# \[ARFC\] Onboard rstETH to Aave V3 Prime Instance **URL:** \ **Category:** Governance\ **Created:** [January 7, 2025, 4:34pm UTC](https://governance.aave.com/t/arfc-onboard-rsteth-to-aave-v3-prime-instance/20539 "2025-01-07T16:34:45Z")\ **Posts on this page:** 9\ **Page:** 1
**Author:** ![ACI](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/aci/32/4780_2.png) [@ACI](https://governance.aave.com/u/ACI)\ **Post date:** [January 7, 2025, 4:34pm UTC](https://governance.aave.com/t/arfc-onboard-rsteth-to-aave-v3-prime-instance/20539/1 "2025-01-07T16:34:45Z")
## **[ARFC] Onboard rstETH to Aave V3 Prime Instance** ## **Author: ACI (Aave Chan Initiative)** ## **Date: 2025-01-07** > ARFC updated with Risk Parameters provided by Chaos 2025-03-03 * * * ## **Summary** This is an ARFC to gauge community sentiment for onboarding P2P’s rstETH on AAVE V3 Ethereum. To align best with goals of all relevant stakeholders, this proposal suggests onboarding rstETH to the Aave v3 Prime instance. ## **Motivation** Adding rstETH to the Aave v3 Prime instance brings additional synergies for all stakeholders. rstETH will add additional demand for wstETH borrowing, making the wstETH looping more favorable for the main users. Incentives from P2P can bring additional wstETH liquidity to the Prime instance, bolstering the existing liquidity mining campaigns. ## **Chain to be deployed/listed** Aave v3 Prime instance on Ethereum **Proof of Liquidity and Deposit Commitments** Additional information of any potential Proof of Liquidity and Deposit Commitments will be provided during ARFC stage. ## Specification rstETH: [Address: 0x7a4EffD8...05f327E3a | Etherscan](https://etherscan.io/address/0x7a4EffD87C2f3C55CA251080b1343b605f327E3a) ### Risk Parameters: ### E-Mode Category: rstETH/wstETH | Parameter | Value | Value | | --- | --- | --- | | Asset | rstETH | wstETH | | Collateral | Yes | No | | Borrowable | No | Yes | | LTV | 90% | - | | LT | 93% | - | | Liquidation Penalty | 1% | - | ### rstETH Risk Parameters (Non E-mode) | Parameter | Value | | --- | --- | | Asset | rstETH | | Isolation Mode | No | | Borrowable | No | | Collateral Enabled | Yes | | Supply Cap | 5000 | | Borrow Cap | - | | Debt Ceiling | - | | LTV | 0.05% | | LT | 0.1% | | Liquidation Penalty | 7.5% | | 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 | rstETH/wstETH | | MINIMUM\_SNAPSHOT\_DELAY | ratioReferenceTime | maxYearlyRatioGrowthPercent | | --- | --- | --- | | 7 days | monthly | 9.68% | ## **Useful Links** [P2P](https://p2p.org) [Documentation](https://docs.p2p.org) [Github](https://github.com/p2p-org) [[TEMP CHECK] Onboard rstETH to Aave V3 Prime Instance](https://governance.aave.com/t/temp-check-onboard-rsteth-to-aave-v3-prime-instance/20255) [TEMP CHECK Snapshot](https://snapshot.box/#/s:aave.eth/proposal/0xa7f77074de4dc07d1306ef95453cded5e1913938d1b93807e98a69378b1e8b39) ## **Disclaimer** The Aave Chan Initiative is not directly affiliated with P2P and did not receive compensation for creation this proposal. ## **Next Step** 1. Publish 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](https://creativecommons.org/publicdomain/zero/1.0/). ---
**Author:** ![LlamaRisk](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/llamarisk/32/12865_2.png) [@LlamaRisk](https://governance.aave.com/u/LlamaRisk)\ **Post date:** [January 11, 2025, 2:56pm UTC](https://governance.aave.com/t/arfc-onboard-rsteth-to-aave-v3-prime-instance/20539/2 "2025-01-11T14:56:47Z")
## Summary LlamaRisk does not recommend onboarding rstETH as ETH-correlated collateral in the Aave V3 Prime instance. We suggest reassessing this asset once two key conditions are met: improved liquidity depth and activation of asset delegation. The asset’s limited liquidity is concentrated in a single venue - the [BalancerV2 