[IIP-27] Clearpool PYTs as a new yield source for BY - Folkvang

Authors

Treasury League and Development League

Summary

This proposal focus on one key initiative and minor updates:

• Clearpool PYTs as a new yield source for BY - Folkvang

Rationale

We suggest visiting the dedicated governance forum post linked below for a comprehensive analysis of the initiative.

Clearpool PYTs as a new yield source for BY - Folvang → Forum post

[…] 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.

In the proposal discussion post, we also highlighted some key mechanisms implemented by Clearpool to incentivize the utilization rate of the pools and protect lenders in case of risk of borrower default. [...]

Specifications The code for the IIP-27 can be found on GitHub here.

IIP-27 actions:

• Add Senior tranche of cpFOL-DAI PYT as a new yield source for idleDAI Best Yield strategy
• Disable stkAAVE price feed from Best Yield oracle
• Update block number calculation for COMP (since after the merge block time has changed to 12s per block)

Together with the above actions, IIP-27 will set a new wrapper contract for the Clearpool Folkvang DAI pool: 0x67e78ED1cC4732816816A62F2e99CDC5CfaAc06E