in the 2-3% range. Euler hit the mainnet in [December 2021](https://ca.finance.yahoo.com/news/euler-finance-launches-defi-lending-141124672.html). Euler’s Perpetual Yield Tranches are live since [June 2022](https://medium.com/idle-finance/euler-pyts-next-gen-risk-adjusted-lending-markets-e00891109fb7). Given the decrease in pure lending rates, the Euler markets on Idle did not get a strong market interest. We see this proposal, also, as a way to invest in a partnership we value. ### Euler details > Euler is a non-custodial permissionless lending protocol on Ethereum that helps users to earn interest on their crypto assets or hedge against volatile markets without the need for a trusted third party. > > Euler protocol features a number of innovations not seen before in DeFi, including permissionless lending markets, reactive interest rates, protected collateral, MEV-resistant liquidations, multi-collateral stability pools, and much more. From the security perspective, Euler has been committed to develop various safe mode measures and introduced the [Oracle Risk Grading System](https://blog.euler.finance/eulers-oracle-risk-grading-system-93f47d68205c). This mechanism empowers EulerDAO to enable lending and borrowing on any ERC-20 token thanks to Uniswap v3 TWAP (Time Weighted Average Price). The risk system estimates the oracle manipulation cost, allowing tokens to unlock specific functionalities (e.g. collateral) only above a certain security score. ### Euler staking details With [eIP-24](https://forum.euler.finance/t/eip-24-update-the-eul-distribution-scheme/462) of November 2022, the Euler DAO decided to modify the [EUL distribution](https://docs.euler.finance/eul/distribution-1) and incentivize the [staking](https://docs.euler.finance/eul/staking) markets of the USDC, USDT, and WETH markets. > For the duration of the three-month trial, 5000 EUL a month (for a total of 15000 EUL) will be distributed to users staking these assets: USDT, USDC and WETH. To stake an asset and receive some of the EUL being distributed, users should stake their [eTokens](https://docs.euler.finance/developers/getting-started/architecture#etoken-less-than-greater-than-dtoken-symmetry) into the staking contract. Euler’s staking contract is based on Synthetix’s staking contracts. There is no lockup period: hence users can unstake their tokens anytime and claim the accrued EUL up to that moment. > While these eTokens are held in the staking contract, users should be aware that they cannot collateralise loans. You cannot borrow against tokens that are earning these EUL in the staking contract. ## Next steps We are going to leave this thread open for comments regarding additions, and in about 24 hours, if there are no objections, we will proceed with the Temperature Check. --- _[View the full topic](https://gov.pareto.credit/t/euler-staking-pyts-as-new-yield-sources-for-by/1105)._