Lido and Idle Collaboration

Published on: 05.02.2022

Idle have collaborated with Lido to launch stETH Perpetual Yield Tranches (PYTs). This DeFi primitive provides users with two risk-adjusted financial products for ETH staking.

Lido represents one of the most popular and widespread liquid staking solution for ETH, and the integration of stETH into Idle’s PYTs now empowers Ethereum stakers to join protected staking or leverage staking yields. The bootstrap phase will initially last 4 weeks, with the distribution of 10,000 $LDO tokens per week to stimulate liquidity provision on stETH Senior Tranches.

The current stETH APR is approximately 1.8% on Senior Tranches and 8% on Junior Tranches. With the upcoming 40,000 $LDO incentives provided by Lido, returns will be higher than 5% APY with $20m in Senior Tranches TVL.

What’s next?

stETH PYTs is the first ETH product with a built-in protection mechanism, targeting a market segment with a conservative risk profile. With the rising interest of institutional capital for ETH in sight of the Merge in 2022, the need for a secure and sustainable yield will increase, thus the need for protection features.

The initial bootstrap phase will represent the first of a long series of potential joint initiatives, with the aim of working with DAO treasuries, collateralized stablecoin protocols, or CeDeFi applications, as integration partners for PYTs.

As part of the PYTs release plan, Idle organized a contest (aka, the Tranches Battle) to allow $IDLE token holders to select the next 5 assets to integrate, using Convex as the underlying yield source. And stETH is currently running as a potential candidate.

While the native integration via Lido enabled single-sided stETH deployment, the eventual integration of stETH via Convex would represent an additional gateway to provide liquidity into Curve and Convex, reducing slippage and improving the resilience against asset fluctuation.

Last but not least, Idle DAO is now discussing to route 990 IDLE/day into Senior Tranches, distributed using the Gauges model (Curve-like). stETH PYTs will also benefit from these incentives, strengthening the relationship between Lido DAO and Idle DAO.

About Idle

Idle DAO is a decentralized organization that builds financial infrastructure for Web3. Businesses of every size — from brand new DeFi protocols to public companies — use our protocol to optimize capital efficiency and manage their treasuries with DeFi.