# \[IP\] Collateral Basket Change Proposal: Methodology v2 Alignment **URL:** \ **Category:** eUSD RFC\ **Created:** [September 28, 2026, 5:35pm UTC](https://forum.reserve.org/t/ip-collateral-basket-change-proposal-methodology-v2-alignment/1656 "2026-09-28T17:35:08Z")\ **Posts on this page:** 5\ **Page:** 1
**Author:** ![ham](https://avatars.discourse-cdn.com/v4/letter/h/ecb155/32.png) [@ham](https://forum.reserve.org/u/ham)\ **Post date:** [September 28, 2026, 5:35pm UTC](https://forum.reserve.org/t/ip-collateral-basket-change-proposal-methodology-v2-alignment/1656/1 "2026-09-28T17:35:08Z")
# Summary This RFC proposes rebalancing the eUSD collateral basket to bring the basket in line with the proposed Mandate and Methodology V2 document. The current basket is currently out of alignment due to its 66% Compound allocation exceeding the proposed 50% protocol limit. The proposed basket corrects this while using the expanded eligible collateral universe to improve diversification and yield. _As ratification of the new Mandate and Methodology does not itself make a change at the DTF level, it may be appropriate to combine ratification of the new mandate and methodology with the first collateral basket rebalance under this new methodology within a single IP. The on-chain mandate could then be updated separately as able, potentially alongside a future Revenue Share proposal, avoiding the need for an additional governance action._ # Problem Statement The current eUSD basket is out of alignment with the Mandate and Methodology V2 proposal following its ratification as Compound represents approximately 66% of the basket against a maximum protocol allocation of 50%. The expanded eligible collateral universe provides an opportunity to correct this while introducing additional strategies that improve the diversification and yield characteristics of the collateral basket. # Rationale ![Screenshot 2026-09-28 at 18.33.59](https://europe1.discourse-cdn.com/flex005/uploads/reserve/original/2X/b/b7bcfad7a8a0c86e1b1406a121896d6bc6a961c2.png) ![Screenshot 2026-09-28 at 18.34.09](https://europe1.discourse-cdn.com/flex005/uploads/reserve/original/2X/b/b671872b6c9788f7f835799a6e0c18ac8a55ea78.png) Aave and Compound are retained as established Core allocations at 25% each, while the remaining 50% is allocated across three Morpho strategies: Gauntlet USDC Prime V2 at 30%, Gauntlet USDC Frontier at 10% and Sentora PYUSD V2 at 10%. This results in an 80% Core / 10% Enhanced / 10% Opportunistic composition, remaining within the respective ≥70%, ≤30% and ≤10% methodology limits. The eligible asset universe and relevant data including these tables can be viewed [here](https://docs.google.com/spreadsheets/d/1RP2ycetWhdrBf9YrzXo5GhKMIVvWzf0lvi1QLYXaB8A/edit?usp=sharing). ### Diversification and Concentration The proposed basket improves diversification across protocols and individual collaterals while maintaining a similar underlying stablecoin composition to the current basket. No individual collateral position exceeds 30% and the diversification ratio increases from 3.01 to 4.26, comfortably above the methodology minimum of 3.0. The use of Aave USDT rather than Aave USDC maintains underlying stablecoin diversification at a minimal cost to the blended yield profile of eUSD. The proposed basket maintains 65% USDC and 25% USDT exposure, consistent with the current baskets 66% and 33% respectively, while the remaining 10% of the proposed basket introduces PYUSD. This avoids increasing reliance on USDC while adding a third stablecoin issuer to the basket. All positions remain below the methodology’s 10% strategy TVL limit. Gauntlet USDC Frontier has the tightest capacity margin, with the proposed $2.275m allocation representing approximately 8.8% of its current $26m TVL. ### Yield Using 30-day moving average yields, blended collateral yield increases from approximately 3.86% to 4.56%, an improvement of approximately 70 bps, while fintech yield increases from 3.47% to 4.10%. This is achieved while bringing the basket in line with the new methodology, reducing protocol concentration, increasing the diversification ratio and maintaining broadly similar USDC and USDT exposure to the existing basket. The additional yield is therefore a secondary benefit of the rebalance rather than its primary justification. # Risks The most significant change in risk