SLURP-62 | Establish DAO-Owned Liquidity in the Morpho LINK Vault

SLURPs
1

Abstract

This proposal seeks to establish a permanent, DAO-owned liquidity position (“floor”) in the Morpho wstLINK/LINK market by deploying idle treasury stLINK rewards into the Alpha LINK Enhanced V2 Vault. The DAO treasury currently holds ~765 unclaimed stLINK from its 20 reSDL NFT positions, rewards that have been accumulating with zero productive use. This proposal converts those rewards into DAO-owned supply-side liquidity in Morpho, simultaneously earning yield on idle assets and deepening the market that underpins stake.link’s growing DeFi presence.

Motivation

The DAO treasury (0xb351ec0f...) holds 20 reSDL NFTs (#1704-#1723), representing 1,000,000 SDL locked at maximum boost (9x), totaling 9,000,000 effective reSDL. These positions continuously generate staking rewards across three tokens:

Token Unclaimed Est. USD Value
stLINK ~765.5 ~$6,600
stPOL ~932.4 ~$215
stESP 0 $0

These rewards have been accumulating since the NFTs were minted and are currently earning nothing, a missed opportunity for the DAO.

Supply-Constrained Morpho Market

The Morpho wstLINK/LINK market is the primary DeFi venue for leveraged stLINK staking. Current state:

Metric Value
Total Supply ~$1.19M
Total Borrowed ~$1.10M
Utilization 92.3%
Supply APY 5.48%
LINK Vault APY 4.69%

At 92.3% utilization, the market is above the 90% IRM target. The AdaptiveCurveIrm is actively ratcheting borrow rates upward, which discourages new borrowing and could stifle market growth. Additional supply-side liquidity directly addresses this by pulling utilization back toward the 90% equilibrium.

Strategic Precedent

This proposal follows the model established by SLURP-51 (DAO-Owned Liquidity for UniV3 SDL/LINK), which successfully deployed idle treasury stLINK rewards into the Uniswap V3 SDL/LINK pool. That initiative:

  • Converted ~681 stLINK from treasury to productive use
  • Created a permanent liquidity floor in the SDL/LINK pair
  • Demonstrated the value of deploying idle treasury assets rather than letting them sit

SLURP-62 applies the same principle to the Morpho market, the DAO’s other key DeFi venue alongside Uniswap, Curve, Folks Finance.

Specification

Initial Deployment

  1. Claim unclaimed stLINK rewards from treasury reSDL NFTs by calling withdrawRewards() on the SDLPool contract (0x0B2eF910...)
  2. Convert claimed stLINK to LINK via the Curve stLINK/LINK StableSwap pool (0x7E138768...) or the Priority Pool
  3. Deposit LINK into the Alpha LINK Enhanced V2 Vault (0x610f5b68...) on Morpho
  4. Hold the resulting vault shares in the DAO treasury

Ongoing Maintenance

  • Quarterly claim-and-redeposit: Every 90 days, claim newly accumulated stLINK rewards from the 20 reSDL NFTs and deposit into the same vault position
  • Yield accrual: Supply APY earned by the vault position accrues automatically to the DAO’s vault shares
  • No active management required: The vault is managed by the existing vault curator; the DAO simply holds shares as a passive supplier

Governance Controls

  • Any withdrawal of the DAO’s vault position requires a separate governance vote
  • Any reallocation of the DAO’s vault shares to a different market or venue requires a separate governance vote
  • The quarterly claim-and-redeposit cadence may be adjusted by the DeFi NAIL representative without additional governance, provided the destination remains the same vault
  • Claiming frequency adjustments (e.g., monthly vs. quarterly) are operational decisions delegated to the DeFi NAIL representative

Financial Parameters

Initial Deployment

Parameter Value
stLINK claimed ~765.5 stLINK
LINK received (after Curve swap) ~763 LINK (est. ~0.3% swap impact)
USD value at deployment ~$6,600
Vault TVL increase ~0.55%

Ongoing Quarterly Deposits

Based on current reward rates, the treasury’s 9M effective reSDL generates approximately:

Period Est. stLINK Rewards Est. LINK Equivalent
Per quarter ~190 stLINK ~189 LINK (~$1,640)
Per year ~765 stLINK ~763 LINK (~$6,600)

After Year 1, the DAO’s Morpho position would grow to approximately 1,526 LINK (~$13,200), all from previously idle rewards, earning organic lending yield on the accumulated position.

