Proposal: Establish a Gauntlet-Curated sUSDS Treasury Vault

[Gauntlet]

Summary

This proposal aims to supply 120M sUSDS from the deUSD Treasury into an sUSDS Treasury Vault curated by Gauntlet. The vault is designed to enable Elixir to earn conservative yield on its sUSDS holdings in the deUSD Treasury. This non-custodial vault will provide actively curated risk-adjusted yield and managed liquidity to protect ongoing treasury operations.

Reasoning

Elixir’s deUSD Treasury holds ~165M sUSDS. This proposal enables Elixir to supply 120M sUSDS into a non-custodial, Gauntlet-curated Treasury Vault designed to deliver conservative, risk-adjusted yield while maintaining liquidity for operational needs. Gauntlet’s Prime Vault strategy prioritizes capital preservation and active liquidity management, offering a secure and sustainable way to grow treasury assets and protect ongoing operations.

Proposed Implementation

Gauntlet will curate an Elixir sUSDS Treasury Vault to provide a conservative, risk-adjusted yield to Elixir’s deUSD Treasury holdings of sUSDS.

Gauntlet will work closely with Elixir to source, run due diligence, set parameters and list markets that drive conservative risk-adjusted yield to the Treasury Vault, and support the RWA DeFi ecosystem that Elixir is building.

Gauntlet Vaults on Morpho

Gauntlet offers multiple risk and yield-optimized strategies on Base and Ethereum, allowing clients to select strategies that suit them best.

There are three primary vault categories, each with its own risk profile.

1. Gauntlet Prime Vaults offer risk-adjusted yield from very low insolvency risk strategies with bluechip, highly liquid assets as collateral.
2. Gauntlet Core Vaults offer smarter yield, low insolvency risk strategies with a blend of blue chip and small-cap assets as collateral.
3. Gauntlet Frontier Vaults target maximum yield, accepting higher risks from volatility and liquidity constraints in exchange for greater supplier returns.

For the purposes of this proposal and program, Gauntlet proposes to start with a bespoke vault that uses Prime Vault strategies to mitigate the risk of insolvencies or other adverse effects due to market volatility.

Gauntlet continuously rebalances asset allocations across Morpho Markets to optimize for risk-adjusted returns subject to the following considerations:

• Collateral risk exposure
• Lending market utilization
• Competitive borrow and supply rates
• Liquidity for partial withdrawals

Historical Performance - Gauntlet Stablecoin Vaults (Excl. Rewards)

NB: The chart above shows Native APY only, and does not include added Morpho Rewards earned by Gauntlet Vaults.

Program	Avg APY last 30 days (Inc Morpho Rewards)
Gauntlet USDC Core	6.01%
Gauntlet USDC Prime	5.11%
Aave USDC	2.74%

Elixir sUSDS Treasury Vault

Gauntlet will work with Elixir to curate an Elixir-owned vault that runs strategies similar to those of our Prime Vaults. All Vault changes — collateral markets, parameters, and interest rate schemas — will be recommended by Gauntlet and approved in partnership with Elixir prior to onchain execution. Gauntlet will use its extensive experience to ensure the Vaults offer the best risk-adjusted yield for their targeted risk level and a sustainable path to growing yield as Elixir scales the program across its user base.

Vault Parameters
Owner: Elixir
Guardian and Curator: Gauntlet
Additional Characteristics:

• Timelock Policy: 120+ hours to mitigate smart contract (SC) exploitation risks.
• Oracle Risk Considerations: No reliance on hardcoded or misaligned oracles; must dynamically track collateral/loan relationships; oracle provider must be from a Gauntlet-approved list. Oracles must be audited by a Gauntlet-approved auditor.

Program Fee: Gauntlet will apply a 7.5% performance fee to the vault on accrued interest, and pass 2.5% (or 1/3 of the total performance fee) back to the Elixir DAO. The fee applies to native yield, and does not apply to any rewards or points generated by the vault.

Market Creation

In addition to the creation of the Elixir sUSDS Treasury Vault, Gauntlet will conduct due diligence on Galaxy’s new Private Credit RWA for addition to Morpho as a collateral asset. Conditional on the asset passing Due Diligence, Gauntlet will set appropriate parameters and launch the market on Morpho. Gauntlet will work with Elixir and Galaxy to source appropriate liquidators and liquidation pathways to protect the Treasury from any liquidations and insolvent positions.

Gauntlet will work with Elixir to source new collateral markets that fit the risk profile and strategy of the vault, providing conservative risk-adjusted yield to the Elixir Treasury and supporting the growing ecosystem of Elixir RWA partners in DeFi.

