[ARFC] Add rETH Aave v3 Optimism

title: [ARFC] Add rETH Aave v3 Optimism
shortDescription: Add rETH to Aave v3 Optimism
author: @Llamaxyz - @TokenLogic
created: 2023-06-24


Add rETH to Aave v3 Optimism as collateral and to the ETH correlated eMode.


rETH is currently listed on Aave v3 Ethereum and Arbtirum. This publication proposes adding rETH to Aave v3 Optimism network.

ETH correlated asset make up over half of Aave’s TVL on Optimism. By adding rETH and providing LST diversification, Aave presents itself as a neutral platform offering users the choice between various LSTs.

A Chainlink exchange rate oracle is now available and there is suitable liquidity across several DEX pools to support an rETH listing.


rETH is listed on Aave v3 Ethereum and has over $58M of deposits. Rocket Pool is expanding its support for rETH across the L2 ecosystem and recently, a Chainlink oracle was published enabling rETH to be added to Aave Protocol. With the release of this oracle, this publication proposes adding rETH to Aave v3 on Optimism.

LST collateral types drive material borrowing revenue to Aave as users deposit the LST and borrow the corresponding network token. This is most evident on Ethereum where the LST-wETH-yield-maximising loop is the source of the vast majority of wETH borrowing demand.

An added benefit of offering a variety of LSTs is the respective communities may elect to compete for user acquisition via Aave through offering incentives. This is currently happening on Aave v3 Polygon and Aave’s TVL has meaningfully increased from a relatively small base.


Ticker: rETH

Contract Address: Optimism:0x9Bcef72be871e61ED4fBbc7630889beE758eb81D

rETH/ETH exchange rate: Optimism: 0x22F3727be377781d1579B7C9222382b21c9d1a8f

Parameter Value
Isolation Mode No
Borrowable Yes
Collateral Enabled Yes
Supply Cap 6,000 units
Borrow Cap 720 units
LTV 67.00%
LT 74.00%
Liquidation Bonus 7.50%
Liquidation Protocol Fee 10.00%
Reserve Factor 15.00%
Variable Base 0.00%
Variable Slope 1 7.00%
Variable Slope 2 300.00%
Uoptimal 45.00%
Stable Borrowing Disabled
Stable Slope 1 13.00%
Stable Slope 2 300.00%
Base Stable Rate Offset 3.00%
Stable Rate Excess Offset 5.00%
Optimal Stable to Total Debt Ratio 20.00%
Flahloanable Yes
Siloed Borrowing No
Borrowed in Isolation No

Optimism - Ethereum Correlated eMode Category

Add rETH to Category 1 eMode

Parameter Value
Category 1 (ETH Correlated)
Assets wstETH, wETH,rETH
Loan to Value 90.00%
Liquidation Threshold 93.00%
Liquidation Bonus 1.00%

Reference: [ARFC] Optimism Create ETH E-Mode


Copyright and related rights waived via CC0.


In favor of this proposal, thanks @Llamaxyz

the ACI supports this proposal, LST diversity on L2s is important and supported by our delegate platform

Thanks @Llamaxyz for putting forward this proposal.

We support the addition of rETH to Aave V3 Optimism.
Utilizing the same framework and analysis as for the addition of rETH on Arbitrum, we support the proposed parameters with a modification of the borrow cap. Based on our observations, the utilization rate for LSDs has been relatively low. Therefore, we recommend a more conservative approach and to set the borrow caps at 720 rETH. If there is a significant increase in demand and utilization, we will reassess the caps according to the utilization pattern.

1 Like

Hi Everyone,

A Snapshot has been created for this proposal.


Thank you to all those that vote in advance.

Gauntlet’s Recommendations

We support the addition of rETH to Aave v3 Optimism under the parameters proposed.

One thing to note is that unlike on Ethereum mainnet, where users can mint and burn rETH in exchange for ETH via the Rocket Pool smart contract - on L2, the quickest option to convert back to ETH is to swap on a DEX such as Uniswap for ETH. Otherwise, rETH on Optimism, like on Arbitrum, needs to be bridged back to mainnet in order to be arbitraged against the smart contract, which creates the possibility of temporary divergences between the rETH price on Optimism and the underlying ETH contained in the pool.

We look forward to community alignment on killswitches for LSTs that can drive further capital efficiency for rETH.

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