[RFC] EUL DEX Liquidity Optimization with Yield Forwarding
Author: Peter from Origin Protocol
Submission Date: 4/2/25
Simple Summary
Hello, I am Peter, core team member from Origin Protocol. This is a proposal for Euler to use some of the liquidity from the WETH/EUL pool on Uniswap to deploy an OETH/EUL pool with Yield Forwarding enabled. Yield Forwarding permits the yield generated by the OETH sitting in a DEX pool to be re-directed to a new address fully controlled by Euler.
Motivation
We have noticed that Euler has EUL supported across multiple chains, some of which have pools paired with ETH. Enabling Yield Forwarding for an EUL pool will allow Euler to put the idle, unused DEX liquidity to work, which will both help grow the Euler treasury and deepen the EUL liquidity across multiple chains.
Specification
Breakdown of OETH
Origin Ether (OETH) was launched in May 2023 and is an ETH mainnet ERC20 that generates yield while sitting in your wallet. OETH is pegged to ETH 1:1 and, similar to stETH, has its yield paid out daily and automatically (sometimes multiple times per day) through a positive rebase in the form of additional OETH, proportional to the amount of OETH held. OETH earns yield from 3 sources:
- DVT direct staking through SSV/P2p
- The Curve AMO
- Those opted-out from receiving the yield - any OETH sitting in smart contracts or smart contract wallets by default is foregoing the yield (except for those who have opted-in, or contracts with YF turned on) in exchange for the DEX emissions to those opted-in, leading to a boost in yield
There are several OETH/ETH pools currently deployed across multiple DEXs, with the largest OETH pools on Curve and Uniswap. OETH redemptions back to ETH are currently available via the OETH dapp. The OETH ARM provides instant redemption liquidity when it is available in the contract.
OETH contracts are continuously audited - all audits can be found in the audits section of the OETH docs. yAudit has been retained to look at our PRs as we code, and OpenZeppelin is also held on retainer to review 100% of the OETH smart contract changes. Origin maintains an active bug bounty with rewards ranging in size from $100 OUSD for minor issues to $1,000,000 OUSD for major critical vulnerabilities. The bug bounty program is currently administered by Immunefi, where Origin maintains a median resolution time of 7 hours. OETH price oracles are available through Chainlink, Tellor, and Dia.
OETH is a simpler version of superOETHb on Base, and is also a core component of superOETHb. A proposal is currently on the Euler forum to onboard superOETHb to Euler as collateral.
Breakdown of Yield Forwarding
Prior to 2025, if a user paired a token with OETH in a DEX pool, that pool address was automatically opted-out from earning the OETH yield via rebase. As mentioned above in OETH yield source #3, this has led to a yield bonus to all OETH holders.
With Yield Forwarding enabled, rather than being given up to those who have opted-in for yield, the yield generated from the OETH sitting in a DEX pool can now be redirected to any address that the Euler team, DAO, and community chooses - in addition to earning the DEX trading fees. Simply put, OETH Yield Forwarding puts the ETH in a DEX pool to work, where a standard ETH pair would otherwise only earn trading fees.
There are two main use cases for Yield Forwarding, for which we have given the name Treasury Booster and Pool Booster:
Treasury Booster
In addition to receiving the pool trading fees, the yield from the OETH in the OETH/EUL pool is sent directly to the Euler DAO treasury address, to be used as the core team, DAO, and community best sees fit. This can be done on any DEX, so long as OETH is part of the token pair.
Pool Booster
In addition to receiving the pool trading fees, the yield from the OETH in the OETH/EUL pool is sent back to the DEX as an incentive bribe on the pair, creating a self-funded auto-bribe on the DEX’s emissions flywheel. This can be done on any DEX with a gauge incentive system, so long as OETH is part of the token pair.
Here is a simple breakdown of the Treasury Booster and Pool Booster:
Yield Forwarding Fees
The yield displayed on the OETH Analytics page is the yield that Euler will earn from OETH Yield Forwarding regardless of volume, in addition to the DEX trading fees. There are no additional fees charged to Euler to use Yield Forwarding. The only fee is Origin’s standard 20% performance fee on the yield generated by OETH. This fee is already accounted for in the historical OETH yield numbers shown on the OETH Analytics page.
A numerical example of an OETH/EUL $1m pool can be found here:
Steps to setup yield forwarding
The process of setting up Yield Forwarding for Euler is simple:
- Euler will deploy an OETH/EUL pool on any preferred DEX
- Euler will decide on if the destination address for the OETH yield should be:
a. An Euler treasury wallet
b. Sent back to the DEX as a bribe on the pair (if the pool is deployed on a DEX that supports bribe emissions)
c. Sent to another contract address for a use case not named in this proposal - Origin will put the DEX pool address through Origin Protocol governance and timelock to enable yield forwarding on the pool, with the destination address set as the address from step #2
Euler can change the destination address that the OETH yield is forwarded to at any time, pending the Origin governance timelock.
OETH/EUL Pool Deployment Configuration
It is ultimately up to the Euler DAO, community, and core team to decide on the configuration of the OETH/EUL pool. We are recommending a full range pool, as was recommended in eIP-58, so that no rebalancing or active management will be needed.
We envision volume on an OETH/EUL to be similar to an ETH/EUL pool, since OETH is pegged 1:1 with ETH. As more projects pair with OETH, volume may even increase on the OETH/EUL pool as there would be more arbitrage opportunities.
EUL Yield Forwarding On Other Chains
In addition to utilizing Yield Forwarding on the Ethereum mainnet, Euler can use Yield Forwarding to put idle DEX assets to work and deepen EUL liquidity on the Base and Sonic chains, following the same 3 steps above. To proceed on Base, Euler must deploy an EUL/superOETHb pool on a DEX (superOETHb is 1:1 with ETH). To proceed on Sonic, Euler must deploy an EUL/OS pool on a DEX (OS is 1:1 with S). The first pools deployed with Yield Forwarding were deployed earlier this year. Many of the pools deployed with Yield Forwarding enabled can be seen on the Origin Protocol governance forum.
Origin invites the Euler community to consider this proposal for creating an OETH/EUL DEX pair with Yield Forwarding enabled and welcomes any suggestions in this direction. Origin also looks forward to the community to suggest:
- DEX to deploy OETH/EUL on
- Pool configuration
- Amount of liquidity to supply to this pool
- Other chains to enable EUL yield forwarding on
Relevant Links
OETH Dapp
OETH Docs
OETH Analytics
Yield Forwarding
Yield Forwarding Thread
Pool Booster
Current Yield Forwarding Pools