From my understanding, sfrxETH has significant counterparty risk to the frax team, including:
- Managing all validators for frxETH
- Minting rights for frxETH (as mentioned above)
- Withdrawal keys for staked ETH underlying the asset
- Control of frxETH Curve LPs generated by withholding 10% of user ETH deposits and pairing with newly minted frxETH
There is no need to run a product like this on a multisig. I find it difficult to call sfrxETH a decentralized liquid staking derivative in its current form. It feels a bit reckless to accept this asset in the same week as the recent Kraken news.
I think sfrxETH would be a suitable addition to Aave once minting, validator withdrawals, and any AMO LP deposits are managed in a decentralized manner (eg on chain governance by FXS or veFXS holders), and underlying staked ETH is distributed across several validators rather than just the Frax team.