GM Friends, on 21st July 2022, Idle announced the launch of PYTs based on Clearpool’s Wintermute borrowing pool. So what does this all mean for lenders?
Before we start, let us get over some terminologies. Idle is a yield aggregator and rebalancing protocol that is based on Ethereum. Founded in 2020, the protocol raised $1.2M from notable investors such as LongHash Ventures, Quantstamp, BlockRock Capital etc. Their most notable strategy, Perpetual Yield Tranches (PYTs), uses a differentiated liquidity mining strategy that provides optimized yields according to different risk appetites. To simplify this concept, we can think of them as senior debt and junior debt in Traditional Finance. Junior debt is typically risker as they pose as the first loss capital, however, this also means they receive a high % of returns. A senior debt tends to be safer and secure since they are buffered against losses by having the junior debt as a sacrifice first.
Idle DAO has partnered with Clearpool to build PYTs on top of their uncollateralized single borrower pool, Wintermute borrower pool: cpWIN-USDC. Previously, lenders are only provided with a single yield rate on Clearpool’s platform while being subjected to the same risks. Accessing the borrower pool on Clearpool via Idle now opens up a new possibility of mitigating risk and optimizing yields for the risk-averse investors.
As a borrower, the costs of capital will fluctuate depending on the rate of utilization. With the recent implementation of the new interest rate curve mechanism on Clearpool, it will encourage optimal borrower utilization, addressing issues like low utilization and overleveraging.
IDLE’s partnership will provide more liquidity to the borrowing pool, benefitting the borrower and a layer of security for conservative lenders given turbulent market environment.
HOW TO GET STARTED:
- Head to https://idle.finance/
- Launch the app.
- Connect Wallet
4. Select Tranches
5. Depending on your risk appetite, you may choose to enter via the Senior Tranche (less risk) or the Junior Tranche (higher risk).
6. Click on Clearpool’s borrowing pool and click ‘Deposit’.
Rewards are compounded and withdrawal is immediate.
In a nutshell, Idle’s innovative strategy mimics current strategies in TradFi, which is one step closer to onboarding the next wave of retail adoption, with risk management at the top of mind.
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