Folkvang Clearpool DAI PYTs as new yield source for BY

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

Summary

A proposal to add the Folkvang Clearpool DAI Senior tranches as a new yield source for the idleDAI Best Yield vault.

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Proposal

After the successful integration of the Wintermute Clearpool PYTs, today we want to open the discussion on a new integration: the Folkvang DAI Clearpool tranches.

• Clearpool DAI (Folkvang) PYTs, with specs available on GitHub here

Similar to Wintermute’s integration, Folkvang’s one would benefit doubly the DAI token holders

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%).

Perpetual Yield Tranches are live since December 2021 holding a cumulative TVL of up to $50m.

Clearpool (Folkvang) pool is open since May 2022 and it has been part of the PYTs offering since October 2022. The Folkvang pool has a size of $9m with an average utilization rate of 84%. Folkvang has a borrowing capacity on Clearpool of up to $151m, i.e. the second largest borrower on Clearpool.

To provide a wider stablecoin offering, users can deposit DAI into the Folkvang PYTs. This smart contract will leverage the Peg Stability Model (PSM) of Maker DAO to swap 1:1 DAI to USDC, avoiding any slippage or impermanent loss risk.

Currently, Folkvang pool provides 8.88% APY with an 84% 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 $151m for the Folkvang pool.

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