Cost to the DAO

Zero incremental cost. The stLINK rewards are already accruing and currently earning nothing. The only cost is gas for the claim, swap, and deposit transactions (estimated <0.01 ETH total per quarterly cycle).

Strategic Benefits

Transforms idle, unproductive treasury rewards into a yield-bearing position. The DAO currently has ~$6,600 of stLINK sitting unclaimed, this proposal puts those assets to work immediately and establishes a pipeline for future rewards.

Additional supply liquidity in the Morpho market directly benefits the ecosystem:

  • Pulls utilization down toward the 90% IRM target, stabilizing borrow rates
  • Enables more wstLINK loopers to enter (higher leverage = more stLINK demand = higher stLINK APY for all holders)
  • Reduces the market’s sensitivity to individual large withdrawals

The vault position earns organic lending yield (currently ~2.76% from borrower interest) for the DAO treasury. On the initial ~763 LINK deposit, this generates ~21 LINK/year. As the position grows through quarterly redeposits, yield increases proportionally, reaching ~42 LINK/year once the full ~1,526 LINK position is built out.

DAO-owned liquidity in Morpho signals long-term commitment to the wstLINK/LINK market. This is particularly important as the DAO allocates incentives (SLURP-57) to this market, having the DAO’s own capital alongside external depositors demonstrates skin in the game.

This proposal complements the existing Merkl incentive campaigns funded by SLURP-57. While those campaigns attract external capital via APY incentives, DAO-owned liquidity provides a permanent, non-mercenary baseline that persists regardless of incentive levels.

Contracts Involved

Contract Address Role
SDLPool (reSDL) 0x0B2eF910ad0b34bf575Eb09d37fd7DA6c148CA4d Claim stLINK rewards
stLINK 0xb8b295df2cd735b15BE5Eb419517Aa626fc43cD5 Reward token
Curve stLINK/LINK 0x7E13876B92F1a62C599C231f783f682E96B91761 Swap stLINK → LINK
LINK 0x514910771af9ca656af840dff83e8264ecf986ca Deposit asset
Alpha LINK Enhanced V2 0x610f5b68bd1eed68af649a3fd3dc2caa1ee4ae7e Morpho vault

Transaction Sequence (via Treasury Safe)

  1. SDLPool.withdrawRewards([token_addresses]) claims stLINK (and stPOL) to treasury
  2. stLINK.approve(CurvePool, amount) approve Curve for stLINK spend
  3. CurvePool.exchange(1, 0, amount, min_out) swap stLINK (coin[1]) → LINK (coin[0])
  4. LINK.approve(Vault, amount) approve vault for LINK spend
  5. Vault.deposit(amount, treasury) deposit LINK, receive vault shares to treasury

All transactions executed as a single multiSend batch via the 6/8 Gnosis Safe.

Voting

  • For: Claim treasury stLINK rewards, convert to LINK, and deposit into the Morpho Alpha LINK Enhanced V2 Vault as DAO-owned liquidity. Establish quarterly claim-and-redeposit cadence.
  • Against: Leave stLINK rewards unclaimed. No change to current treasury operations.
3 Likes
2

I support this move to establish LP at morpho and start earning more for treasury

1 Like
3

I’m aligned with the intent of this proposal, turning “idle” rewards into a recurrent engine is important. Where I’m still unconvinced is why we’d make Morpho the default sink for treasury rewards when we already have a working, measurable framework in SLURP-51.

What the DAO is actually earning today

Using the DAO’s current LINK/SDL UniV3 position (publicly viewable on Revert):

DAO Treasury LP

  • Position value: ~$11,421
  • Total fees earned (so far): ~$302.85
  • Fee APR: ~7.00%
  • Avg daily fees: ~$2.30/day (≈ ~$840/year if conditions stay similar)

(Context: divergence loss currently shown around -$173, and net ROI excluding gas around +1.10%. LP PnL is not “just fees,” but fees themselves are tangible and recurring)

That ~7% fee APR is the key datapoint because it’s the closest apples-to-apples cashflow comparison we can make versus Morpho’s supply yield.

What’s at stake on earnings

Starting input is the same: ~$6.6k of treasury rewards (≈ 763 LINK, per SLURP-62).

