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.
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.
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.
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.
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.
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.
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.
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.
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