Accept sBUIDL as collateral in stablecoin vaults in Euler Prime and Euler Yield

Euler DAO Markets
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Summary

Objective Labs recommends the strategic addition of sBUIDL to the collateral set of stablecoin vaults in Euler Prime and Euler Yield. The sBUIDL vault is part of a separate market (Euler RWA), and external with respect to Euler Prime and Euler Yield. This addition intends to facilitate the pilot of an instant redemption pool for sBUIDL using Euler’s newly launched hybrid DEX, EulerSwap.

Fundamentals

sBUIDL is Securitize’s sToken wrapper for Blackrock’s BUIDL fund. BUIDL is widely recognized as a blue chip RWA token with exposure to short-dated US treasury bills and similar instruments. Securitize’s wrapper makes BUIDL easily transferrable and a recent upgrade to the sToken system enables permissionless liquidations, thus making sBUIDL eligible as collateral on Euler.

Recommendations

Liquidation Loan-to-value Ratios (LLTVs)

Market Collateral Debt LLTV
Euler Prime sBUIDL USDC, USDT, RLUSD, USDS, USDtb 0.93
Euler Yield sBUIDL USDC, USDT, RLUSD, USDS, USDtb, USDe, DAI, PYUSD, USD0 0.95

Oracle

We recommend the use of RedStone’s BUIDL fundamental price feed in both markets

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Summary

Gauntlet agrees with Objective Labs’ LLTV recommendations and, should the community look to onboard sBUIDL, recommends setting the sBUIDL supply cap at 1.1M.

Rationale

sBUIDL is an ERC-20 token minted when investors lock BUIDL in a Securitize vault. Currently, all the supply of sBUIDL (~1.1M) is used by an Elixir Contract to mint deUSD. We can use this as a proxy for DeFi demand for sBUIDL even though BUIDL has a token supply of 443M.

Caveat

  • It’s unclear how liquidators will redeem sBUIDL for BUIDL or other stables as they must complete Know Your Customer (KYC) verification before accessing the underlying BUIDL.
  • We assume that Euler Labs or an associated engineering team intends to deploy a dedicated liquidator contract that hooks into EulerSwap, enabling near-instant on-chain redemptions for sBUIDL.
  • Until that contract is live, spot liquidity for forced liquidations may be thin. Gauntlet will track usage and stand ready to adjust caps via the Cap Steward.

Cap Recommendations

Gauntlet recommends a supply cap of 1.1M, given:

  • 1.1M is the current DeFi Demand on sBUIDL
  • Based on demonstrated user demand post-launch, we will monitor the sBUIDL market and will adjust the caps accordingly using the Cap Steward.

Interest Rate Curve Recommendation

This asset is recommended not to be borrowable initially, so no IR curve needs to be set.

Next Steps

We welcome community feedback.

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