LlamaRisk supports onboarding wrapped Super OETH (wsuperOETHb) as collateral on Aave V3. The asset’s technical foundation is solid, with a well-thought-out architecture reused for other products like WOETH and OUSD.
The AMO (Algorithmic Market Operations) provides protocol-owned liquidity, which supplies concentrated liquidity (1bps tick range) to the Aerodrome superOETH/WETH pool. This ensures that a large amount can be swapped at a 1:1 rate with WETH, but comes with tradeoffs. Origin owns all superOETHb supplied to that liquidity pool, which the 2/9 multisig guardian could remove without a timelock in an emergency. A hypothetical attack vector also uses flashloans to manipulate superOETHb’s market price. Given these considerations, we advise using Origin’s internal exchange rate in conjunction with CAPO.
Our original WOETH review on the Ethereum mainnet found that OriginProtocol adhered to best-in-class transparency and decentralization processes. The situation on Base is similar, except for the DAO governance by xOGN token holders being bypassed, with the 5/8 Admin multisig having direct control over the 48-hour timelock. Although superOETHb’s architecture significantly depends on the one deployed on the mainnet (still controlled by xOGN token holders), it is more centralized than WOETH on the Ethereum mainnet.
We support the parameters presented by ChaosLabs. Below is our comprehensive assessment.
Collateral Risk Assessment (click to expand)
1. Asset Fundamental Characteristics
1.1 Asset
superWOETHb is essentially the same as WOETH, the re-pricing LST from OriginProtocol, but bridged over to the Base L2 with a compounding mechanism that harvests liquidity incentives from the Aerodrome liquidity marketplace on Base L2. WOETH is the wrapped (re-pricing) version of OETH, an ERC-20 LST from OriginProtocol that operates a set of permissioned validators through the SSV Network. This staking infrastructure marketplace uses DVT (Decentralized Validator Technology) to offer marginally higher staking yields and reduced consensus penalty risks.
Here is an exhaustive list of the relatively minor added risks superWOETHb presents compared to WOETH:
- Base L2 security risk
- Mainnet to Base L2 bridging risk
- Aerodrome AMM smart contract risk
- The potential end of liquidity incentives from the Aerodrome AMM, forfeiting part of the yield
On-chain data indicates that all underlying assets are ETH and protocol-owned superOETHb, with a majority staked on the beacon chain. WETH can be wrapped into wsuperOETHb, an ERC-4626 token, through the OriginProtocol modal, which offers two options: minting from the Base vault or the Base Aerodrome liquidity pool. Because the AMO protocol-owned liquidity mechanism automatically mints and burns wsuperOETHb in the pool to maintain the exchange rate, both options offer marginally equal exchange rates.
Source: OriginProtocol landing page, October 7th, 2024
A 20% performance fee applies to all rewards accrued through native staking. As of October 7th, 2024, superOETHb advertises a 141,000 ETH-equivalent TVL ($349m) and a 15,31% APY. That figure should not be taken at face value, though, as 80% of the TVL is closed-loop superOETHb minted by AMO to balance the liquidity pool.
Source: OriginProtocol superOETHb dashboard, October 7th, 2024
1.2 Architecture
Source: OriginProtocol documentation, October 3rd, 2024
The wsuperOETH is essentially the same as the WOETH one on Ethereum mainnet, except for the strategy contracts, of which there are two. The first strategy is the BridgedWOETHStrategy contract, which is tasked with bridging the WETH deposited to the Ethereum mainnet for native staking and to receive WETH from the Ethereum mainnet when withdrawal requests are made. The second is the AerodromeAMOStrategy contract, which manages Aerodrome’s protocol-owned liquidity. Below is the OETH architecture, which is almost identical to the wsuperOETHb architecture:
Source: OriginProtocol documentation, similar to the (October 3rd, 2024)
Main protocol contracts on Base L2:
- wrapped super OETH: Wraps superOETH into wsuperOETH, an ERC-4626 token
- super OETH: An ERC-20 token contract
- OETH Base Zapper: Deposit WETH to mint superOETH
- Vault: manages withdrawal requests and redemptions
- Strategies: Each a contract. Two in total, the BridgedWOETHStrategy contract and the AerodromeAMOStrategy contract
- Harvester: Receives rewards from the strategy contracts and sends them to the Dripper contract
- Dripper: Receives rewards from the Harvester and sends them to the Vault slowly over 7 days
- Vault Value Checker: Check the Vault balance against expected values and variance
AMO
The Automated Market Operations (AMO) mechanism maintains price stability by balancing liquidity on both sides of the Aerodrome superOETH/WETH liquidity pool. If one side becomes unbalanced, the protocol adjusts it by minting or burning superOETH in the pool. Because those superOETH tokens never leave the pool without being matched by the correct WETH amount from third-party depositors, the protocol remains 100% collateralized.