trenSTETH](https://balancer.fi/pools/ethereum/v2/0x4216d5900a6109bba48418b5e2ab6cc4e61cf4770000000000000000000006a1) pool, which pairs 4 LRTs with wstETH. Within this pool, only 25 rstETH (~$97k) are available within a 7.5% price impact. The majority of liquidity is provided by a single StakeStone vault, making it susceptible to sudden withdrawal. The Mellow protocol demonstrates robust security architecture through advanced control systems, multiple multisigs, timelocks, and an emergency system with Hypernative integration. However, neither Mellow nor Symbiotic maintain an ongoing bug bounty program - Mellow only ran a brief three-week contest with limited rewards that do not match its protocol TVL (\>$700M) or codebase complexity. At the same time, Symbiotic has not conducted any bug bounty initiatives. If liquidity conditions improve, we recommend implementing rstETH’s internal rate with CAPO, aligning with our [steakLRT assessment](https://governance.aave.com/t/arfc-onboard-steaklrt-to-aave-v3-lido-instance/18613/2). While [Symbiotic has announced](https://blog.symbiotic.fi/introducing-cohort-1/) integration of 14 networks in September 2024, asset delegation launch is scheduled for January 28, 2025. Current yields combine Lido APR with points rewards (Symbiotic and Mellow). A new risk assessment will be required post-delegation activation to evaluate potential slashing impacts. > **Expand to see our comprehensive asset review** > > ## 1. Asset Fundamental Characteristics > > ### 1.1 Asset > > Restaking Vault ETH (rstETH) is an ERC-20 liquid restaking token (LRT) minted on [Mellow Protocol](https://docs.mellow.finance/mellow-lrt-lst-primitive/overview) and curated by [P2P](https://p2p.org/), a professional staking service provider. The Mellow Protocol is a modular infrastructure for issuing LRTs and deploying collateral to [Symbiotic](https://symbiotic.fi/), the second biggest restaking protocol after EigenLayer. > > Symbiotic allows for the creation of restaking vaults whose deposited assets can be delegated to operators who run Actively Validated Services (AVSs) infrastructure. Mellow accepts various tokens such as wstETH, WBTC, tBTC, or sUSDe. However, because Mellow stems from Lido and is part of the so-called [Lido Alliance](https://research.lido.fi/t/lido-alliance-an-ethereum-aligned-ecosystem/7475), it only accepts wstETH as Ethereum LSTs and not other ETH-based LSTs. P2P will select the Actively Validated Services (AVSs) and operators to restake collateral on Symbiotic and set the LRT’s ratios (e.g., reward generation fees). At the time of writing, the deposited collateral has not yet been delegated to AVSs and operators on Symbiotic, meaning that the underlying wstETH is not being actively re-staked. > > To mint rstETH, users can provide ETH, WETH, stETH, and wstETH. ETH, WETH, and stETH deposits will be automatically converted to wstETH by internal interaction with the Lido contracts. The internal exchange rate for rstETH is maintained in the `RatiosOracle` contract. At the same time, deposited assets are kept in an ERC-4626 vault whose shares represent ownership of the underlying assets and accumulated rewards. The rstETH supply is currently limited to 80,000 wstETH in the vault, presently standing at 46,214 wstETH. This limit will be lifted once Symbiotic goes live with network delegation (scheduled for January 28, 2025). > > ### 1.2 Architecture > > The general architecture of rstETH resolves around wstETH or approved assets (ETH, WETH, and stETH) being converted into wstETH and deposited into the vault contract. Once delegation is activated, deposits will be managed by P2P: most of it will be allocated to [Symbiotic](https://0xppl.com/0x7a4EffD87C2f3C55CA251080b1343b605f327E3a/activities) operators and AVSs, while a liquidity reserve fund will help to bootstrap liquidity. We previously did [a complete risk assessment