This proposal seeks approval to integrate eUSDe as a collateral on Euler Yield market. Ethereal is the flagship product of the Ethena ecosystem, which debuted its point program last Thursday. Interest in the program, according to Dune, remains at a good level and Euler will be able to get a share from it by enabling looping on eUSDe.
Motivation and opportunity
Ethereal is a decentralized spot and perpetuals exchange built on the Ethena Network, powered by native USDe collateral. eUSDe is the receipt token for USDe deposits into Ethereal Season Zero campaign that enables composability with DeFi protocols. When a deposit is made, eUSDe is issued which can be redeemed for USDe at any time (no lock-up). Key opportunities include:
Liquidity Growth: the demand is very high, DeFi integration will help farmers increase their position to farm points.
High market utilization: one of the conditions for receiving points is the duration of eUSDe hold, which will give continued demand for borrow against eUSDe.
Risks
Smart Contract Risk: Ethereal vault has completed an audit by Guardian Audits
This has our directional support, pending risk provider parameter recommendations. We’re grateful for @Gauntlet doing the legwork necessary to have this asset onboarded quickly. Thank you @daffy for the work on this proposal.
Gauntlet - Parameter Recommendations for eUSDe on Euler Yield (2025-03-06)
In light of the proposal by @daffy, Gauntlet recommends the following risk parameters to the protocol:
Cap Recommendations
Gauntlet will recommend this asset is not initially borrowable. This asset is less than one month old and presently has limited DeFi and DEX integration.
Set supply cap to 5,000,000
Set borrow cap to 0
Present TVL is ~$376M, and has generally trended up since launch, excepting a notable outflow of ~$169M on 03/01. Though DEX liquidity is absent, the protocol offers instant withdrawal for eUSDe one-to-one for underlying USDe, noting that “USDe deposited into the Ethereal pre-deposit contract can be withdrawn any time”. It may be prudent for Ethereal to clarify whether one-to-one mints and redemptions of eUSDe / USDe will hold once the protocol is fully live (i.e. no longer in a pre-deposit phase).
Our risk recommendations are pursuant to the inclusion of an eUSDe / USDe exchange rate oracle for the new vault, or an oracle with similar risk profile. We recommend that Euler’s swapping infrastructure incorporate Ethereal’s pre-deposit mint/redemptions path for eUSDe / USDe for enhanced liquidator availability.
Interest Rate Curve Recommendations
These assets are recommended to not be borrowable initially, so no IR curve need be set.
LLTV Recommendations
Here we aim to maximize risk-adjusted capital efficiency for users. We anticipate usage of markets in particular for looping eUSDe / USDe.
This table assumes eUSDe as the collateral asset.
Borrow LTVs are recommended as two percentage points less than the recommended LLTVs per collateral/debt pair.
We support this effort. Not making this asset is borrowable and the suggested parameters seem sufficiently aggressive to facilitate growth. It is worth paying close attention to this market’s growth to ensure that eUSDe remains instantly redeemable and that underlying collateral remains liquid. Thank you @Gauntlet for the good work here!
Hey @Gauntlet, I am very glad to see your feedback on my proposal!
92% LLTV for USDE is very good news for farmers, but IRM does not allow using this strategy on 100%. I think you should take a closer look to change the configuration to more flexible one.
Objective Labs: Recommendations for eUSDe on Euler Yield.
Objective Labs agrees with Gauntlet’s risk assessment and parameter recommendations for caps and IRM.
LLTV
We agree that eUSDe should remain non-borrowable. The assessment that eUSDe / USDe is the optimal looping setup is correct, however for practicality concerns, we recommend higher LLTVs for the other non-yield-bearing stablecoins, in particular USDC.
Additionally, we recommend that wUSDM be excluded from the list as it is yield-bearing and non-borrowable in the rest of the cluster due to economic concerns.
Debt
LLTV
wUSDM
0% (disabled)
wM
88%
USDT
88%
USDS
88%
USDe
92%
USDC
88%
USD0
88%
RLUSD
88%
PYUSD
88%
FDUSD
88%
DAI
88%
Oracle
Objective Labs recommends an exchange rate oracle for eUSDe/USDe crossed with the same Pyth oracle for USDe/USD used in Euler Yield
We additionally recommend that the 5M cap remain fixed until the vault is added to Ethereal’s point program.
Objective Labs has reached out to the Ethereal team to confirm that eUSDe lenders on Euler will be eligible for Ethereal’s points program. Given the current stage of Ethereal, we believe points incentives are the main driver of user interest, and therefore are a precondition for this Euler Yield integration.
Gauntlet has reviewed Objective Labs’ recommendation to increase the proposed LLTVs against stablecoin borrows to 88%. We are amenable to this change, with the additional change of setting all corresponding Borrow LTVs to 84%. These amends will facilitate higher capital efficiency while presenting a minimal increase in insolvency risk due to a tail depeg of USDe, while shielding against liquidations from accruing debt positions combined with observed intraday fluctuations in USDe/USD.
Just confirming from our end that eUSDe lenders on Euler will be eligible for the Ethereal Season Zero Points Program & any additional Ethena programs (as confirmed by Ethena)
Points will be tracked in collaboration with the Euler team providing necessary adapters, as discussed, and backdated to launch. Upon launch, we will list it as “Coming Soon” for points tracking in our UI.
Expected to have full points tracking by mid April.