exposure is the introduction of Morpho at 50% of the collateral basket. While this remains within the methodology’s protocol concentration limit, it introduces a new shared protocol dependency across three collateral positions alongside additional curator and vault-specific risks. All positions remain below the methodology’s 10% strategy TVL limit. Gauntlet USDC Frontier has the tightest capacity margin, with the proposed $2.275m allocation representing approximately 8.8% of its current $26m TVL, leaving relatively limited capacity for eUSD growth at current strategy TVL. # Risk Management These risks will be managed through the reporting and rebalance framework established within Mandate and Methodology V2. Particular attention should be given to Morpho protocol exposure and the capacity of Gauntlet USDC Frontier, alongside continued monitoring of stablecoin issuer concentration, liquidity and the diversification ratio. The basket will be reviewed at least quarterly under the methodology, with earlier rebalances possible where material changes in strategy capacity, liquidity or risk justify intervention. # Conclusion The proposed rebalance brings the eUSD collateral basket into alignment with Mandate and Methodology V2 while improving diversification and expected yield. Compound exposure falls from approximately 66% to 25%, the diversification ratio increases from 3.01 to 4.26 and blended yield increases from 3.86% to 4.56%. The basket remains 80% Core and within the methodology’s protocol, constituent and strategy capacity constraints. Importantly, these improvements are achieved without increasing the basket’s existing reliance on USDC. The proposed basket maintains approximately 65% USDC and 25% USDT exposure, while introducing a 10% PYUSD allocation and therefore an additional stablecoin issuer. The principal new concentration is Morpho at 50% of the basket. While this represents an improvement on the current 66% Compound concentration, Morpho exposure and the capacity of Gauntlet USDC Frontier should remain areas of active governance oversight as the basket evolves. ---
**Author:** ![0xd15co](https://dub1.discourse-cdn.com/flex005/user_avatar/forum.reserve.org/0xd15co/32/926_2.png) [@0xd15co](https://forum.reserve.org/u/0xd15co)\ **Post date:** [October 3, 2026, 10:25am UTC](https://forum.reserve.org/t/ip-collateral-basket-change-proposal-methodology-v2-alignment/1656/2 "2026-10-03T10:25:46Z")
Excellent work, Ham! > [@ham](#): > > Compound exposure falls from approximately 66% to 20%, the diversification ratio increases from 3.01 to 4.26 and blended yield increases from 3.86% to 4.56%. The basket remains 80% Core and within the methodology’s protocol, constituent and strategy capacity constraints. This about sums it up for me. I honestly cannot see any downside here, so I will clearly be voting in favor! ---
**Author:** ![Raphael\_Anode](https://dub1.discourse-cdn.com/flex005/user_avatar/forum.reserve.org/raphael_anode/32/1100_2.png) [@Raphael\_Anode](https://forum.reserve.org/u/Raphael_Anode)\ **Post date:** [October 4, 2026, 3:44pm UTC](https://forum.reserve.org/t/ip-collateral-basket-change-proposal-methodology-v2-alignment/1656/3 "2026-10-04T15:44:57Z")
One thing I noticed while writing the state of reserve report today: The allocation text and Q3 report assign **25% to Compound** , while the proposal’s conclusion puts Compound at **20%**. The five stated weights sum to 100% with Compound at 25%. Could you clarify this? ---
**Author:** ![ham](https://avatars.discourse-cdn.com/v4/letter/h/ecb155/32.png) [@ham](https://forum.reserve.org/u/ham)\ **Post date:** [October 5, 2026, 7:27am UTC](https://forum.reserve.org/t/ip-collateral-basket-change-proposal-methodology-v2-alignment/1656/4 "2026-10-05T07:27:12Z")
Apologies, that’s a typo in the conclusion. Will amend now. Thanks for flagging. ---
**Author:** ![R72](https://dub1.discourse-cdn.com/flex005/user_avatar/forum.reserve.org/r72/32/634_2.png) [@R72](https://forum.reserve.org/u/R72)\ **Post date:** [October 8, 2026, 6:38am UTC](https://forum.reserve.org/t/ip-collateral-basket-change-proposal-methodology-v2-alignment/1656/5 "2026-10-08T06:38:06Z")
Once again excellent work Ham, this proposal would positively impact diversification ratio and blended yield whilst (additional) risks are minor and the basket is still within set constraints. Vote(d) in favor.