A) Morpho supply (SLURP-62 as written)

  • Capital deployed: ~$6.6k
  • Yield cited: ~2.76%
  • Expected annual return: ~$180/year (≈ 21 LINK/year, per SLURP-62)

B) Uniswap v3 DAO-owned liquidity (SLURP-51 framework)

  • Rewards are paired with an equal USD value of SDL, so total liquidity deployed is ~2×
    • → ~$13.2k total (≈ $6.6k rewards + ≈ $6.6k SDL)
  • Using the DAO’s observed fee rate on the existing LINK/SDL position: ~7% fee APR
  • Expected annual fees: ~$920/year on the ~$13.2k position

Under the same assumptions, the SLURP-51 style deployment targets roughly ~5× higher annual cashflow than the Morpho route (~$920 vs ~$180), while simultaneously strengthening SDL liquidity — which remains strategically important given the DAO’s balance sheet composition.

Where SLURP-59 fits

SLURP-59 already provides a clean governance pathway for supporting credit markets via incentives realignment.

In other words, we can (and likely should) support Morpho through explicit incentive policy.

Treasury rewards compounding, however, is a different lever. If we route rewards into Morpho by default, we are implicitly choosing:

  • Lower recurring yield (based on current numbers), and
  • No direct improvement to SDL liquidity depth or resilience

On concentration: higher yield + deeper liquidity

The DAO’s current UniV3 position is full range, which is conservative.

A more concentrated range could:

  • Materially increase fee APR
  • Provide significantly deeper effective liquidity around the active price

This requires deliberate range selection, monitoring, and redeployment rules to avoid sitting permanently out of range. I’m not suggesting rushing this without analysis — but the upside is real and directly aligned with the DAO’s need for reliable SDL market structure.

Note:

One underappreciated benefit of SDL/LINK LP is its dynamic exposure profile.

If SDL strengthens, the position naturally becomes more LINK-weighted (effectively selling SDL into LINK over time). This can be beneficial because:

  • It marginally diversifies treasury exposure
  • If SDL rallies, the DAO can redeploy additional SDL (top-up liquidity or re-center a range) from a position of strength — not as a reaction to mercenary liquidity exiting

TL;DR

I support making rewards recurrent and productive.

However, the default route should remain:

  1. Build and compound DAO-owned SDL liquidity (SLURP-51 framework) while SDL liquidity remains strategically fragile — because it offers higher earning potential and deploys more capital productively.
  2. Use SLURP-59-style incentives as the primary governance lever to support Morpho and credit markets — rather than consuming the rewards compounding engine for that purpose.

Purely on the numbers, Morpho as the default sink is difficult to justify today compared to what the DAO is already earning in UniV3 — especially once you factor in the matching framework and the SDL-liquidity externality.

2 Likes
4

ty ser. The core thesis of SLURP-62 is market infrastructure, not yield. The financial parameters section exists because governance proposals should quantify what’s being deployed. But the yield the DAO earns is a side effect, not the motivation.

The Morpho wstLINK/LINK pool has ~$130K of borrowable LINK remaining. At 92%+ utilization,
the AdaptiveCurveIRM is already ratcheting rates upward past the 90% target. This means:

A $500K wstLINK position wanting to loop can only borrow ~$130K before the pool is
drained. That’s ~1.26x leverage, barely worth the gas. Even a modest $100K position would consume most of the remaining liquidity and spike rates further for everyone.The adaptive curve punishes this exponentially. Every dollar borrowed past the target utilization accelerates rate increases, creating a negative feedback loop where high rates discourage new supply, which keeps utilization high, which keeps rates high.

This is the only active flywheel market for stLINK. Looping is how stLINK holders amplify
their staking yield, and looping at scale is how stLINK demand grows, which benefits every
holder and creates actual moat. Right now that flywheel is jammed because there simply isn’t enough supply-side liquidity.

765 stLINK sitting unclaimed in the treasury does nothing. Deployed into Morpho, it
directly loosens the constraint that’s throttling the market we’re simultaneously spending
incentive budget (SLURP-57) to grow. We’re paying to attract borrowers to a pool that
can’t service them. That’s the mismatch this proposal fixes, even if it’ll take time as we don’t have much liquidity to provision.

To be clear: this doesn’t compete with or preclude future UniV3 SDL/LINK deposits. Those
serve a different purpose (token liquidity/price discovery). This is about unblocking the
DeFi loop that drives stLINK demand.

1 Like
5

Hello Tokenized, and thank you for bringing this proposal forward. I appreciate the thought and effort that went into it.