Concentrated liquidity, together with the use of AMO, can represent a liquidity risk for lending protocols like Aave. As AMO is a protocol-owned liquidity mechanism, the OriginProtocol team can theoretically pull liquidity out of this pool without notice through the 2/9 Guardian multisig, which could prevent liquidations from happening.
1.3 Tokenomics
Governance token
The OGN token serves as the governance token of the OriginProtocol ecosystem of products. Holders can lock their tokens in exchange for xOGN, which grants economic rewards and governance power. The longer the staking period, up to one year, the higher the multiplier, incentivizing long-term commitment. Stakers can delegate votes, stake for multiple periods, and collect rewards from protocol revenue, primarily through OETH and OUSD performance fees. Unlike other models, xOGN balances remain stable throughout the lock-up period, though the staker’s share of the overall voting power decreases as new stakes are made.
We note that the xOGN DAO governance is bypassed on Base, contrary to Ethereum mainnet, with the 5/8 Admin multisig having direct control over the 48-hour timelock, which controls protocol upgrades and parameter changes.
SSV network
As an SSV network user, OriginProtocol must acquire SSV tokens to pay the network fee and the fee for each operator to operate its validators to operate its validators. This is known as the SSV burn rate, which is calculated as follows:
Source: SSV network documentation, October 2nd, 2024
Aerodrome
Most of the yield (as of October 3rd, 2024) of wsuperOETHb comes from liquidity rewards accrued from the Aerodrome liquidity marketplace on Base L2. The AERO liquidity rewards are harvested at regular intervals. Part of it is used to bride liquidity in Aerodrome, while the other part is sold for WETH, which accrues back to superOETHb holders. Therefore, OriginProtocol is not exposed to the price fluctuation of the AERO token. The AERO rewards are currently sent to a 2/8 multisig called the Guardian.
Source: DeFiLlama, October 3rd, 2024
2. Market Risk
2.1 Liquidity
Source: Aerodrome, October 7th, 2024
Aerodrome, the main liquidity venue for superOETHb on Base L2, offers 25,165 superOETH of total liquidity. Because of the 1bpp concentrated liquidity, anything below that amount would provide 1bpp of slippage, and anything above would offer 100% marginal slippage. Interestingly, if deposits can be made to the Vault or the Aerodrome liquidity pool, all withdrawals must go through the Aerodrome liquidity pool, which AMO manages.
2.2 Volatility
Source: Coingecko Terminal, October 3rd, 2024
Because the Aerodrome OETHb/WETH liquidity pool uses a 1bpp concentrated liquidity tick, all swaps happen within that band. The pool’s depth limits the maximum amount one can swap, which OriginProtocol manages through the AMO mechanism. Therefore, beyond a certain amount, one might have to wait for the WETH to be withdrawn from the beacon chain on the Ethereum mainnet and then bridged over to Base L2 before being allocated to the Aerodrome OETHb/WETH liquidity pool or for WETH to be deposited on Base L2.
2.3 Exchanges
superOETHb can be exchanged on the Aerodrome superOETHb/WETH liquidity pool. A superOETHb/USDC liquidity pool is also available on Aerodrome. Still, it routes through the superOETHb/WETH one, hence accessing the same AMO-managed liquidity. Finally, 195 superOETHb is available on the superOETHb/OGN Aerodrome liquidity pool. However, this is both very small and correlated to the OriginProtocol’s health, which is not recommended in case of liquidation.
2.4 Growth
Source: Dune, October 3rd, 2024
The chart above aggregates the activity of wsuperOETHb and superOETHb token holders. Starting from September 9th, 2024, a significant increase in the number of users can be observed, coinciding with the start of liquidity incentives from Aerodrome on Base L2, which resulted in a double-digit APY.
3. Technological Risk
3.1 Smart Contract Risk
Audits
The codebase for superOETH, fully open source and open to contributions, is mostly based on the OUSD codebase, which has already benefited from numerous audits. The complete list of audits can be found in the OriginProtocol documentation. superOETH and its two specific strategies has benefitted from an audit from OpenZeppelin September 27th, 2024.
In addition, OriginProtocol also has an ongoing agreement with OpenZeppelin to review all of their code changes through PR reviews. OriginProtocol cites our own report from August 2024 as an audit-like resource.
Bug bounty
A 1,000,000$ bounty is currently active on ImmuneFi. Although this bug bounty covers contracts common to superOETH, OETH, and OUSD, it does not cover contracts specific to the superOETH product — the AMO Aerodrome and Base bridging strategies.
