Proposal for Yield Generation on Polygon PoS Chain

The Polygon community is discussing a proposal to generate yield from over $1 billion held on the PoS Chain bridge, which connects the network with Ethereum.

Web3 risk provider Allez Labs, along with DeFi protocols Morpho and Yearn, wrote a Pre-Polygon Improvement Proposal (Pre-PIP) seeking community input on deploying about $1.3 billion in stablecoin reserves (DAI, USDC, and USDT) from the Polygon PoS Bridge.

The proposal claims these funds represent an opportunity cost of around $70 million annually due to the idle reserves. The goal is 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. According to the proposal, these vaults would be risk-managed by Allez.

The proposal is set to be discussed through community forums and Polygon’s specialized Protocol Governance Council.