of Symbiotic](https://www.llamarisk.com/research/current-state-of-symbiotic) on August 15, 2024. > > Withdrawals from the vault are handled through the `processWithdrawals()` function of the _Vault_ contract and processed manually by the vault operator P2P. Therefore, the completion of withdrawals can vary depending on how responsive P2P is to withdrawal requests from users. The Mellow team plans on automating withdrawals after January 28, 2025. > > ![image](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/e/e1b886e6ef5ce0ba3973d02af480ae70f9a651dc.jpeg) > > Source: [Mellow Protocol Docs](https://docs.mellow.finance/mellow-lrt-lst-primitive/dvsteth-vault-overview), January 10th, 2025 > > Mellow LRT components relevant to rstETH include a set of contracts that manage vault operations, strategy management, and system parameters. They include: > > - `Vault`: ERC-2646 contract that handles asset deposits, issuing of LP tokens, withdrawal management, and underlying token administration (adding and removing accepted tokens). > - `VaultConfigurator`: Determines parameters and access control for the `Vault` contract. > - `ManagedValidator`: Role-based validator for smart contract functions, permitting or revoking permissions to functions and interactions with contracts. > - `DefaultBondStrategy`: Allocates deposited funds to bond strategies (i.e., LRT strategies) and facilitates withdrawals. > - `DepositWrapper`: Allows the _Vault_ to accept ETH, WETH, and stETH deposits and convert them into underlying wstETH. > - `Curator`: P2P [2/3 Safe multisig](https://etherscan.io/address/0x4a3c7F2470Aa00ebE6aE7cB1fAF95964b9de1eF4) with the OPERATOR role, manages liquidity allocations to different strategies and processes requested withdrawal through _DefaultBondStrategy_ (see section 4.2 for more on OPERATOR role). > - `Erc20TvlModule`: Standardizes calculation of ERC20 tokens TVL in a vault. > - `DefaultBondTvlModule`: Calculates TVL of bond-based assets in a vault, i.e., restaked wstETH in Symbiotic. > - `ManagedRatiosOracle`: Manages the vaults’ underlying token ratios for deposit and withdrawal. The contract allows for updating and retrieving target ratios. > - `PriceOracle`: Sources Chainlink price feeds for vault pricing set to a base token. > > Mellow LRT contracts are open source on [Github](https://github.com/mellow-finance/mellow-lrt/tree/8021ff9affa4710b79d72afbad8026f0ac2a68bd/src). > > ### 1.3 Tokenomics > > No governance token has been issued yet for Mellow Protocol; their Lido Alliance proposal communicated plans for one in the form of MLW. > > ![image](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/c/cba311fb9ada352a37fbf59792f4e583f5192148.png) > > Source: [Lido DAO Gov](https://research.lido.fi/t/mellow-lido-alliance-proposal/7557/3), May 27th, 2024 > > Mellow employs a loyalty points system for vaults, distributing Mellow and Symbiotic points to users and curators per hour on a linear TVL basis. More details can be found [here](https://docs.mellow.finance/mellow-lrt-lst-primitive/loyalty-points). > > #### 1.3.1 Token Holder Concentration > > ![image](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/1/126b2c12a360467e3e07c64c3edea59549fbb115.png) > > | Description | Value | > | --- | --- | > | **Total Holders** | 7,796 | > | **Total rstETH Supply** | 48,930.12 (~$197m) | > | **Top 10 Address Holdings** | 85.72% | > | **Largest Holder** | [MellowDepositWstETHStrategy](https://etherscan.io/address/0xe9b7ccfc7d05028bd8214bd04f9b4fa7c734d574) (~42%) | > > Source: [Etherscan](https://etherscan.io/token/tokenholderchart/0x7a4EffD87C2f3C55CA251080b1343b605f327E3a), January 8th, 2025 > > The top 10 addresses hold a high concentration of rstETH, approximately 85.72% of the total supply. Of the top 10 holders, 6 are EOAs, 3 are contracts, and 1 is a multisig. As of