3.2 Price Feed Risk
There is no wsuperOETHb/WETH oracle. Given that the AMO-managed Aerodrome superOETHb/WETH liquidity pool has a 1bpp concentrated liquidity tick, it makes more sense to use the internal exchange rate of the protocol on-chain, which should theoretically be equal to that of the Aerodrome superOETHb/WETH liquidity pool thanks to AMO.
The Aerodrome superOETHb/USDC pool only has $19k of TVL, and the Aerodrome superOETHb/OGN pool has a TVL of $13m but presents a risk because of the correlated nature that OGN has with OriginProtocol.
3.3 Dependency Risk
SSV Network
Origin protocol integrates with the SSV Network to manage validators and staking operations. The NativeStakingSSVStrategy contract shares functionalities with other OETH contracts, with functions such as collectRewardTokens to gather both consensus and execution rewards and checkBalance to view the amount of ETH backing the strategy. Execution rewards are collected in the FeeAccumulator contract, which includes transaction fees and MEV rewards, whereas consensus rewards are sourced from the Beacon Chain.
SSV Network has over $3.6B in TVL, 1.1M ETH staked, 34,507 validators, and 771 registered operators. In the SSV Network, OriginProtocol has two clusters, each with four operators. All operators are P2P, although in different geographic locations, which currently has a 2.21% network penetration:
Although SSV Network provides redundancy through an N-of-M keyshare scheme (DVT), using a single node operator (P2P) might nevertheless represent a single point of failure that cancels out the benefits of DVT. Furthermore, all servers are in a limited geographical area of France, Germany, Luxembourg, and the Netherlands.
The SSV audit history can be found here.
Aerodrome
wsuperOETHb depends on the Aerodrome AMM for its high yield. The Aerodrome team retains control over the gauge system and can kill or revive any gauge. This means that the wsuperOETHb’ yield could decrease to that of WOETH. Furthermore, any security breach in the Aerodrome could put AMO-managed liquidity at risk, resulting in an insolvency situation from OriginProtocol. A good example is the Curve hack on July 30th, 2024, during which OriginProtocol pulled all liquidity as a safety precaution.
4. Counterparty Risk
4.1 Governance and Regulatory Risk
xOGN holders control all protocol aspects, including the yield generation strategies, the fee collection and distribution, and contract upgrades. Proposals are first discussed on the Discord server of the protocol. A temperature check is then done off-chain through the Snapshot.org space with an ERC-20 vote with override strategy and a quorum of 20% of the circulating supply.
The Origin DeFi Governance contract on the Ethereum mainnet is the entry point for any on-chain protocol changes. Anybody with at least 100,00 xOGN can create a new on-chain proposal. After a proposal is created on-chain, anybody can call the queue() method, but the call will succeed only if the protocol has received enough positive on-chain votes. Finally, anybody can execute the transaction on-chain once the timelock delay has passed. Only xOGN holders can vote on proposals on-chain according to their voting power. Votes can be delegated for off-chain proposals only.
A minimum of 20% of the xOGN supply is required to reach quorum. All passing proposals are subject to the 48-hour timelock before being executed. Time-delayed admin actions allow users to exit OUSD or OETH if any malicious proposals are passed or the protocol changes in a way that users do not like. These conditions are similar to the ones seen previously in veOGV.
Other participation criteria include:
- no minimum xOGN to vote on existing proposals, whether off-chain or on-chain,
- at least 5,000 xOGN to create a Snapshot proposal and
- 100,000 xOGN to create an on-chain proposal
4.2 Access Control Risk
All protocol contracts are controlled by the Timelock with a 48-hour delay. The role assignment is the following:
Contrary to OETH on Ethereum mainnet, the Timelock is not managed by a governance contract which allows token holders to vote on proposals, but directly by the 5/8 Admin multisig. Effectively, token holders do not have a say regarding contract upgrades and parameter changes on Base L2. However, since superOETHb is ultimately built on top of the OETH architecture on the Ethereum mainnet, xOGN token holders retain some form of control over superOETHb.
Similarly to OETH on Ethereum mainnet, however, is a 2/8 Guardian multisig that is tasked with day-to-day administrative tasks necessary for the protocol to function properly. The OriginProtocol documentation on Base L2 mentions a 2/8 Reservoir multisig that is not being used.
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.
There is no market price feed available for wsuperOETHb. The available liquidity pool on Aerodrome provides concentrated liquidity, with the AMO (Algorithmic Market Operations) managing protocol-owned liquidity in the superOETH/WETH pool and maintaining a fixed exchange rate within a 1bps tick range. This arrangement is not suitable for use as a market price oracle due to the following reasons:
Given these considerations, we recommend using Origin’s internal exchange rate in conjunction with CAPO. This approach protects against identified risk vectors while ensuring a reliable price feed.
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.