Questions and Clarity

About Gauntlet

Gauntlet is the leading product-led model provider in crypto, building optimization strategies and platforms for tokens, protocols, and chains. Gauntlet is now applying its years of research and expertise managing risk for DeFi’s largest lending protocols to Gauntlet Morpho Vaults, curating sophisticated risk-adjusted yield to vault suppliers.

Gauntlet has extensive experience collaborating with partners across product, engineering, legal, and growth. We are a US-based company backed by Ribbit Capital, Coinbase Ventures, Polychain, Paradigm, Bain Capital, and Standard Crypto, among others.

For more info on Gauntlet, see the Gauntlet website.

About Morpho

Morpho (~$4.2B TVL) is a lending protocol providing a trustless lending primitive layer (Morpho Markets) combined with an abstracted non-custodial risk and yield vault management layer (Morpho Vaults).

In each vault, the Vault Curator can:

• Allocate user supply between various Morpho Markets
• Manage supply caps for different markets to manage risk and optimize yield
• Set vault fees to earn a proportion of the interest

In line with their non-custodial nature, all supply and withdrawal transactions can only be completed by the supplier.

For more detailed information on Morpho see the Morpho Docs as well as the Morpho SDKs.

Steps to Implement

• Governance:
  • Forum Discussion Period (~1-2 Weeks)
  • Snapshot Vote (~1 week)
• Vault Creation: Gauntlet creates the Elixir sUSDS Treasury Vault with the parameters outlined above.
• Vault Seeding: Elixir will seed the Vault with 120M sUSDS from their deUSD Treasury.
• Vault Curation (ongoing): Gauntlet will actively serve as vault curator to ensure the Vaults offer the best risk-adjusted yield for their targeted risk level.

[Cole0x]

Greatly appreciate the initiative and continued support as one of (in my humble opinion) highest quality, integrity driven risk-analysis firms in the space.

This idea would be not just another yield optimization opportunity, but a fundamentally new product — a conduit freeing sdeUSD’s underlying native yield from being cuffed to risk-free rates (an issue all stablecoins are facing as they compete for TVL).

An impalpable dilemma for most stablecoins, but uniquely enabled by deUSD’s institutional RWA direct minting abilities.

As a core contributor I support this proposal fully.

[nya]

Elixir’s official tweet mentioned an improvement in yield—does this refer to something different from the proposal above? https://x.com/elixir/status/1910020133864837145

If it is a separate initiative, then depending on the details, it may seem unnecessary to increase risk, even if it’s low-risk.

what do you think? @GOMPANG

[dmytro.btc]

In my opinion, this is a strong and strategically smart move for Elixir.

They’re shifting from simple farming to serious treasury management, bringing in professionals from Gauntlet. This means not just profit, but also trust, stability, and a clear intention to build something long-term.
The fact that the vault will operate on Morpho is another big plus — it’s one of the most promising platforms in DeFi right now.
Elixir is thinking several steps ahead. This isn’t about “quick money” — it’s about building real infrastructure for the future. And I respect that.

[Karm]

Given this is a large percentage of the deUSD Backing, could you clarify what procedures or safeguards will be in place to ensure sufficient redemption liquidity and enable timely deUSD burns—particularly during periods of elevated deUSD redemptions.

• Will there be a defined methodology to measure and manage available liquidity for deUSD redemptions?

• Are there target thresholds or minimum liquidity buffers to prevent redemption bottlenecks?

• How will these parameters respond to shifts in market conditions or changes in vault utilization?

[GOMPANG]

FYI : Before I begin, I’d like to clarify that I’m not a spokesperson or part of the team.
I’m sharing information with my perspective to help provide some additional context.
Q1: Are there target thresholds or minimum liquidity buffers to prevent redemption bottlenecks?
A1: (Asset Liquidity | Gauntlet VaultBook)
▸ Market cap / utilization: ≤ 80 %.
▸ Vault cash buffer: ≥ 10 % of AUM in “blue‑chip, one‑block‑exit” markets.
▸ Slippage guard: modeled liquidation slippage ≤ 2 %.
▸ Timelock: withdrawals that would break the cash buffer enter a 24‑120 h queue.

Q2: Dynamic response to market shifts / vault usage?
A2: (Under the Hood: Unpacking Our Morpho Vault Curation Methodology - Gauntlet), Market Allocation Strategy section and under below risk-off section
▸ ABS reruns whenever utilization rises above 85 % or hourly when price volatility breaches the 3σ band(three-sigma rule).
▸ If risk‑off is signaled,
(1) Gauntlet shrinks the offending market cap
(2) sells down to cash sleeve
(3) pauses deposits until metrics normalize.
▸ When conditions improve, caps reopen and idle cash is redeployed to restore target APY.

