Polygon is considering a game-changing proposition that could unlock more than $1 billion in dormant stablecoin reserves to strengthen its decentralized finance (DeFi) ecosystem.
Currently, the Polygon PoS Bridge contains a large amount of unused stablecoins, such as DAI, USDC and USDT, which do not generate any returns. This proposal, backed by DeFi giants Allez Labs, Morpho Labs and Yearn Finance, aims to deploy these funds into DeFi projects to create massive growth opportunities.
The initiative aims to deploy approximately $1.3 billion worth of stablecoins in curated vaults on Polygon, including Yearn’s yeUSDC on Ethereum and Morpho Vaults, which will use high-quality collateral such as USTB and sUSDS.
In doing so, the proposal aims to generate an estimated annual return of $91 million. The yield would then be reinvested into the Polygon ecosystem to foster liquidity, encourage DeFi activity, and improve the infrastructure of the Polygon PoS chain and its AggLayer.
Paul Frambot, CEO of Morpho Labs, pointed out that unproductive reserves represent a missed opportunity worth between $50 million and $90 million per year at current lending rates.
The proposal envisions a self-sustaining growth model in which Polygon can maintain control of its liquidity and borrowers using Morpho’s technology, while ensuring security through formal code verification.
In addition to this DeFi push, Polygon recently upgraded its native token from MATIC to POL, which has seen a significant increase in market value, now reaching over $5 billion in market cap. The community is currently discussing the proposal on Polygon’s governance forums, with a focus on maximizing the potential of these idle assets to drive long-term growth of the ecosystem.
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