Introduction
Euler vaults can make life simpler, safer, and more efficient for lending and borrowing using PT tokens. This proposal suggests that Euler DAO deploy and govern a new market called Pendeul, which is dedicated to utilising Pendle PT tokens as collateral on Euler. The market would begin with support for trading of LBTC, eBTC, WBTC, cbBTC, pumpBTC, and solvBTC, later being extended to include other forms of PT token. Additional collateral types can be added/removed from these markets as and when PT tokens mature or are created.
Configuration
The deployment would initially involve creation of new vaults for BTC assets LBTC, eBTC, WBTC, cbBTC, pumpBTC, and solvBTC. These assets would be borrowable by their corresponding PT tokens, but would otherwise have limited or no use as collateral themselves. The PT tokens themselves will be non-borrowable collaterals - available to use as collateral, but themselves non-borrowable.
The principle use-case here is that when PT tokens yield more than the supply APY on the underlying assets Pendeul provides users with an opportunity to multiply their PT yield, whilst simultaneously allowing underlying asset holders to gain exposure to Pendle yields without giving up the ability to withdraw and trade their assets anytime.
The proposed loan-to-value relationships between the vaults are displayed in Table 1. Given the limited cross-collateralisation in this market, the risk to lenders if a particular asset devalues is limited. It should also be noted that PT tokens and their underlying assets are correlated in value, since the PT token resolves to the underlying asset at maturity. In the event a bitcoin LRT devalues, the devaluation should impact both collateral and debt in a similar manner.
Note that the Pendeul market accepts as collateral bitcoin assets from Euler Prime (a lower risk market). This helps expand opportunities for traders, increasing capital efficiency without a corresponding increase in risk, and show-cases the power of the Ethereum Vault Connector in allowing markets to accept collateral from outside of themselves.
Supply and borrow caps will be set conservatively to begin with, as shown in Table 2.
Interest rates for the borrowable will be configured as shown in Table 3. The rates target a conservative level of utilisation at 85%.
Oracles for assets will be configured as shown in Table 4. All oracles will use BTC as the unit of account, with pricing to secondary market liquidity used where possible, or 1:1 pricing with BTC used where not. Pendle TWAPs will be used for the PT tokens themselves.
Rewards will be allocated for a minimum of 1 month to each of the underlying markets to incentivise supply for early borrowers.