Integrate SyrupUSDC on Euler Yield Market

Euler DAO Markets
1

Summary

This proposal seeks approval to list SyrupUSDC as collateral and borrow asset on Euler Yield.

Motivation

About SyrupUSDC

SyrupUSDC is a liquid yielding dollar managed by Maple. The yield is generated by providing institutional loans to borrowers. All loans are overcollateralized by digital assets, predominantly by native BTC at the moment. All of this can be verified through syrup.fi/details.
Users can mint SyrupUSDC with USDC on syrup.fi/lend. SyrupUSDC is built with Maple’s smart contracts and benefits from all of Maple’s security and track record.
SyrupUSDC has a track record of strong yield outperformance.

Why SyrupUSDC on Euler Yield?

Enabling collateral and borrow support for SyrupUSDC on Euler Yield will expand the variety of yield strategies available to Euler users. SyrupUSDC has deep on-chain liquidity, growing DeFi composability and options for additional yield leverage.
Integrating SyrupUSDC would boost Euler’s TVL, bring additional mindshare to Euler, contribute to Euler’s revenue and expand the user base.

Acquiring SyrupUSDC

SyrupUSDC can be acquired by one of the following methods:

Performance

SyrupUSDC has been consistently offering industry-leading yields. The TVL has exceeded $725M, the base yield is at 7% with an additional protocol incentive boost of $3.5% to bring the total average APY to 10.5%.
The supply is steadily rising, which shows the growing interest in SyrupUSDC as well as its expanding DeFi presence.

Spark has allocated into SyrupUSDC with Block Analitica writing a favorable review.

SyrupUSDC is now the second largest market on Morpho as well.

Security considerations

SyrupUSDC has been audited by Three Sigma and 0xMacro. The audits are available on Security | Syrup.
As SyrupUSDC is built on the Maple contract infrastructure, it benefits from Maple audits that can be found here: Security | Maple.

Market parameters

The LTV, supply and borrow cap parameters will be set by Gauntlet. We encourage the Euler DAO to share their feedback and we are looking forward to being integrated into the Euler ecosystem.

Relevant links

Maple website

SyrupUSDC website

SyrupUSDC Gitbook

Maple Gitbook

Audits (Maple, SyrupUSDC)

Blog

Twitter

Telegram

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Thank you @Maple for submitting this proposal. Objective Labs recommends the onboarding of syrupUSDC and PT-syrupUSDC on Euler Yield.

Fundamentals

syrupUSDC is a yield-bearing stablecoin generating returns by providing overcollateralized loans to instituional borrowers through Maple’s network, lending into Aave, and depositing into sUSDS to earn the Sky savings rate. The backing portfolio of syrupUSDC is fully transparent on Syrup’s public dashboard. Both Syrup and Maple protocol are thoroughly audited with a $500k bug bounty program on Immunefi, monitoring and alerting systems, and a limited emergency pause role.

Loans are collateralized by a limited set of blue chip assets including BTC, LBTC, ETH, tETH, sUSDe, using a multi-layer margin system with initial LTVs of 50-80%, margin call LTVs allowing a 24-hour borrower response period, and liquidation LTVs up to 90% for BTC and 85% for ETH. Liquidations are executed primarily through OTC desks, though mechanisms for CEX or DEX liquidation are available as well. Some collateral is reinvested (e.g. ETH into weETH) to increase returns for syrupUSDC.

Presently syrupUSDC’s portfolio consists of $61M deposited into sUSDS (earning the 4.5% SSR), and $3.5M USDT lent into Aave. The remaining $270M are used to provide institutional loans through Maple’s network at a healthy 186% collateralization ratio in aggregate. 86% of collateral is BTC, 5% ETH, and 5% Treehouse tETH, 2% LBTC.

Liquidity

Instant DEX liquidity for syrupUSDC is limited, with a single Uniswap V3 pool with $10M total liquidity. This pool supports a $7M swap with 0.2% price impact. syrupUSDC is redeemable to its underlying in 2 days, though the delay could go up to 30 days depending on available liquidity. Since ~19.5% of syrupUSDC is deposited into Sky and Aave, instantly redeemable and liquid to USDC, we estimate that the liquidity risk for syrupUSDC is low, despite the limited DEX liquidity. We note that this estimate is based on a snapshot of syrupUSDC’s portfolio and may change if the Sky allocation is repurposed for Maple loans.

Pendle PT

syrupUSDC has a Pendle pool maturing on 28 Aug with $13M in liquidity. We believe the onboarding of the PT has synergetic effects as Euler’s modular architecture allows PT-syrupUSDC/syrupUSDC to be looped at a higher LLTV, which in turn reduces the total cost of syrupUSDC-collateral borrowers. A similar dynamic can be seen with eUSDe / PT-eUSDe currently on Euler Yield.

Recommendations

Based on our analysis we recommend that syrupUSDC and PT-syrupUSDC be onboarded as collateral in Euler Yield to augment the market’s collateral offering and allow syrupUSDC holders to loop on their deposits.

LLTVs

Collateral Debt LLTV
syrupUSDC USDC, USDT, PYUSD, RLUSD, wM, USDS, sUSDS, DAI, sDAI, USD0, USDe, USDtb, rUSD 92%
PT-syrupUSDC USDC, USDT, PYUSD, RLUSD, wM, USDS, sUSDS, DAI, sDAI, USD0, USDe, USDtb, rUSD 88%
PT-syrupUSDC syrupUSDC 95%

In line with the rest of the market, we recommend that borrow LTVs be set to 2 percentage points lower than LLTV.

IRMs

Vault Base rate Kink Rate at kink Rate at 100% (max)
syrupUSDC 0% 90% 2% 80%

Since syrupUSDC will only be borrowable by its PT, the rate at kink was chosen based on the rate spread between PT-syrupUSDC (9.9%) and syrupUSDC (6.8% without boosts).

We recommend that the interest fee for rUSD be temporarily set to 0% to drive initial growth.

Caps

Vault Supply Cap Borrow Cap
syrupUSDC 20M 18M
PT-syrupUSDC 20M 0

Oracles

We recommend the use of an exchange rate oracle for syrupUSDC and a Pendle TWAP oracle for PT-syrupUSDC, crossed by the same exchange rate oracle for syrupUSDC.