AIP - 103: Deploy a Transmuter instance for EURC on Base and activate stEUR on the chain

Hello,

This is a proposal to:

• deploy a Transmuter with the right to mint EURA on Base and with EURC as a collateral
• activate the stEUR savings product on Base
• seed a EURA/USDA liquidity pool on the chain

Context

The protocol has a Transmuter instance on Base for USDA with USDC as a collateral. It allows anyone to swap USDC and in a single transaction get into the stUSD yield product of the protocol.

EURC has gained quite a lot of momentum recently on Base, notably thanks to a Coinbase integration enabling people to convert EUR to EURC 1:1 from their Coinbase account with no fees and send EURC for free on the chain. Several USDC/EURC pools have grown on Base and a lot of the Forex volume is now taking place across these pools on Base. While we've been experimenting across several verticals on Forex and how to improve Angle dominant position, given the recent growth and efforts on the chain, it makes sense for the protocol to start playing it more seriously on Base and give the means for EURC holders to earn a yield directly from their deposits, to unleash its Forex infrastructure directly on the chain and be a facilitator for anyone looking to trade USD/EUR onchain.

Proposal

The proposal is to deploy a Transmuter instance with EURC as a collateral on Base, and activate the stEUR product on Base just like it's been activated on other chains already.

We propose to seed the EURC Transmuter on Base with 300k EURC taken from 300k€ of bC3M on mainnet.

While a EURC and USDC Transmuter are great, given that these systems are integrated by major aggregators, by having a deep USDA/EURA pool on Base, the protocol could start capturing a significant share of the EURC<->USDC trades taking place on Base (provided that these go through aggregators). Right now, on Aerodrome the EURC/USDC concentrated 0.05% pool is making almost $10m in volume a day with less than $2.3m in liquidity.

The pool is currently heavily concentrated and with the protocol we couldn't offer something as concentrated without taking large liquidity + impermanent loss (IL) risks.

The protocol already has experience deploying liquidity in such pools. We typically have a $10m liquidity pool on UniV3 on mainnet seeded in the range [0.8-1.4]. This pool which facilitated a considerable volume since its launch has been maintained at barely no cost by the protocol as the fees earned offset the impermanent loss faced on the position. In order to preserve competitiveness while being wary of minimizing IL risks and rebalancing needs, we suggest to start with a $5m pool ($2.5m on each side), in the range [1.02-1.19].

The way we've set the rate here is by using the simulation tools available at Desmos: https://www.desmos.com/calculator/i8h0wzqaci?lang=fr and using what we have developed internally at Angle as well here. The concern is to make sure that even in a tight range if we need to rebalance our positions with the protocol because the Transmuter on one side or the other has been emptied, we shouldn't have to do it more than once a day. The average daily volatility on EUR/USD is 0.37% and here at current prices 1% variations in EUR/USD lead the position between 1.02 and 1.19 to move from 50%/50% EURC/USDC to 55%/45% (or the opposite) corresponding to the thresholds with which our transmuter would start being emptied (assuming ~250k EURC and USDC on each side). At the same time, with a position of this concentration, and assuming the Transmuter remain well routed for EUR<->USD trades, and the Aerodrome position remains the same, the protocol would capture approximately 1/4th of the trades.

Implementation

For the Transmuter deployment, we suggest to use the exact same methodology as what we used for the crosschain USDA Transmuter: https://gov.angle.money/t/aip-97-crosschain-transmuter-deployment/858, that is to say deploy a Transmuter instance with hard caps on what can be minted with it.

We propose to start here without a rebalancing infrastructure in place at the moment. Backed offers its tokenized securities directly on Base, and if the Transmuter starts to get a lot of EURC, we could add a Backed collateral within the Transmuter.

As for the crosschain stEUR setup, we propose to use the same methodology as what is used on other chains, meaning to keep the same rate policy in place.

The state of the P&L of the AMO position with the $5m pool will be trackable in real time from the analytics.

We also suggest to launch the liquidity AMO position and seed the Transmuter with EURC after a few weeks of deployment. If there is demand on Base to move from EURC into stEUR and earn a yield, there might even be no need at all to sell bC3M on mainnet to fill the Transmuter. We propose to wait for 2 weeks after the integration is ready within major aggregation solutions (Odos, 1inch) before evaluating whether seeding with bC3M and the creation of the pool should be done.

As always, please let us know if you've got any question on the proposal.