Euler staking PYTs as new yield sources for BY

The following is an extract of the proposal posted on the Idle governance forum.

Summary

A proposal to add the Euler staking Senior tranches as new yield sources for the Best Yield strategy.

Proposal

Today we want to open the discussion on some new integrations: the Euler staking (Senior) PYTs

• Euler staking PYTs for the USDC, USDT and WETH markets, with specs available on GitHub here

Similar to previous integrations, Euler staking ones would benefit doubly the Idle ecosystem

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%).

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. Euler’s Perpetual Yield Tranches are live since June 2022. 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. 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 of November 2022, the Euler DAO decided to modify the EUL distribution and incentivize the 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 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.