Treehouse expands tETH strategy by integrating Compound V3

Treehouse has successfully passed proposal TIP 14 via a Snapshot vote, which integrates Compound V3 into its tETH Market Efficiency Yield (MEY) strategy. This move expands the lending and borrowing options for tETH, a product based on Liquid Staking Tokens (LST) that utilizes Lido’s wstETH as its underlying asset to earn Ethereum Proof-of-Stake rewards.

The MEY strategy functions by using wstETH as collateral to borrow WETH when borrowing rates are lower than staking yields, subsequently converting the borrowed WETH back into wstETH to increase LST exposure. By adding Compound V3’s WETH market, Treehouse aims to increase liquidity access and reduce dependency on specific protocols. Currently, the strategy utilizes four lending protocols: Aave Core, Aave Prime, Gearbox, and Spark.

While the integration introduces potential risks related to smart contracts, oracles, and market liquidity, Treehouse intends to apply existing risk management standards. Capital will be allocated between Compound V3 and existing protocols based on market interest rates, utilization, liquidity, and risk levels. Following the vote, the protocol will determine specific collateral ratios, leverage limits, and initial capital allocation ranges.