Polygon community weighs proposal to deploy over $1 billion in stablecoin on its bridge for yield generation
Quick Take
- The Polygon community is evaluating a proposal to utilize over $1 billion in stablecoin reserves held on the PoS Chain bridge to generate yield.
- The proposal was pitched by Web3 risk provider Allez Labs in conjunction with DeFi protocols Morpho and Yearn, aiming to gather community input.
- The idle reserves currently represent an opportunity cost of around $70 million annually, the proposal claimed.
The Polygon community is discussing a proposal to generate a yield from over $1 billion held on the PoS Chain bridge — the canonical bridge connecting the network with Ethereum.
Web3 risk provider Allez Labs, along with DeFi protocols Morpho and Yearn, wrote a Pre-Polygon Improvement Proposal seeking input from the Polygon community on deploying about $1.3 billion in stablecoin reserves (DAI, USDC and USDT) from the Polygon PoS Bridge.
The proposal claimed that these funds represent an opportunity cost of around $70 million annually due to the idle $1.3 billion stablecoin reserve.
It aims to use these funds to incentivize additional activity on Polygon PoS and within the broader AggLayer.
The stablecoin reserves would be gradually deployed into ERC-4626 vaults specific to each asset type.
DAI reserves were proposed to be held in Maker’s sUSDS vault, while USDC and USDT would utilize Morpho Vaults as the primary source of yield. These vaults would be risk-managed by Allez, according to the proposal.
The proposal is set to be discussed through the community forums and the Polygon’s specialized Protocol Governance Council.
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