Introduction
Based on forum proposals from Gauntlet and MEV Capital (which passed governance roughly 5 months ago), we will shortly be launching dedicated sUSDS and USDC lending vaults on Morpho, enabling higher yields while unlocking liquid levered RWA strategies for endusers.
Notably, these vaults will NOT include sdeUSD (removing possible recursive re-hypothecation risks) and will lend to a select group of curated assets. As a part of this Elixir will lend to Stream Finance at a conservative LTV, as Elixir has negotiated a 1 for 1 backstop with their protocol. The protocol will run a segmented, lending-based portfolio separate from the rest of its assets with Elixir as the most senior lender and liquidator.
All RWA vaults will have very conservative LTVs, at a max of 86% LTV - except for deUSD markets (for those minting deUSD with RWAs at LTVs). Those will have a max of 91.5% LTV.
Rationale
Elixir powers instant liquidity for a handful of highly liquid, top RWAs. While Elixir can’t hold most senior private credit RWAs directly (without a $1 backstop, as in the case with F-ONE), Elixir has seen significant demand to borrow against its backing. Levered RWA strategies benefit from a private borrow rate, and the ability to liquidate. Morpho’s battle tested lending infrastructure enables Elixir to lend out sUSDS (or USDC) collateral, offering more competitive yields while furthering its vision of increasing onchain liquidity for institutional assets.
Elixir Benefits
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Capital Efficiency: Leveraging existing sUSDS and USDC collateral allows more competitive yields through lending and borrowing demand.
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Preferred Redemption Rights: Senior 1:1 redemption rights grant vault participants priority claims, increasing liquidity protections and user confidence.
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Institutional-Grade Collaboration: Partnering with reputable lending teams drives better underwriting and portfolio diversification.
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Strategic Innovation: This initiative advances Elixir’s mission to bridge DeFi composability with Real World Assets, expanding user opportunities.
Potential Risks
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Credit Risk: Elixir cannot hold most RWAs directly (without a 1 for 1 backstop), as they carry inherent volatility. Elixir will only lend to these RWAs with the exception of F-ONE (where Elixir has a 1-1 backstop), and all future potential assets will require significant future due diligence and analysis.
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Market Volatility: Liquidation risks may arise if sUSDS or USDC prices fluctuate significantly against vault assumptions.
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Operational Risk: Segmented portfolios and multiple lending teams increase operational complexity requiring robust oversight.
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Liquidity Risk: Even with senior redemption rights, liquidity could be constrained during extreme market stress.
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Smart Contract Risk: Reliance on Morpho’s contracts entails increased exposure to smart contract exploits.