As Ari mentioned, “I’m aligned with the intent of this proposal, turning ‘idle’ rewards into a recurrent engine is important.” I support that objective.

Here are a few thoughts:

These rewards have been accumulating since the NFTs were minted and are currently earning nothing, a missed opportunity for the DAO.

The proposal suggests routing them to Alpha LINK Enhanced v2 on Morpho, where the yield is 4.77% (3.06% in $LINK and 1.70% in $SDL). From my perspective, this results in earning less $LINK than the current staked position (4.83% in $LINK currently on stake.link), while adding exposure to $SDL that the DAO may not necessarily need. It also introduces additional counterparty risk by depositing on an external platform.

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Additional supply-side liquidity directly addresses this by pulling utilization back toward the 90% equilibrium.

this effect would likely be temporary. Utilization would tend to move back toward its starting point as more $LINK is borrowed against the additional supply.

Do we believe that depositing 765 $LINK will meaningfully address the mismatch the proposal aims to solve? Even the reference to “a modest $100K position” suggests that the scale required to move the needle is significantly larger. Adding 765 $LINK to the pool is unlikely to produce a noticeable impact.

Additionally, the initial deployment shows an estimated loss of around 2.5 LINK from the Curve swap. What is the urgency that justifies realizing that loss? My understanding is that stLINK is currently trading at a premium.

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If anything, with 9M reSDL, those 765.5 LINK would likely be staked relatively quickly through the priority pool in my view. There does not appear to be a strong reason to leave value on the table.

Overall, I think the initiative is constructive, but I’m not convinced the move is favorable from a risk–reward perspective.

As Ari suggested, I would be more supportive of allocating these “unclaimed rewards” to strengthening our fragile $SDL liquidity. This could generate a better yield (7%) than Morpho or simply remaining staked, while also addressing a more structural issue, which is the DAO’s own liquidity. Fees generated from the LP position should also be redeposited into the pool periodically, for example every three months.

Let’s think about other alternatives to bring $LINK liquidity to morpho if that’s what blocking the flywheel. Reaching out to a strategic market market solves this problem.

Reach out to crypto funds holding large LINK positions (LToads come to my head), staking operators, ecosystem players and market makers. Offer private incentives or boosted yield are just some ideas.

Cheers.

1 Like
6

Thanks guys, appreciate the detailed engagement. Let me address the core framing first, then the specifics.

The goal of this proposal isn’t to optimize yield on 765 LINK. If that were the objective, I’d agree with you, the numbers don’t justify the complexity. But that’s not what this is.

This is about the DAO establishing its first self-directed DeFi deployment pipeline. The 765 LINK is intentionally modest because it’s a proof of concept (and also what we currently have). We’re building the muscle: custody flow, deployment mechanics, monitoring, rebalancing. Once that infrastructure exists and is battle-tested, the DAO can deploy at meaningful scale with confidence, whether into Morpho, SDL liquidity, or wherever the best risk-adjusted opportunity sits.

On the specifics:

  • Yield comparison (4.77% vs 4.83%): Fair math, but it misses that the Morpho position earns SDL alongside LINK and wstLINK soon too. More importantly, the DAO curating its own vault on a protocol it has a strategic relationship with has value beyond the APY delta (which is just us funneling money back to ourselves anyways). We’re not passive depositors, we’re building our presence in the ecosystem we want to lead.

  • “765 LINK won’t move the needle on utilization”: Correct, and it’s not meant to. This is a baseline. You have to start somewhere to get there.

  • Curve swap loss (~2.5 LINK): Valid point. If stLINK is trading at a premium, timing the conversion or exploring alternative routes makes sense. Happy to optimize the execution path and use the Priority Pool, but this is a routing detail, not a reason to shelve the initiative.

  • SDL liquidity alternative: I actually like this idea and don’t see it as competing with the Morpho deployment. A split allocation - Morpho as the DeFi infrastructure proof of concept, SDL liquidity to address the structural gap you identified, could serve both objectives. Open to have any of you make your own proposal pitching it.

The risk I want us to weigh isn’t “what if we lose 2.5 LINK on a swap.” It’s “what if, 12 months from now, we still have no proven pipeline for deploying DAO assets into DeFi, and we’re still fully reliant on third parties for every initiative.”

This proposal is a seed, not a harvest. The harvest comes when the DAO can confidently deploy at scale because we’ve already proven the path works.

1 Like
7

Revised plan is up instead of this one: