[ARFC] Add support for Wrapped Origin Sonic (wOS) to Aave v3

Governance New Asset
1

[ARFC] Add support for Wrapped Origin Sonic (wOS) to Aave v3

Author: ACI

Date: 2025-02-24

Simple Summary

In response to the Temp Check and recently passed ARFC proposal of deploying Sonic markets on Aave, this is a proposal for adding supply/borrow support for wOS on the Aave Sonic Instance.

Motivation/Background

Origin Sonic (OS) was launched in January 2025 and is an ERC20 LST that generates yield while sitting in your wallet by delegating S to a node operator. Similar to stETH, OS yield is paid out daily and automatically (sometimes multiple times per day) through a positive rebase in the form of additional OS, proportional to the amount of OS held.

Several LSTs trade below their peg due to DEX fees and slippage, and to reflect the time value of money. LSTs that consistently trade below peg effectively impose a hidden exit fee - certain LSTs often trade ~0.25% below peg, meaning it takes three weeks of staking to break even. This may be ok for long-term holders, but is terrible for users who plan to loop LTSs for additional yield. This was not the case for OETH or superOETHb, and will not be the case with OS.

Using OS on Aave will produce higher yield than other supported Sonic LSTs and have a near perfect S peg. The coming OS AMO will strengthen the peg, increase capital efficiency, and maximize yield. Our vision for OS is for it to become the most trusted LST for those seeking to use an LST for leveraged staking on Aave’s coming Sonic instance.

Obtaining OS is effortless, users can convert their S into Origin Sonic via any of the following methods:

wOS is a ERC-4626 tokenized vault designed to accrue yield in price rather than in quantity. When you wrap OS, you get back a fixed number of wOS tokens. This number will not go up - you will have the same number of wOS tokens tomorrow as you have today. However, the number of OS tokens that you can unwrap to will go up over time, as wOS earns yield at the same rate as standard OS. The wOS to OS exchange rate can be read from the contract (function number 16), or via the OS dapp.

Current exchange rate as of 2/04/25: 1 wOS = 1.00614219 OS

Security Considerations

OS was launched in January 2025 with 95% of its code forked from OUSD, which has been the basis of our other yield-bearing tokens OETH and Super OETH as well. This allows OS to inherit years of top-tier audits and a proven track record of securing hundreds of millions of dollars worth of underlying collateral. All OS audits can be found in the audits section of the OS docs. We have recently retained yAudit to look at our PRs as we code, and OpenZeppelin is also held on retainer to review 100% of the OETH and OUSD smart contract changes. Origin maintains an active bug bounty with rewards ranging in size from $100 OUSD for minor issues to $1,000,000 OUSD for major critical vulnerabilities. The bug bounty program is currently administered by Immunefi, where Origin maintains a median resolution time of 6 hours.

We are in talks with Chainlink, Redstone, Pyth, and API3 about deploying an OS/S price feed, but the redemption rate of OS to S can also be used to derive the price of OS on chain (OS redemptions back to S are currently available and were available at launch). Origin Sonic likely qualifies for a Correlated-Asset Price Oracle (CAPO) based on similar LSTs that have qualified.

Performance

Origin Sonic has seen healthy growth since launching on January 14th of 2025. Proof of Yield tracks the distribution of each Origin Sonic rebase event and displays the compounded yield on an annualized basis each day. The current Origin Sonic TVL sits at $2.6m (5.2m S) with a native yield of 17.69% APY:

Origin Sonic is growing at a steady rate and is currently the number two spot by TVL on Defillama for LST projects on Sonic:

and is the number 11 spot for

all protocols

on Sonic:

There has been immense demand for borrowing S against OS for leverage looping on money markets since launch due to the high underlying OS APY, and since OS and wOS earn 2x Passive Points and 4x Active Points (8x total points) when used in Defi protocols.

Origin has managed to integrate and onboard Origin Sonic into a variety of protocol verticals, including vaults, perps, and money markets:

Benefits of listing Origin Sonic

Since 2021, Origin has streamed millions of dollars in stablecoin to Aave markets via OUSD strategies, generating millions in yield and significantly boosting Aave’s TVL.

Enabling lend and borrow support for wOS on Aave will provide a new market for OS holders and Origin Protocol users, and add a new platform for leverage looping S. This new Origin Sonic market would lead to additional increased TVL for Aave’s new Sonic instance, additional revenue to the Aave Protocol and DAO from active loans and liquidations, and will attract a wider user base due to Origin Sonic being significantly higher yielding over the other Sonic LSTs that have launched.

Proof of Liquidity (POL) and Deposit Commitments

While no incentives have been used within any Origin Sonic integrations due to the high native yield of Origin Sonic, the Origin Protocol team is open to providing seed liquidity to jumpstart the Origin Sonic market on Aave once wOS is onboarded. More accurate amounts will be discussed with the Aave team and the ACI and can be shared during the ARFC stage of the proposal process.

Specification

ARFC has been updated with latest Risk Parameters provided by Risk Service Providers 2025-03-05

wOS Market Configuration (Sonic Instance)

Parameter Value
Asset wOS
Isolation Mode No
Borrowable No
Collateral Enabled Yes
Supply Cap 10,000,000
Borrow Cap -
Debt Ceiling -
LTV 66%
LT 68%
Liquidation Penalty 10%
Liquidation Protocol Fee 10.00%
Variable Base -
Variable Slope1 -
Variable Slope2 -
Uoptimal -
Reserve Factor -
Stable Borrowing Disabled
Flashloanable Yes
Siloed Borrowing No
Borrowable in Isolation No
E-Mode Category wOS/wS

wOS/wS Isolated Liquid Liquid E-mode Configuration

Parameter Value Value
Asset wOS wS
Collateral Yes No
Borrowable No Yes
Max LTV 87% -
Liquidation Threshold 90% -
Liquidation Bonus 1.0% -

CAPO

maxYearlyRatioGrowthPercent ratioReferenceTime MINIMUM_SNAPSHOT_DELAY
32.97% monthly 7

Useful Links

This is Origin’s fifth proposal to Aave, after proposing to add OGN as an Aave asset in 2021, proposing to add OUSD as an Aave asset in January 2023, proposing to add OETH as an Aave asset in September 2024, and proposing to add superOETHb as an Aave asset also in September 2024.

Additional relevant links:

Disclaimer

The current proposal is powered by Skywards. ACI is not directly affiliated with Origin Sonic and did not receive compensation related to this proposal.

Next Steps

  1. Publication of a standard ARFC, collect community & service providers feedback before escalating proposal to ARFC snapshot stage
  2. If the ARFC snapshot outcome is YAE, publish an AIP vote for final confirmation and enforcement of the proposal

Copyright

Copyright and related rights waived under CC0.

1 Like
2

Since the Temp Check post on Feb 4th, the Origin Sonic TVL has grown to $21.55m (25.32m S) with a native yield of 14.88% APY.

1 Like
3

Summary

LlamaRisk supports onboarding Wrapped Origin Sonic (wOS) to Aave v3 and recommends configuring a dedicated wOS/S Emode to maximize capital efficiency. wOS is a Sonic liquid staking token designed to support leveraged staking strategies. Our analysis indicates that wOS is built on a strong foundation, reflecting the solid track record of the Origin team and oversight from their in-house security expert.

The Origin team has confirmed that fixes for their latest OpenZeppelin audit will be deployed imminently, alongside the inclusion of wOS in their bug bounty program. We consider these actions mandatory before onboarding. Furthermore, while the current yield is generated solely through staking, wOS’s risk profile may evolve significantly as additional DeFi strategies are adopted.

Collateral Risk Assessment (click to reveal)

1. Asset Fundamental Characteristics

1.1 Asset

Wrapped Origin Sonic (wOS) is an ERC-4626 tokenized vault that supports leveraged staking strategies. Unlike traditional tokens, whose supply increases with yield accumulation, wOS appreciates while its token count remains unchanged, reflecting the growing underlying asset. Its design aligns with previous Origin tokens such as OUSD, OETH, and SuperOETH, with approximately 5% of its code modified from the audited OUSD contract to implement its unique yield-generation mechanics.

1.2 Architecture

image
image1544×717 52.6 KB

Source: Origin Documentation via LlamaRisk on Aave Forum, October 3 2024

wOS is engineered to maximize yield by capturing network staking rewards and pool revenues. While its overall structure is analogous to wOETH, subtle implementation differences have been introduced to optimize performance and manage specific risk factors. The diagram above illustrates the protocol’s comprehensive architecture and yield capture mechanism, showcasing the OETH/superOETHb function (which is analogous to wOS).

image
image770×813 48.1 KB

Source: wOS dependencies, Origin documentation, February 24 2025

Specific wOS architecture is detailed above. It shares the same architectural design as wOETH and other Origin tokens with minor implementational differences.

Key wOS contracts include:

This architecture is relatively straightforward and introduces a few points of failure beyond yield strategy selection.

1.3 Tokenomics

The tokenomics structure for wOS is straightforward. Origin users stake S among diverse validators to receive network rewards passed to token holders. Users can choose to hold either OS—which increases in number over time as rewards are credited—or wOS, which represents a fixed share of an ever‑increasing pool of OS.

image
image1370×1092 47.3 KB

Source: Percentage of wrapped OS (wOS), Origin Analytics, February 24 2025

Currently, the proportion of wOS relative to unwrapped OS is 60%. Approximately 23,000,000 OS are staked, with network rewards at 10%—down from 15% two weeks ago.

The associated OGN token serves as the governance token for the Origin Protocol ecosystem. Holders can lock their OGN in exchange for xOGN, which grants economic rewards and governance rights. The multiplier increases with longer staking durations (up to one year), incentivizing long-term commitment. Stakers may delegate votes, participate in multiple staking periods, and collect rewards from protocol revenue, primarily through OETH and superOETHb performance fees. Importantly, while xOGN balances remain constant during the lock-up period, a staker’s share of the overall voting power decreases as additional stakes are introduced.

Although new to Aave, Origin’s tokenomics system has been thoroughly tested in design and implementation.

1.3.1 Token Holder Concentration

image
image2790×1452 343 KB

Source: wOS holder distribution, Etherscan,, February 24th 2025

wOS holders are relatively concentrated, with approximately 75% held by just two addresses. The first address is an Euler Finance wOS vault, and the second is a Silo Finance wOS vault. Within these vaults, the largest holder (an EOA) supplies about 20% of the vault’s assets. This distribution suggests a degree of ownership balance that may help limit Aave’s concentration risk.

2. Market Risk

2.1 Liquidity

image
image477×615 30.4 KB

Source: OpenOcean, March 4, 2025

Liquidity for wOS to S is reasonable (via OS), with the asset being able to handle ~$3.5m within 7.5% slippage. Given that wOS may be unstaked from Origin-selected validators on a 14-day cooldown, this liquidity constraint is not an all-encompassing concern.

2.1.1 Liquidity Venue Concentration

Most of the liquidity is held on SwapX and Metropolis, with smaller pools on Shadow and Beethoven.

2.1.2 DEX LP Concentration

It is important to note that OpenOcean routes unwrapping as a potential route, deepening liquidity.

2.2 Volatility

The OS/S has remained strong, showing very little volatility.

2.3 Exchanges

The market presence of wOS is currently limited, with trading activity confined to just a few DEXs. The asset has no CEX support.

2.4 Growth

From early February, TVL started at a relatively low base and exhibited gradual accumulation, reaching 37.5M S as of today. This upward trend reflects growing confidence and usage within the Sonic ecosystem, likely driven by the attractive yield opportunities currently available on the network. Among these opportunities, OS and wOS tokens stand out as they are whitelisted for 4x Sonic points, offering enhanced rewards.

image
image1732×962 46.5 KB

Source: Origin Sonic TVL, DefiLlama, February 26th, 2025

3. Technological Risk

3.1 Smart Contract Risk

The Origin Sonic contract is a nuanced adaptation of the OUSD contract, which has undergone multiple comprehensive security audits. A dedicated Origin Sonic Staking Audit performed by OpenZeppelin in February 2025 identified one medium severity, three low severity, and four informational issues. The issues have been acknowledged, and the team confirmed fixes will be deployed shortly. Additional Sonic network adaptations are undergoing further audits, with results expected in the first week of March.

3.2 Bug Bounty Program

Origin maintains a bug bounty program offering rewards of up to $1,000,000 OUSD for identifying major critical vulnerabilities. At present, the program covers only OUSD and OETH. The Origin team has indicated that the scope will be expanded to include wOS shortly.

3.3 Price Feed Risk

As an ERC-4626 compliant contract, wOS has a built-in internal exchange rate oracle available via the convertToAssets function. There is currently no wOS/S market price feed.

3.4 Dependency Risk

Dependencies are depicted in the architecture diagram provided earlier. In addition to relying on ERC-20 and ERC-4626 standards, wOS introduces timelock dependencies:

  • The contract inherits from OpenZeppelin’s TimelockController.
  • It implements ERC-165 for role‑based access control.

All main protocol components use the same proxy pattern by inheriting from InitializeGovernedUpgradeabilityProxy—a custom proxy implementation rather than the standard OpenZeppelin patterns.

4. Counterparty Risk

4.1 Governance and Regulatory Risk

Origin’s core protocol operations—yield generation, fee collection, and distribution—are executed through upgradeable smart contracts governed by token holders. Governance decisions require a quorum of at least 20% of the total xOGN supply (staked Origin Token). All approved proposals are subject to a mandatory timelock before execution, allowing users to exit their positions if they disagree with forthcoming changes.

Most governance activities begin off-chain on the Origin Governance Forum and Discord server, then progress to a Snapshot vote before culminating in formal implementation.

Governance participation is tiered according to token holdings:

  • Voting on existing proposals has no minimum requirement.
  • Creating a Snapshot proposal requires 5,000 xOGN.
  • Submitting an on-chain proposal requires 100,000 xOGN.

The governance contract includes additional parameters, such as a 24-hour voting delay, a 48-hour voting period, and a two-day timelock delay before proposal implementation.

The website (www.originprotocol.com) and the decentralized application are accessible via IPFS at originprotocol.eth.limo (the Interface) are provided by Origin Protocol Labs, a Cayman Islands entity. While the Cayman Islands offer a recognized yet adaptable legal environment for digital assets and related services, they have not formally addressed liquid staking within their regulatory framework.

Hosted on IPFS, the Interface enables users to interact with decentralized protocols deployed on public blockchains. Under the Terms of Service, users always maintain full control over their crypto assets. Origin neither holds nor manages these assets nor assumes any role in transactions conducted via the Interface or protocol. All interactions occur directly between a user’s self-custodial wallet and the underlying protocol.

Due to the decentralized nature of the Interface—where files and content reside on multiple IPFS nodes rather than a central server—Origin cannot modify, supervise, or guarantee its availability at any given time.

This decentralized approach limits the risk to Aave stemming from counterparty exposure, though some residual risk remains.

4.2 Access Control Risk

Here are the main controlling wallets:

Here are the main contracts of the protocol:

  • Origin Sonic (ERC-20) : The ERC20 implementation. Deployed behind an older version of a BaseUpgradeabilityProxy contract from OpenZeppelin and is owned by the Timelock.
  • Wrapped OS (ERC-4626): An ERC4626 wrapper for the token. Deployed behind an older version of a BaseUpgradeabilityProxy contract from OpenZeppelin and is owned by the Timelock.
  • Vault Admin: Manages the supported assets for minting OS, deposits/withdraws from strategies, and allocates funds to the withdrawal buffer.
  • Vault Core: Manages strategy configuration. It is deployed behind an older version of a BaseUpgradeabilityProxy contract from OpenZeppelin and is owned by the Timelock.
  • Oracle Router: Oracle that returns the 1e18 constant (fixed price oracle). The contract is immutable.
  • Dripper: Passes rewards to OS holders at a fixed rate to avoid drastic changes in the internal exchange rate. Deployed behind an older version of a BaseUpgradeabilityProxy contract from OpenZeppelin and is owned by the Timelock.
  • Zapper: Allows to mint and redeem wOS for S and conversely. The contract is immutable, and only the Vault Core contract can use its minting and redeeming functions.
  • Sonic Staking Strategy: Manages staking into the consensus layer of Sonic. Deposits and withdrawals are available to the Vault Core contract only. Deployed behind an older version of a BaseUpgradeabilityProxy contract from OpenZeppelin and is owned by the Timelock.
  • VaultValueChecker: Ensures that changes in the vault’s backing evolve within expected boundaries. It is an immutable contract.

4.2.1 Contract Modification Options

In most cases, all contract upgrades and state modifying functions are restricted to the governor, which is the Timelock. This Timelock is itself controlled by the Admin Multisig and the Guardian Multisig.

The vault code is split between the Vault Core and Vault Admin contracts for contract size reasons. When functions are called on the proxy, it first checks the Vault Core implementation and delegates to the Vault Admin implementation if the function is not found there. In both cases, privileged functions can only be executed by the Timelock. Below is a non-exhaustive list of important tasks that the Timelock can execute:

  • setPriceProvider(): Updates the contract address that provides asset price data.
  • setRedeemFeeBps(): Sets the fee percentage charged for redeeming tokens, limited to a maximum of 10%.
  • setStrategistAddr(): Updates the address of the Strategist who has partial administrative capabilities (no strategist is set for now).
  • setWithdrawalClaimDelay(): Changes the waiting period for async withdrawals, with constraints between 10 minutes and 15 days.
  • supportAsset(): Adds a new asset to the list of supported assets that can be used for minting OS.
  • removeAsset(): Removes an asset from the list of supported assets only if the vault holds minimal amounts.
  • setSwapper(): Sets the contract that performs swaps of collateral assets.
  • approveStrategy(): Adds a new strategy to the vault’s approved strategies list.
  • removeStrategy(): Removes a strategy from the vault, ensuring it’s not a default strategy for any asset.
  • setVaultBuffer(): Sets assets buffer to keep in the vault to handle redemptions without unwinding from strategies.
  • pauseCapital(): Pauses capital movement to prevent deposits and withdrawals.
  • unpauseCapital(): Resumes capital movement to allow deposits and withdrawals.

4.2.2 Timelock Duration and Function

The Timelock is controlled by the following roles:

4.2.3 Multisig Threshold / Signer identity

Two multisig wallets control the protocol:

The identity of the signers is not disclosed.

Note: This assessment follows the LLR-Aave Framework, a comprehensive methodology for asset onboarding and parameterization in Aave V3. This framework is continuously updated and available here.

Aave V3 Specific Parameters

Will be presented jointly with @chaoslabs

Price feed Recommendation

We recommend using the wOS internal exchange rate with the CAPO adapter.

Disclaimer

This review was independently prepared by LlamaRisk, a community-led non-profit decentralized organization funded in part by the Aave DAO. LlamaRisk is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any compensation from the protocol(s) or their affiliated entities for this work.

The information provided should not be construed as legal, financial, tax, or professional advice.

4

Overview

Chaos Labs supports listing wOS on Aave V3’s Sonic instance. Below is our analysis and initial risk parameter recommendations.

Origin

Origin is a DeFi platform that offers a range of yield-generating products. Currently, it supports five key offerings: OETH, a ETH LST; OS, Sonic’s S-Tier LST; Super OETH, a supercharged LST; OUSD, a stablecoin; OGN, a governance and value accrual token for all Origin products; and ARM, a zero-slippage swapping tool;

Origin Ether (OETH) is one of the most popular products launched by Origin. It is an ETH LST leveraging SSV Network’s distributed validator technology (DVT), which splits validator keys into KeyShares across nodes to ensure uninterrupted operation. OETH redemptions are available through three methods. Origin’s ARM enables lossless 1:1 WETH exchanges with no slippage. Async withdrawals allow direct ETH redemptions from the Beacon Chain when ARM liquidity is low. Instant vault redemptions, an older method with a 0.1% fee, will be phased out as ARM expands. User can also exit through DEX via the OETH/ETH Curve pool.

OS

Sonic employs a consensus mechanism called Lachesis, which represents a sophisticated approach to solving blockchain’s traditional limitations. Lachesis is a leaderless, asynchronous Byzantine Fault Tolerant (aBFT) consensus protocol built on a Directed Acyclic Graph (DAG) architecture, fundamentally different from traditional blockchain structures that process transactions in sequential blocks. This mechanism allows each validator in the network to maintain its own local block DAG and process transaction batches independently, eliminating the need for a central authority to coordinate consensus. The asynchronous nature of Lachesis enables validators to reach agreement on the order and validity of transactions without waiting for rounds of communication to complete, significantly reducing latency while maintaining security against malicious actors.

Operating within Sonic’s proof-of-stake framework, this consensus approach delivers near-instant transaction finality—approximately one second—while supporting throughput of over 10,000 transactions per second in its optimized form. The protocol’s Byzantine fault tolerance ensures the network remains operational and secure even when some nodes fail or behave maliciously.

Origin Sonic (OS) is an LST on Sonic. As a rebasing token, OS distributes staking rewards automatically to holders by increasing their token balance over time. The protocol delegates staked Sonic S to a subset of active validators, which earn staking rewards every 10 minutes. These rewards are then distributed to OS holders through its rebasing mechanism.

The getAllStrategies function in OS vault returns the active strategy used by the vault, while the defaultValidatorId in the strategy contract indicates the validator receiving the delegated funds. Currently, defaultValidatorId is set to 18, corresponding to the top validator on Sonic’s Validators Leaderboard, controlling 15% of all stake. Since OS’s vault utilizes a single active strategy, all staked assets are concentrated in Validator 18, resulting in a high slashing risk concentration. However, given that the validator is created by Sonic Labs, which has maintained a strong track record with no recorded slashing incidents and near-perfect uptime, the operational risk remains relatively low.

Users can exit OS through two primary options: swapping OS for S on SwapX or using asynchronous withdrawals. In the latter case, OS is burned immediately, and the underlying S is queued for withdrawal, subject to a minimum 24-hour delay before claims can be processed. If the vault holds sufficient unstaked S, users can redeem their funds immediately after the waiting period.

image - 2025-03-05T000632.176
image - 2025-03-05T000632.1761779×1372 150 KB

OSonicVaultProxy

However, if liquidity is low, redemptions may take longer as the protocol waits for additional S to be unstaked from validators, a process that can take up to 14 days. After reviewing the OS vault, it shows the vault consistently maintains 1–1.5% of the available token supply unstaked to support withdrawals. Currently, the vault holds 540,000 wS in unstaked reserves.

Screenshot 2025-02-25 at 8.54.57 AM
Screenshot 2025-02-25 at 8.54.57 AM1728×254 38.3 KB

wOS

wOS (Wrapped OS) is an ERC-4626 tokenized vault that serves as a non-rebasing alternative to OS. Unlike OS, which distributes staking rewards through rebasing by increasing token balances, wOS maintains a fixed balance while its value appreciates relative to OS via an exchange rate mechanism. As of the time of writing, the exchange rate stands at 1 wOS = 1.013 OS.

Users can unwrap wOS back into OS at any time through an atomic process, as demonstrated in the transaction example provided below.

Screenshot 2025-02-26 at 4.25.08 PM
Screenshot 2025-02-26 at 4.25.08 PM1550×876 65.2 KB

wOS Redeem Transaction Example

Market Cap & Liquidity

OS’s TVL has been on a continuous upward trend since its launch in January 2025, reaching $25M within the first month. As of the time of writing, its total supply stands at 35M, translating to a $26.7M TVL.

Screenshot 2025-02-26 at 4.25.08 PM
Screenshot 2025-02-26 at 4.25.08 PM1550×876 65.2 KB

Origin Sonic Official Website

The percentage of OS wrapped into wOS has also maintained a steady upward trend, with a noticeable increase over the past week. As of the time of writing, approximately 45% of OS has been wrapped into wOS.

Screenshot 2025-02-26 at 4.25.37 PM
Screenshot 2025-02-26 at 4.25.37 PM1550×868 45.3 KB

Origin Sonic Official Website

Due to the atomic conversion mechanism between wOS and OS, OS‘ liquidity is the only critical component when accessing if users can exit smoothly under stressful market conditions. Currently, the majority of OS liquidity is concentrated in the OS/wOS trading pair on SwapX.

Below, we present the aggregated DEX liquidity for OS over time. The chart shows a consistent upward trend in liquidity. Since early February 2025, the total token amount in the pool has remained above 7.5M. As of the time of writing, the total TVL stands at approximately $7M.

Screenshot 2025-02-26 at 4.28.55 PM
Screenshot 2025-02-26 at 4.28.55 PM1920×1272 76.5 KB

Volatility

In the OS/wS SwapX Liquidity Pool, OS and wOS have maintained a strong peg since the pool’s launch. As shown in the chart below, the largest deviation between OS and wOS has been approximately 10bps.

Screenshot 2025-02-25 at 3.45.13 PM
Screenshot 2025-02-25 at 3.45.13 PM2096×1208 306 KB

OS/wOS SwapX Peg

LTV, Liquidation Threshold, and Liquidation Bonus

Given the analysis above, wOS has shown a clear upward trend while OS has maintaining a relatively stable peg with wS. Therefore, a higher LTV and LT would be reasonable and beneficial, as they create a new channel for users to leverage looped wS.

However, several concerns remain. First, like some LSTs, OS lacks an atomic conversion process to wS, requiring a minimum one-day waiting period for redemptions. However, OS is unique in that, if the vault’s liquidity is insufficient, redemptions may be delayed by up to 14 days. During periods of market stress, users would have no choice but to rely on the liquidity pool as their only exit option. This leads to the second concern—OS is still in its early stages, and data on its liquidity pool remains limited. While the OS/wS pair on SwapX currently has sufficient liquidity and has remained stable over the past two weeks, it is uncertain whether its price will remain stable.

Third, since wS serves as the underlying asset of OS and exhibits inherent volatility, its price can fluctuate significantly within short periods, introducing duration risk. Specifically, when a user redeems OS and waits for wS to unlock, market fluctuations in wS’s price could lead to a substantial divergence between the final redeemed value and the initial deposited OS value.

Given these factors, we recommend adopting slightly more conservative parameters compared to wS, proposing an initial LT of 68%, a LTV of 66%, and a liquidation bonus of 10%.

E-Mode

We recommend establishing an isolated liquid E-Mode for wOS and wS to facilitate the expected leverage looping use case of wOS, potentially driving growth for the Sonic instance.

Supply Cap and Borrow Cap

We recommend setting the wOS supply cap based on Chaos Labs’ standard methodology, which defines the cap as twice the liquidity available under the liquidation bonus. Based on this approach, we propose an initial supply cap of 10M.

Given wOS’s yield-bearing nature and the historically limited use cases for borrowing yield-bearing assets, we recommend setting wOS as non-borrowable at this time.

Oracle/Pricing

We recommend pricing wOS using the internal exchange rate between wOS and OS via the convertToAsset function in the wOS contract. Additionally, we recommend using the S/USD Chainlink price feed instead of an OS/USD price feed, as the underlying price feed is more resilient during market stress. Specifically, the S/USD Chainlink price feed prevents unnecessary liquidations or instability caused by temporary OS/USD depegs that may occur in volatile conditions. This follows the same principle as using ETH/USD as the anchor for stETH pricing.

CAPO

wOS employs a mechanism similar to OETH, utilizing the Dripper contract to smooth out rewards distribution. As a result, a 7-day MINIMUM_SNAPSHOT_DELAY is sufficient to obtain a stable and accurate reading of the rolling APY.

Screenshot 2025-03-04 at 3.54.46 PM
Screenshot 2025-03-04 at 3.54.46 PM1920×1150 75.8 KB

Specification

Following the above analysis, we recommend the following parameter settings:

wOS Market Configuration (Sonic Instance)

Parameter Value
Asset wOS
Isolation Mode No
Borrowable No
Collateral Enabled Yes
Supply Cap 10,000,000
Borrow Cap -
Debt Ceiling -
LTV 66%
LT 68%
Liquidation Penalty 10%
Liquidation Protocol Fee 10.00%
Variable Base -
Variable Slope1 -
Variable Slope2 -
Uoptimal -
Reserve Factor -
Stable Borrowing Disabled
Flashloanable Yes
Siloed Borrowing No
Borrowable in Isolation No
E-Mode Category wOS/wS

wOS/wS Isolated Liquid Liquid E-mode Configuration

Parameter Value Value
Asset wOS wS
Collateral Yes No
Borrowable No Yes
Max LTV 87% -
Liquidation Threshold 90% -
Liquidation Bonus 1.0% -

CAPO

maxYearlyRatioGrowthPercent ratioReferenceTime MINIMUM_SNAPSHOT_DELAY
32.97% monthly 7

Disclaimer

Chaos Labs has not been compensated by any third party for publishing this recommendation.

Copyright

Copyright and related rights waived via CC0

3 Likes
5

Update: We confirm that the Origin Sonic contract suite is now covered by the Immunefi program, up to $1M.