Day 11+12+13: DeFi Strategies - The Power Trio
[30-Day Writing Challenge] How Morpho, Level, & Pendle are Reshaping DeFi Integration
Updated: 22/04/25 Feedback from @donovanchoy
TL;DR
I spent 3 days researching the Level x Pendle x Morpho integration to find the optimal yield strategy for lvlUSD. After analyzing multiple vaults, PT-lvlUSD-29MAY2025/USDC emerged as the best choice with 0.98% net APY plus 5x Level XP. This article documents my research process and implementation.
The Quest for Optimal Yield
In April 2025, Level, Pendle Finance, and Morpho Labs announced a powerful integration that created new yield opportunities for lvlUSD holders.
As a DeFi yield hunter, I immediately wanted to find the most profitable strategy within this ecosystem.
My Research Methodology
Step 1: Understanding the Available Options
These were the four potential vaults for strategy implementation based on this tweet. Links to vaults below.
slvlUSD/USDC
PT-lvlUSD-29MAY2025/USDC
PT-slvlUSD-29MAY2025/USDC
M11C-LevellvlUSD
Step 2: Creating Evaluation Criteria
To determine the "best" vault, I focused on:
Net APY (earn APY minus borrow costs)
Market liquidity and activity
XP rewards multipliers
Vault curator credibility
Maturity timelines
Step 3: Data Collection
After seeking community support in Discord, I discovered I didn't need to query the Morpho subgraph after all.
The curator information was already listed on each vault page! This made my research process much simpler.
I gathered key data on each vault, including:
Liquidity depth ($5M in PT-lvlUSD market)
Borrowing activity (over $407K)
User participation (221 participants)
Current rates (11.41% earn APY vs 10.43% borrow APY)
Vault curators (clearly displayed on the vault interface)
The Winning Strategy
After comparing all options, PT-lvlUSD-29MAY2025/USDC emerged as the clear winner with:
0.98% net APY (highest among options)
Full 5x Level XP multiplier
Strong liquidity for easy position entry/exit
Reputable vault curator (Steakhouse Financial)
Implementation Experience
Here's exactly what I did:
Pendle:
Swapped USDC for lvlUSD
Supplied lvlUSD to get PT-lvlUSD
Morpho:
Borrowed USDC
Deposited PT-lvlUSD as collateral
Conclusion and Next Steps
My implementation has been running for 2 days, generating some returns plus XP accumulation for potential future benefits.
The power of this integration lies in its capital efficiency. It allows you to maintain exposure to lvlUSD while simultaneously borrowing against it and earning rewards from multiple protocols.