Proposal to Bootstrap liquidity for Stargate USDT pools on Pendle

Background

The Pendle protocol enables permissionless tokenization and trading of yield. Pendle allows anyone to purchase assets at a discount, obtain fixed yield, or long DeFi yield. The protocol enables this by taking yield-bearing tokens and then splitting them into their principal and yield components, PT (principal token) and YT (yield token) respectively, which allows them to be traded via Pendle’s AMM.

Section 1 - Issue Statement

Stargate liquidity providers can earn STG rewards by allocating their LP tokens to a Stargate farm. Pendle intends to create yield markets for the staked LP positions on Stargate by tokenizing them — splitting the LP token into the yield and principal components — therefore expanding their use case. This is made possible by wrapping the farming position into an EIP-5115 SY token that is directly utilizable on Pendle.

By creating a yield market, Pendle unlocks the full potential of yield. Pendle enables users to execute advanced yield strategies, such as:

• Long assets at a discount
• Fixed yield for low-risk, stable growth
• Leverage exposure to future yield streams without the need for collateral
• A mix of any of the above strategies
• Any asset deposited into Pendle goes back to Stargate’s farming TVL.

Section 2 - Solution

Stargate has protocol owned liquidity (PoL) for the different stablecoins across each of the eight chains it is deployed on, namely Ethereum, BNB Chain, Avalanche, Polygon, Arbitrum, Optimism, Fantom, and Metis. As Pendle is deployed on Ethereum and Arbitrum, it intends to create the first yield markets for Stargate for USDT on those chains.

Pendle is requesting that Stargate move $100k each of their USDT PoL on Ethereum and Arbitrum ($200k in total) to bootstrap the Pendle Stargate-USDT yield market pools. Any deposits into these yield markets go back directly to Stargate’s farming TVL. So the requested USDT PoL would still be owned and fully represented in Stargate’s overall TVL.

In return, Stargate will receive additional incentives in the form of swap fees generated by the Pendle AMM and PENDLE incentives. The Pendle team will also work to promote and co-market with Stargate by onboarding more users into Stargate via Pendle’s yield markets. This aligns Stargate with a large and engaged community of DeFi users.

Section 3 - Success

If successful, this proposal will result in a bootstrapped Stargate-USDT yield market that immediately allows users to trade yield or allowing them to provide liquidity into the pool by zapping in with lower price impact. This will allow Stargate’s USDT PoL to continue to grow and expand its use to allow the greater DeFi market to trade yield.

Through Pendle, this will allow Stargate’s USDT pool to grow in TVL as well, as any deposits made through Pendle will directly be contributed back to Stargate. When compared to the last previous launches, Pendle has:

1. contributed to 73% of the growth on Gains Networks’s gDAI pool since launch (9th Mar 2023);

   • gDAI liquidity grew by 3.6M LP; Pendle contributed 2.6M LP;

2. contributed to 272% growth in Aura’s ankrETH-WETH pool since launch (16th Mar 2023);

   • Aura ankrETH-WETH liquidity grew by 329 LP; Pendle contributed 893 LP;

Section 4 - Execution

$100k each of USDT PoL from Ethereum and Arbitrum (totaling $200k) will move from the Stargate USDT pool into the Pendle Stargate-USDT pool on both Ethereum and Arbitrum. Stargate will reserve the right to remove the USDT PoL from the Pendle pools at any point in time.

Section 5 - Timeline and Costs

March 28th, 2023:

• Stargate team to move $100k of USDT PoL from Stargate into Pendle on Ethereum to bootstrap the Pendle yield market;
• Stargate team to move $100k of USDT PoL from Stargate into Pendle on Arbitrum to bootstrap the Pendle yield market;

March 30th, 2023:

• Pendle team to announce and launch the Stargate-USDT yield market on Pendle;

Section 6 - Summary

• Pendle will launch a Stargate-USDT yield market on Ethereum and Arbitrum.
• Pendle is requesting for Stargate to move $100k each of their USDT PoL on Arbitrum and Ethereum ($200k in total) into the Pendle Stargate-USDT yield market. Any deposits made through Pendle go directly back to Stargate’s TVL.
• At launch of the yield market, we can expect the DeFi community to be able to purchase USDT at a discount or to trade yield via Pendle. We expect the overall USDT TVL on Stargate to increase by at least 20% once this yield market is live.

Section 7 - Poll

Kindly vote on the poll to gauge sentiment on this proposal.