[ARFC] Onboard rsETH to Arbitrum and Base V3 Instances

Governance
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Summary

LlamaRisk recommends onboarding rsETH on the Arbitrum and Base V3 instances. We previously conducted a full review of rsETH on Ethereum mainnet, and our positive outlook remains. We agreed on the parameters with ChaosLabs, who will share them shortly. Since the main use case is to leveraged-loop rsETH with wstETH, an rsETH-wstETH E-mode makes sense for Arbitrum and Base. The demand for a rsETH-stablecoin E-mode is expected to be low, so it is not recommended.

Although the liquidity for rsETH on those chains is not very high, it is mitigated by the fact that rsETH will be correlated against its debt asset wstETH. We note that no Timelock is slowing down contract upgrades or parameter updates, which could increase users’ safety.

rsETH on Arbitrum

Liquidity

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Source: Kyberswap, January 27th, 2025

rsETH has meaningful liquidity on Arbitrum, with 462 rsETH ($1.49m) available to be sold at a 7.5% price impact.

Access control

Kelp is using LayerZero for bridging the assets deposited on Arbitrum to the Ethereum mainnet, where it is restaked. Three assets can be deposited: ETH, ETHx, and wstETH. A LayerZero endpoint is used to receive the rsETH/ETH exchange rate. The Kelp’s architecture on Arbitrum is made of the two following contracts:

  • RSETH_OFT: LayerZero ERC20 contract representing rsETH on Arbitrum.
  • RSETHPool: deployed behind a TransparentUpgradeableProxy contract from OpenZeppelin. It allows for the minting of rsETH on Arbitrum by depositing ETH, ETHx, or wstETH. The deposited assets are bridged to Ethereum mainnet for restaking within EigenLayer.

Here are the controlling wallets:

The RSETH_OFT contract is owned by the 2/6 Multisig directly. The RSETHPool contract is controlled by the two following roles, which are all assigned to the ProxyAdmin:

  • DEFAULT_ADMIN_ROLE: can set the fee, pause/unpause deposits, update the oracle for rsETH, update the L1 vault address, update the Startgate pool, add/remove accepted tokens, and update the LayerZero destination chain.
  • BRIDGER_ROLE: can withdraw the accumulated fees from the pool and move assets for bridging.

rsETH on Base

The main token for rsETH on Base is wrsETH, a thin wrapper around the underlying rsETH that is being bridged. Since they are atomically redeemable 1-1 for each other, we refer to them interchangeably.

Liquidity

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Source: Kyberswap, January 27th, 2025

Base has less liquidity than Arbitrum, with only 342 rsETH ($1.02m) available within a 7.5% price impact.

Access control

Like on Arbitrum, LayerZero is also used on Base, but only ETH can be deposited in exchange for rsETH. The Kelp architecture on Base is made of the following three contracts:

  • RSETHPoolV2ExternalBridge: deployed behind a TransparentUpgradeableProxy contract from OpenZeppelin. Allows for the minting of rsETH on Arbitrum by depositing ETH, which is then bridged to Ethereum mainnet for restaking within EigenLayer.
  • RSETH_OFT: LayerZero ERC20 contract representing rsETH on Arbitrum.
  • RsETHTokenWrapper: a wrapper for rsETH that can be redeemed for it on a 1-1 basis.

The RSETHPoolV2ExternalBridge contract has two roles, which are both assigned to a 3/6 Safe multisig:

  • BRIDGER_ROLE: can withdraw fees and bridge the ETH deposited.
  • DEFAULT_ADMIN_ROLE: can set the fee, change the rsETH oracle, change the L1 vault, change the stargate pool, change the destination chain, and pause the contract.

The RSETH_OFT contract is owned by the 3/6 Safe multisig.

The RsETHTokenWrapper contract has the following roles:

Price Feeds

Although Chainlink price feeds are available for Arbitrum and Base, we recommend using the internal exchange rate of rsETH together with CAPO. The internal exchange rate for rsETH on Arbitrum and Base is pushed through LayerZero, whose risk is already borne by Aave since the minting and burning of rsETH on those chains also happens through LayerZero. This will also depend on BDG’s preference and technical appreciation.

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.