January 8, 2025, 48 930 wstETH (~$197m) has been deposited into the vault. The first address by TVL (~42%), the [MellowDepositWstETHStrategy](https://etherscan.io/address/0xe9b7ccfc7d05028bd8214bd04f9b4fa7c734d574) contract, is a strategy managed by StakeStone for its STONE product: 23.3% of StakeStone’s TVL is currently being deposited in this strategy. The StakeStone team controls this strategy and can decide to pull liquidity unilaterally. > > ## 2. Market Risk > > ### 2.1 Liquidity > > A Balancer 5pool ([trenSTETH](https://etherscan.io/token/0x4216d5900a6109bba48418b5e2ab6cc4e61cf477)) is the only source of DEX liquidity for rstETH. The Composable Stable Pool consists of other Mellow LRTs and wstETH. rstETH amounts to approximately 25% of the pool’s liquidity. A liquidator willing to swap rstETH for stables would first have to swap for one of the other assets in the pool before swapping for stables. WstETH will likely be used because of its higher stable liquidity. > > ![image](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/6/617379191327ed9c03efd320d3ea2b2338833ecc.jpeg) > > Source: [Balancer V2](https://balancer.fi/pools/ethereum/v2/0x4216d5900a6109bba48418b5e2ab6cc4e61cf4770000000000000000000006a1), Janurary 8th, 2025 > > Over 90 days, between October 2024 and January 2025, the pool’s liquidity has hovered around $600k, which is relatively low given the 5 different assets it is made of. > > ![image](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/d/d150b0562d2c5cfb844bfc4c737d646ee383c9b3.jpeg) > > Source: [Balancer V2](https://balancer.fi/pools/ethereum/v2/0x4216d5900a6109bba48418b5e2ab6cc4e61cf4770000000000000000000006a1), January 8th, 2025 > > A Uniswap rstETH/wstETH pool was another DEX source of liquidity—albeit for a short period—but liquidity has since been removed. > > ![image](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/c/c35b4e0b6e0f1494369b7aecd6adc6d5e2ca62f9.png) > > Source: [Dextools](https://www.dextools.io/app/en/ether/pair-explorer/0xc9f5cb045c75758e2a6dd7cea9e7ad6c3edef95d?t=1735220722574), rstETH/wstETH pool, January 8th, 2025 > > DEX aggregators are unaware of this BalancerV2 pool, and liquidity for rstETH is only accessible through a direct swap into this pool using the expert option. When doing so, only 25 rstETH ($97k) were available within a 7.5% price impact. > > ![image](https://hackmd.io/_uploads/SyJvTj1Dyl.png) > Source: [Balancer V2](https://balancer.fi/pools/ethereum/v2/0x4216d5900a6109bba48418b5e2ab6cc4e61cf4770000000000000000000006a1), January 8th, 2025 > > #### 2.1.1 Liquidity Venue Concentration > > The [BalancerV2 trenSTETH pool](https://etherscan.io/token/0x4216d5900a6109bba48418b5e2ab6cc4e61cf477) is the only liquidity venue for rstETH. > > #### 2.1.2 DEX LP Concentration > > The _ComposableStablePool_ contract [pre-mints](https://docs-v2.balancer.fi/concepts/advanced/preminted-bpt.html) Balancer Pool Tokens (BPT) and holds them in the Balancer Vault as the LP token. To determine LP concentration, the circulating supply is calculated using the `getActualSupply` [function](https://etherscan.io/token/0x4216d5900a6109bba48418b5e2ab6cc4e61cf477#readContract) (the value returned also includes protocol fees due). Analyzing the circulating supply and LP holders, a [Gauge deposit](https://etherscan.io/token/0x03ac2920378a51d6ca78813b1d7578dab08d3760#balances) contract (allows LPs to stake their BPT to claim BAL from liquidity mining) holds over 162 of the total 177.75 trenSTETH supply. > > ![image](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/0/0767127f451880a2355e1f5d40895d619062d0b5.png) > > Source: [BalancerV2 trenSTETH Gauge deposit contract](https://etherscan.io/token/tokenholderchart/0x03ac2920378a51d6ca78813b1d7578dab08d3760), January 8th, 2025 > > The largest single account holds over 15.3% (24 trenSTETH), followed