While all of the above can be considered part of the methodology, it is difficult to visualize clearly, so I will substitute with a reference link instead.
As for the deUSD redemptions section, it is unclear whether the question refers to “when a lent-out backing asset suddenly has to be recalled”, so I will leave it blank for now.
+Gauntlet provide real‑time dashboards(https://dashboards.gauntlet.xyz)
per‑market utilization(gauntlet app>each vault has market breakdown)

I believe this provides at least a minimum level of response.
However, some information may need to be checked for potential conflicts with existing whitepapers or official documentation.
If any part of my understanding is incorrect or if any explanation was unnecessary, I’d appreciate your feedback.

[Gauntlet]

Hey @karm, thank you for the response.

@GOMPANG has provided a great answer that highlights our vault management methodology and how we mitigate liquidity risk.

A primary consideration for this program is managing liquidity risk for deUSD withdrawals, as a proportion of supplied treasury funds are loaned out. This inherent illiquidity could create poor user experiences when users request withdrawals that cannot be serviced if not properly managed. Below, we’ll outline strategies to mitigate these risks and improve the withdrawal experience for holders of deUSD.

To help manage liquidity and ensure Elixir can satisfy high-demand redemption periods, Gauntlet can further utilize a number of liquidity risk management strategies:

1. Split Liquidity Management Strategy

   We will want flexibility in asset allocation to manage liquidity risk. Recall that assets deposited into a Morpho vault are either going to be:

   • Allocated to a Morpho Market, where they may be loaned out entirely depending on borrower activity.
   • Allocated to an idle market, where the funds cannot be loaned out and thus are not accruing any yield.

   This creates a tradeoff between maximizing yield and ensuring withdrawal flexibility. We will optimize between deploying capital to lending markets for yield and holding sufficient capital in the idle market to ensure liquidity for withdrawals in high-demand market situations. These will be single-block exits and provide instant liquidity to deUSD withdrawals. We will hold a proportion of sUSDS in idle market relative to total deUSD market cap, ensuring that we are providing sufficient instant withdrawal liquidity as the Elixir treasury grows. The capital held in idle markets will still earn the base sUSDS yield.

2. Lower Optimal Target Utilization

   Additionally, we can target lower utilization in the sUSDS markets we deploy to; this is the simplest way to manage float for deUSD redemptions. The standard interest rate model used on Morpho is the Adaptive Curve interest rate model, which is similar to the kink-slope model used by other lending protocols like Aave and Compound. The borrow APY is a piecewise linear function of the utilization, with the interest rate linearly increasing up to the target utilization of 90% (also referred to as the kink) and then increasing at a much steeper rate beyond that. One sensible approach is to have the target utilization of the sUSDS/USDC Morpho market be lower than 90%.

   The utilization of a Morpho market is defined in the following way:

   utilization = total borrowed / total supplied

   Ex: If the sUSDS/USDC Morpho Market has $10M in USDC supply, and $8M USDC of this market borrowed, the utilization is 80%.

   

The 90% target utilization parameter is immutable in the current contract and Morpho Markets cannot change their interest rate model. Therefore, to have a different target utilization, we would (and can, at Elixir’s discretion) need to deploy a new Adaptive Curve interest rate model contract with a lower TARGET_UTILIZATION according to Elixir’s reserve requirements and create a new Morpho Market that uses this newly deployed interest rate contract. Some tradeoffs need to be considered as a lower TARGET_UTILIZATION setting will:

• Lower equilibrium utilization. We generally expect max utilization to be ~2+% lower than the target utilization. So, if the target utilization is 85-88%, the equilibrium utilization should lie around 83-85%.
• Sacrifice some capital efficiency for increased liquidity. The supply yield necessarily decreases for the same borrow cost as is determined by the formula: supply APY = utilization x borrow APY.

[Ayor]

imo 0 fckin asset should be spotted not working on DeFi.

I’m not a Gauntlet fan guy because they usually take a lot of fees, but if it’s a way to boost our yield without going nobrain on lil DeFi dApps, I’m in.

[pryvigo]

I support this proposal. It offers a responsible and strategic way to earn conservative, risk-adjusted yield on idle treasury assets while maintaining liquidity and control.

Gauntlet’s experience, combined with the use of non-custodial Prime Vault strategies, provides strong risk management. The performance fee is fair, and returning a portion to the DAO aligns incentives well.