Summary
This proposal requests DAO approval to adjust the Reserve Fee split for a new set of infiniFi markets on Euler, designed to support a tightly integrated lending and EulerSwap-based liquidity system.
These markets will support infiniFi deposit receipts:
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iUSD (infiniFi USD – base liquid receipt)
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siUSD (staked infiniFi USD – yield-bearing liquid receipt)
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liUSD (locked infiniFi USD – fixed-duration tranches)
At launch, the system will focus on liUSD 4-week & 13-week tranches, and siUSD, with additional liUSD maturities, as well as iUSD, expected to follow over time.
The purpose of these markets is to introduce a secondary liquidity layer on top of infiniFi’s native redemption system, enabling early exits, improving capital efficiency, and supporting the growth of duration-based positions.
The proposed Reserve Fee split is:
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30% → Euler DAO
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50% → Cassa
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20% → infiniFi
Background
infiniFi introduces a duration-based system where users can choose between:
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Fully liquid exposure (iUSD, siUSD)
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Locked positions across multiple time horizons (liUSD tranches)
While liUSD positions naturally settle through the system over time, the addition of secondary liquidity meaningfully enhances the product by allowing users to exit early if desired. This flexibility is particularly important for attracting capital into longer-duration tranches, as it reduces the opportunity cost of locking funds.
Euler markets, combined with EulerSwap, provide the infrastructure to enable this functionality. Rather than relying on external liquidity pools, the system is designed such that early exits are facilitated through credit-backed liquidity sourced directly from Euler lending markets.
As outlined in the architecture, EulerSwap allows swaps to be executed by borrowing against collateral in real time, rather than requiring pre-funded liquidity pools . This makes it uniquely suited for supporting assets like liUSD, where liquidity demand is episodic and closely tied to unwind flows.
Motivation
The core objective of this proposal is to demonstrate a fundamentally different approach to liquidity in DeFi.
Today, most protocols that require secondary liquidity must bootstrap it through external AMMs such as Curve or Balancer. This typically involves significant and ongoing costs in the form of incentives, emissions, or bribes to attract mercenary liquidity providers. These models are inherently inefficient and do not scale well for systems with many assets or fragmented liquidity needs.
The approach enabled by EulerSwap is structurally different.
Instead of renting liquidity, infiniFi can source liquidity directly from Euler lenders, using the lending markets themselves as the capital base for market making. When a user exits a liUSD position early, the system does not require a pre-funded pool of idle capital. Instead, the EulerSwap operator borrows USDC against the incoming collateral and completes the swap atomically. This allows the system to simulate deep liquidity with significantly less capital than traditional AMMs.
This mechanism is further strengthened by arbitrage. When liUSD trades at a discount due to early exits, arbitrageurs are incentivized to step in, purchase the discounted asset, and hold it to maturity or route it through the most efficient path. This flow naturally rebalances the system and reduces the operator’s exposure over time. In this way, arbitrage is not incidental but a core component of how liquidity is sustained and normalized.
An important implication of this design is that, in many cases, these flows resemble a debt refinance rather than a traditional exchange of capital. When an existing borrower or looper exits through the system, the underlying position is effectively transferred rather than requiring new external liquidity. This further reduces capital requirements and increases system efficiency.
Role of infiniFi and Cassa
infiniFi will act as the curator of these markets, retaining full control over:
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Market parameters (IRM, LTV, caps)
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EulerSwap operator behavior
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Allocation of capital from the Earn vault
This is a deliberate design choice. The system will only support infiniFi-native assets, meaning there is strong alignment between:
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Borrowers
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Lenders
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The curator
infiniFi has direct exposure to the success of these markets and a vested interest in maintaining a healthy balance between utilization, risk, and growth. This alignment reduces the risk of misconfiguration and ensures that decisions are made with a holistic view of the system.
Cassa will support this system by providing infrastructure and tooling for automation, monitoring, and parameter management. Their experience with both Euler and EulerSwap makes them a valuable partner in scaling this architecture efficiently while minimizing operational overhead.
Why a Fee Split Adjustment is Required
The standard Reserve Fee structure assumes a relatively passive system, where value is generated primarily through lending activity.
In this case, a significant portion of the value creation comes from active market making and system operation:
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Managing EulerSwap operators
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Pricing early exits
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Absorbing and warehousing flow
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Enabling arbitrage-driven normalization
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Coordinating with vault allocation
This is ongoing, operational work that directly enables the functionality of the markets.
At the same time, the system materially benefits Euler:
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It drives borrowing demand and utilization
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It increases yields for lenders through the onboarding of high yielding liUSD tranches
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It showcases a novel and highly differentiated use case for EulerSwap
Perhaps most importantly, it demonstrates that:
secondary liquidity in DeFi does not need to be subsidized — it can be profitable
This is a meaningful shift from the dominant paradigm and has the potential to attract other protocols to build similar systems on Euler.
Proposal
We propose the following Reserve Fee split for these markets:
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30% → Euler DAO
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50% → Cassa
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20% → infiniFi
This applies to:
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liUSD 4-week, 8-week, and 13-week tranches at launch
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Future liUSD tranches
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Future iUSD and siUSD markets
Expected Outcomes
This structure enables a system where:
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liUSD holders can exit early, improving the attractiveness of locked positions
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Arbitrage flows maintain pricing and system balance
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Liquidity is sourced from lenders rather than external LPs
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The cost of liquidity is replaced with a profit-generating mechanism
Over time, the profits generated by this system can be reintegrated into infiniFi’s native yield framework, increasing yields for users and further reinforcing demand.
For Euler, this represents a concrete demonstration of how its lending markets and EulerSwap can function together as a unified liquidity layer — not just for trading, but for structured financial systems.
Next Steps
If there is general support from the DAO, infiniFi and Cassa will proceed with:
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Launching initial liUSD markets
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Deploying and configuring EulerSwap operators
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Activating Earn vault allocation
Additional markets and assets will be introduced in phases as the system scales.
Closing
This proposal is not simply a request for a different fee split.
It is an attempt to establish a new model for how liquidity can be created, managed, and monetized in DeFi — one that is more capital efficient, more aligned, and more sustainable.
We believe Euler is uniquely positioned to lead this shift, and this system is a strong step in that direction.
We look forward to feedback from the community.