by numerous other liquidity providers with decreasing participation. Although this diversity is reassuring, one must remember that one of those wallets might still be providing the entire liquidity for one of the five assets in the pool. > > ### 2.2 Volatility > > Relative to ETH, rstETH has exhibited nominal fluctuations, trading close to ETH at a slight discount. Over the past 90 days, the discount/premium differential ranged from -0.48% to +0.041%, which is acceptable. > > ![image](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/c/cb535453e688606a30c10547fdda5b310c2fa214.png) > > Source: [Dune](https://dune.com/queries/4481926/7493883), January 8th, 2025 > > ### 2.3 Exchanges > > No CEX currently supports rstETH. > > ### 2.4 Growth > > Until August 2024, rstETH saw impressive early growth but has since stagnated. As the largest Mellow LRT, rstETH accounts for ~32% ($198m) of all Mellow vault TVL ($622m) and represents the third largest LRT TVL by ETH on Symbiotic (as of January 8, 2025). > > ![image](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/9/984d11398602dfba1783e7d14940dd04be40d5a8.png) > > rstETH wstETH TVL. Source: [Dune](https://dune.com/queries/3939479/6626000), January 8th, 2025 > > We can see that rstETH’s share of all Symbiotic LRTs by TVL has gotten smaller and smaller. > > ![image](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/7/746056720e66b14286f00294bfb4791cdf500d88.png) > > Symbiotic LRT TVL. Source: [Dune](https://dune.com/queries/3912936/6577692), January 8th, 2025 > > User activity, measured using unique receivers and senders, has declined overall. The graph below shows a spike in activity between October 18th and 26th, possibly due to a Zircuit L2 staking rewards program launch: the Zircuit L2 [announced a staking partnership](https://x.com/ZircuitL2/status/1844416243039936620) with Mellow, offering additional rewards in Zircuit Points and Project Airdrops. > > ![image](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/b/b5ccf0198c381592b0bf9a00edefbda004a67160.png) > rstETH user activitySource: [Etherscan Analytics](https://etherscan.io/token/0x7a4EffD87C2f3C55CA251080b1343b605f327E3a#tokenAnalytics), January 8th, 2025 > > ## 3. Technological Risk > > ### 3.1 Smart Contract Risk > > The Mellow protocol has been audited by 2 professional auditing firms, as well as by the [Sherlock Community](https://www.sherlock.xyz/): > > - [StateMind](https://1022099409-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-Mk3LEacyGwD8y6mb9-2%2Fuploads%2FkF9WEmdIYGcCPdAPltyL%2FStateMind%20Mellow%20LRT%20report%20with%20deployment.pdf) (May 27, 2024): 4 medium risks findings, no critical or high risks findings. > - [ChainSecurity](https://1022099409-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-Mk3LEacyGwD8y6mb9-2%2Fuploads%2FaiDDg7ORuaHbrAVq97AR%2FChainSecurity%20Mellow%20Finance%20Mellow%20LRT%20audit.pdf) (August 12th, 2024): 2 medium risks findings. No critical or high-risk findings. > - [Sherlock Community](https://1022099409-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-Mk3LEacyGwD8y6mb9-2%2Fuploads%2FT65xUuoxB4TbuaSjSyst%2FSherlock%20Mellow%20Modular%20LRTs%20Audit%20Report.pdf) (June 27, 2024): 4 medium risks findings, no high-risk findings. > > Although the audits revealed some vulnerabilities in the smart contracts, primarily related to reentrancy attacks and improper access controls, the development team promptly addressed these issues. Symbiotic has been [audited](https://docs.symbiotic.fi/security) by ChainSecurity and StateMind. Low-severity issues were identified and resolved, with no critical, high, or medium issues found. > > ### 3.2 Bug Bounty Program > > Mellow’s [bug bounty contest](https://immunefi.com/boost/boost-lido/information/) on Immunefi ran from August 15 to September 5, 2024, and the reward pool