Overview
Chaos Labs supports listing wOETH on Aave V3’s Ethereum Main deployment.
OETH
Origin Ether (OETH) is a liquid staking token that enhances yield and strives to maintain a 1:1 peg to ETH; wOETH is the wrapped version, which accrues yield in its price relative to ETH. It achieves this through the use of Distributed Validator Technology (DVT) via the SSV network, which decentralizes and secures ETH staking by splitting validator keys into multiple KeyShares across non-trusting nodes.
OETH employs an Automated Market Operations (AMO) mechanism to maintain its 1:1 peg with ETH, enhance capital efficiency, and maximize yields for its holders. The AMO strategically provides liquidity on both sides of pools like Curve by supplying equal amounts of OETH and WETH. When the pool is unbalanced — having more WETH than OETH — the AMO can mint additional OETH to restore equilibrium. This minted OETH is initially unbacked but becomes fully collateralized when users trade WETH for OETH in the pool, as the incoming WETH backs the previously unbacked OETH.
This process allows the protocol to remain 100% collateralized while effectively managing the money supply in response to market conditions. The AMO also earns rewards from liquidity provider incentives (such as CRV and CVX tokens), which are converted into collateral (WETH) and distributed to all OETH holders by automatically increasing their balances. Through the AMO, OETH maintains its peg to ETH, ensures liquidity, and maximizes yield.
Liquidity and Peg
wOETH does not have its own DEX liquidity pool, thus, this section focuses on the unwrapped version of the asset, OETH. It’s important to note that major DEX aggregators like 1inch automatically route transactions between the wrapped and unwrapped versions, meaning that all of OETH’s properties also apply to wOETH.
The current on-chain supply of OETH is approximately 30,700, distributed among 900 holders with over 14,000 token transfers. The supply has remained relatively stable since its peak in July 2023 and has gradually decreased over the past 30 days.
While OETH has several on-chain liquidity pools, the majority of liquidity is concentrated in the Curve pool. As seen in the chart, liquidity surged during the summer of 2023 but has since declined, mirroring the changes in OETH’s circulating supply since then.
The current buy-side liquidity stands at 4,000 WETH or $11.6M.
Despite the significant liquidity, OETH’s peg with ETH has shown inconsistency, experiencing significant price wicks in the past. However, over the last 180 days, the situation has improved, with the largest depeg narrowing to just 0.5%.
Volatility
With a 180-day average market cap of $106M and a trading volume of $680K, OETH has exhibited sustained volatility against ETH. This volatility has been increasing, as the 30-day average stands at 17.36 compared to the 180-day average of 10.89. The largest price drop recorded over the past six months was 4.92%.
LTV, Liquidation Threshold, and Liquidation Bonus
Considering the asset’s liquidity and recent volatility increase, Chaos Labs recommends adopting listing parameters in line with similar assets. We suggest setting the Liquidation Bonus at 7.5%, in line with similar assets in the pool, while setting the LTV and Liquidation Threshold at 72.5% and 75%, respectively. These values align with osETH, which shares a similar liquidity and volatility profile.
Supply and Borrow Caps
In line with Chaos Labs’ methodology, we determine supply and borrow caps at twice the DEX liquidity available under a price impact equal to the Liquidation Bonus.
Based on this approach, we recommend a supply cap of 9,000 wOETH.
As wOETH is a yield-bearing asset, we anticipate low borrowing demand and suggest an initial borrow cap of 10% of the supply cap.
IR Curve
We recommend aligning the Interest Rate curve and Kink to similar yield-bearing assets such as osETH.
Pricing
Given the existence of withdrawals for wOETH and price wicks in the past, we recommend using the exchange rate for the asset, as this will limit the risk of liquidation cascades.
E-Mode
The asset’s strong mean reversion and availability of withdrawals lead us to recommend including wOETH in the ETH-correlated E-Mode category.
Recommendations
Following the above analysis, we recommend listing wOETH on Aave V3’s Ethereum deployment. We recommend the following parameter settings:
| Parameter | Value |
|---|---|
| Isolation Mode | No |
| Borrowable | Yes |
| Collateral Enabled | Yes |
| Supply Cap | 9000 |
| Borrow Cap | 900 |
| Debt Ceiling | - |
| LTV | 72.5% |
| LT | 75% |
| Liquidation Bonus | 7.5% |
| Liquidation Protocol Fee | 10.00% |
| Variable Base | 0% |
| Variable Slope1 | 7% |
| Variable Slope2 | 300% |
| Uoptimal | 45% |
| Reserve Factor | 20% |
| Stable Borrowing | Disabled |
| Flashloanable | Yes |
| Siloed Borrowing | No |
| Borrowable in Isolation | No |
| E-Mode Category | ETH-Correlated |
CAPO
As OETH employs the Dripper contract to smooth out the rewards distribution, a 7-day MINIMUM_SNAPSHOT_DELAY is sufficient to get a smooth reading on the rolling APY.
| maxYearlyRatioGrowthPercent | ratioReferenceTime | MINIMUM_SNAPSHOT_DELAY |
|---|---|---|
| 8.46% | monthly | 7 |