AAVE [Temp Check]: Onboarding swBTC to Aave V3 Ethereum

Governance New Asset
1

Title: [TEMP CHECK]: Onboarding swBTC to Aave V3 Ethereum

Author: zKilian_Swell

Date: 10-09-2024

Summary

Swell is seeking community support for adding swBTC to Aave V3 Ethereum. swBTC allows holders to earn native yield from restaking platforms while simultaneously utilizing swBTC across the DeFi ecosystem.

Motivation

The aim of this proposal is to give Aave users access to the growing ERC-20 BTC market to improve asset diversity and increase liquidity in the ecosystem. Users seeking exposure to BTC price action and restaking yield will be able to use swBTC on Aave as a collateral asset to borrow WBTC and Stablecoins.

Swell believes that all roads lead back to Ethereum, and we believe that the ERC-20 BTC market will grow rapidly over the coming years. We built swBTC with this in mind, including some keys features:

  1. swBTC is a permissionless restaking product with a clear risk profile for WBTC users
  2. It offers liquidity for users who want to stake their WBTC in protocols like Symbiotic, EigenLayer, or Karak without locking up their WBTC.

Benefits for Aave users

A swBTC integration would be beneficial to Aave in a few ways:

  1. Most of the WBTC in Aave is underutilised, by integrating swBTC, it creates a demand driver for WBTC utilisation and will result in more fees for Aave protocol.
  2. Users can earn restaking yield while still holding exposure to WBTC, which is a significant market for Aave

Risk mitigation

swBTC has been audited by Nethermind and ChainSecurity

Withdrawals are live and can be made at any time. Withdrawing swBTC currently takes 3 days. Enabling arbitrage in the unlikely event of a depeg.

Tokenomics & Governance

swBTC is a yield bearing ERC-20 Liquid Restaking Token that offers liquidity for users who want to stake their WBTC in protocols like Symbiotic, EigenLayer, or Karak without locking up their WBTC. As of 10/09/2024, approximately 560.72 WBTC has been deposited into swBTC.

Swell protocol is governed by Swell DAO, the DAO is capable of funding the development and upgrade of the protocol from the DAO token treasury, along with other management activities. Service fees accumulated from Swell are directed towards insurance and development funds, which are distributed by the DAO.

On-chain Metrics

  • As of 10/09/2024
    • Total Value Locked (TVL): $31 460 000 (560.72 WBTC)
  • Unique swBTC holders: 754
  • swBTC pools: Curve, PancakeSwap

You can view additional swBTC stats on Dune.

Oracles

Swell will deploy Aave’s CSPA adapter that will directly read swBTC pricePerShare() x underlying asset’s Price Feed (WBTC).

Protocols on Ethereum mainnet can directly read from swBTC contract’s pricePerShare x Chainlink’s WBTC-BTC x BTC-USD feed to derive swBTC/USD or swBTC/BTC.

The WBTC-BTC and BTC-USD feeds are very widely used by protocols on mainnet currently.

Important Links

Contract Address

Architecture

Reward distribution mechanism

Next Steps

  1. If consensus is reached on this [TEMP CHECK], escalate this proposal to the Snapshot stage.
  2. If the Snapshot outcome is YAE, this proposal will be escalated to ARFC stage
  3. Publication of a standard ARFC, collect community & service providers feedback before escalating proposal to ARFC snapshot stage
  4. If the ARFC snapshot outcome is YAE, publish an AIP vote for final confirmation and enforcement of the proposal
3 Likes
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Hello @zKilian_Swell :ghost:
Does the Swell team have plans to execute provision of initial liquidity and/or incentive programs?

3 Likes
3

Greetings @SaucyBlock!

Yes - Swell DAO will seed initial liquidity and provide ongoing incentives to boost market utilisation for Aave.

2 Likes
4

swBTC’s market cap is very small, ranking below 500th at CoinGecko. Additionally, its market cap relative to BTC has been stagnant over the past month. Given these two data, we think it too early to onboard swBTC on Aave v3.

1 Like
5

We have reservations about this proposal, especially considering the recently announced changes in WBTC’s structure and the upcoming effective date in less than a month. Given swBTC’s close tie-in with WBTC, these changes introduce uncertainties that could impact swBTC’s stability and usability on Aave.

We suggest reassessing the situation in a month, allowing time for the WBTC changes to settle and providing a clearer picture of the viability and potential benefits of integrating swBTC.

3 Likes
6

I agree with the previous comments. I think swbtc is not mature enough right now for being added in Aave.

2 Likes
7

Can someone from the Swell team give further details on the relationship with Gauntlet and how their influence or management is involved in swBTC?

According to the launch post:

Vault strategy is powered by Aera and managed by expert Restaking Guardian Gauntlet

This wasn’t mentioned at all in the proposal above but seems like a key point to highlight considering Gauntlet’s reputation and history with Aave DAO.

3 Likes
8

After the requisite forum discussion period, this proposal has been escalated to Snapshot stage for voting. We encourage everyone to participate.

2 Likes
9

Gauntlet is providing guidance on restaking allocation decisions of the collateral underlying swBTC, and Aera is a solution that is helping with the execution of those allocation decisions. This infrastructure does not impact the liquidity depth, peg strength, or the underlying functions of the Swell DAO.

2 Likes
10

The Snapshot vote for this proposal has concluded with a NAE result and the proposal will not proceed to ARFC stage at this time.

1 Like