Summary
Gauntlet recommends delisting ETHx and mETH from Euler Prime. Demand for both vaults has been extremely weak, and removing them from Euler Prime will reduce overall risk exposure.
Description
Gauntlet regularly reviews Euler markets to identify opportunities to reduce protocol risk exposure. Euler Prime is the cornerstone of Euler DAO’s lending infrastructure on Ethereum. Built for blue-chip collateral, Prime lets users borrow stablecoins against high-quality assets through conservatively tuned risk parameters that target attractive, risk-adjusted yields.
The ETHx and mETH vaults joined Euler Prime during an an early growth phase. Now that Prime has matured, these vaults contribute just $0.36 in TVL while disproportionately exposing Euler to market risks. For these reasons, Gauntlet recommends offboarding ETHx and mETH from Euler Prime.
Offboarding Process
- Set supply and borrow caps to zero.
- When the vaults hit zero supply, delist them from the UI.
Next Steps
- We welcome community feedback.
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Objective Labs supports Gauntlet’s recommendation to offboard ETHx and mETH from Euler Prime. These vaults have historically seen very little organic usage. They reached peak TVL during the initial incentive campaigns, however nothing has remained after the end of the campaigns.
Bootstrapping LST/LRT usage in a lending protocol depends heavily on the issuer’s support and their efforts to reach out to their major LPs. Unfortunately little has been accomplished on that front with ETHx, whose only significant lending protocol is Aave. ETHx lenders on Aave receive surplus rewards in Stader’s governance token in Aave’s Merit program, which by design bars participants from using competing lending protocols like Euler.
Mantle’s mETH does not have a strong outlook as collateral in Euler Prime for different reasons. The issuer’s revealed priority is Mantle Network and their newer LRT, cmETH. mETH’s holder distribution and DeFi penetration confirms that. While Mantle has previously communicated regarding the creation of Euler markets for cmETH, little has transpired since those conversations. We remain optimistic for mutually beneficial alignment between Mantle and Euler in the future, however we believe it is clear that mETH has little benefits for Euler Prime in the current configuration.