was $100k. Key results from the [report](https://drive.google.com/file/d/1L1OK7_NmMl8IRaViao8JEjY1gTVPSPvK/view); 38 submitted reports, 0 valid vulnerabilities, 1 insight report, and a total payout of $1,000. > > In our steakLRT [assessment](https://governance.aave.com/t/arfc-onboard-steaklrt-to-aave-v3-lido-instance/18613), we noted that for Symbiotic’s bug bounty on Immunefi: > > > “This sum is inadequate considering the protocol’s 1,281 lines of code across 12 smart contracts and the potential value at stake.” > > On September 11, Symbiotic announced a three-week bug bounty program on [Cantina](https://cantina.xyz/competitions/8bab566e-a6d4-4c1b-9f28-71a94bfd1da2) with a total reward pool of $120k. A total of 39 prize winners received $50k. No high-severity findings were reported, and the highest number of medium-severity findings in a report was 3. > > ### 3.3 Price Feed Risk > > The `VaultConfigurator` contract uses a [Chainlink Oracle](https://etherscan.io/address/0x1Dc89c28e59d142688D65Bd7b22C4Fd40C2cC06d) for price feeds. Mellow employs a custom ChainlinkOracle that enforces cross-oracle price checks. > > Chainlink Aggregators, [ConstantAggregatorV3](https://etherscan.io/address/0x6A8d8033de46c68956CCeBA28Ba1766437FF840F#code) and [WStethRatiosAggregatorV3](https://etherscan.io/address/0x94336dF517036f2Bf5c620a1BC75a73A37b7bb16#code), are used to fetch accurate pricing data for WETH (the vault base token) and wstETH respectively using the `getPrice()` function. Relative pricing is computed in terms of WETH with the `priceX96()` method. > > We recommend using the internal exchange rate of the protocol for rstETH together with a CAPO oracle. > > ### 3.4 Dependency Risk > > The security of rstETH depends on various protocols upon which the LRT is built. The first is Lido with wstETH, a liquid staking token representing ETH staked through permisioned validators. Lido wstETH boasts a $33b TVL and is generally regarded as the most liquid and well-maintained LST there is. The audit report from [ChainSecurity](https://1022099409-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-Mk3LEacyGwD8y6mb9-2%2Fuploads%2FaiDDg7ORuaHbrAVq97AR%2FChainSecurity%20Mellow%20Finance%20Mellow%20LRT%20audit.pdf?alt=media&token=41271d09-3132-4545-9293-af52b274fe82) notes: > > > “Lido.depositBufferedEther is expected to work correctly as documented. Curators of a vault should continuously monitor and take measures if Lido’s oracle is inactive or reports incorrect data. Obol staking module and Lido’s Deposit Security Committee are assumed to be trusted. Similarly, Chainlink oracles are considered trusted.” > > Mellow also depends on Symbiotic to participate in the economic security of various off-chain services through restaking. Symbiotic, the second largest restaking protocol after EigenLayer, has not yet activated the delegation of the deposited assets to operators to secure AVSs. As such, no added rewards are generated, and the deposited assets are not yet at risk of being slashed. The audit report from [ChainSecurity](https://1022099409-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-Mk3LEacyGwD8y6mb9-2%2Fuploads%2FaiDDg7ORuaHbrAVq97AR%2FChainSecurity%20Mellow%20Finance%20Mellow%20LRT%20audit.pdf?alt=media&token=41271d09-3132-4545-9293-af52b274fe82) notes: > > > “The bonds used (at the time of this review) are DefaultCollateral of Symbiotic. These contracts are fully trusted to work as expected (i.e., no slippage on minting and withdrawal, and the conversion rate is always 1:1).” > > When delegation is activated in the future, carefully selecting the operator and AVSs that are being secured will be important. As per the Mellow vault’s description, P2P aims to allocate wstETH to multiple networks. No further selection criteria are publicly available at this time. > > ## 4. Counterparty Risk > > ### 4.1 Governance and Regulatory Risk > > Mellow Protocol incorporates a [hierarchical system](https://docs.mellow.finance/mellow-alm/mellow-permissionless-vaults/architecture#system-management) of governance for Protocol and Vault parameters. Different roles manage these parameters: _Admin_, _AdminDelegate_, and _Operator_ (see section 4.2.). > > Protocol Governance manages the [global parameters](https://docs.mellow.finance/mellow-alm/mellow-permissionless-vaults/governance-parameters#protocol-governance-parameters) of the protocol (e.g., `maxTokensPerVault`). Mellow plans on transitioning to a DAO governance model, but at the time of writing, only speculative plans were found in Mellow’s Lido Alliance proposal. > > A Vault Governance contract manages mellow vaults, each with its own set of parameters (e.g., `managementFee`), which are governed by a _Strategist_, which in the case of rstETH is P2P. In our [Operator Assessment](https://www.llamarisk.com/research/node-operator-assessment-p2p) of P2P, we pointed out the following on the regulatory side: > > > “P2P [Terms of Use](https://p2p.org/terms-of-use) lack clarity regarding the operating entity responsible for providing a wide range of services, including validator services.” > > > “While the [Pitchbook](https://pitchbook.com/profiles/company/465463-72#overview) profile of P2P and the [Web3 Foundation grants program](https://grants.web3.foundation/applications/Validator_Monitoring_Service) also reference the Cayman Islands as the country of establishment, we are unable to freely access and validate incorporation details due to the fee-gated nature of the business registry in the Cayman Islands.” > > ### 4.2 Access Control Risk > > The Mellow architecture uses the `DefaultAccessControl` contract for role-based access control. > > **Controlling wallets** > > - [Multisig A](https://etherscan.io/address/0x9437B2a8cF3b69D782a61f9814baAbc172f72003) : 5/8 Safe multisig controlled by the Mellow team. > - [Multisig B](https://etherscan.io/address/0x48bfC7C0C6EBA7486797FdBb75e22A55F20cEE51): 3/8 Safe multisig controlled by the Mellow and Lido team. > - [Hypernative bot](https://etherscan.io/address/0x88e5ff761cf775a7561805145952078e07936073): an EOA controlled by the Hypernative bot. > - [Timelock A](https://etherscan.io/address/0x9cd146fc4a7019fc3610cfc8c72d55f364afcef4) : a 0 delay timelock. [Multisig A](https://etherscan.io/address/0x9437B2a8cF3b69D782a61f9814baAbc172f72003) is the ADMIN, PROPOSER and CANCELLER of the Timelock, while both the [Hypernative bot](https://etherscan.io/address/0x88e5ff761cf775a7561805145952078e07936073) and [Multisig B](https://etherscan.io/address/0x48bfC7C0C6EBA7486797FdBb75e22A55F20cEE51) are the EXECUTOR. > > **Roles** > > - ADMIN : assigned to [Multisig A](https://etherscan.io/address/0x9437B2a8cF3b69D782a61f9814baAbc172f72003), can update parameters and assign ADMIN and ADMIN\_DELEGATE roles. > - ADMIN\_DELEGATE : assigned to [Multisig A](https://etherscan.io/address/0x9437B2a8cF3b69D782a61f9814baAbc172f72003), can update any parameters. > - OPERATOR: assigned to [Timelock A](https://etherscan.io/address/0x9cd146fc4a7019fc3610cfc8c72d55f364afcef4), which can perform certain actions related to restaking through Symbiotic. > > Because ADMIN\_DELEGATE has fewer rights than ADMIN, we believe it should be assigned to a different wallet. > > #### 4.2.1 Contract Modification Options > > All Mellow vaults, including the one for rstETH, are deployed behind _TransparentUpgradeableProxy_ contracts, which are all owned by [Multisig A](https://etherscan.io/address/0x9437B2a8cF3b69D782a61f9814baAbc172f72003), a 5/8 Safe multisig that can perform role changes and contract upgrades. > > _Vault_ contract: > > - _addToken()_: restricted to ADMIN and ADMIN\_DELEGATE roles > - _removeToken()_: restricted to ADMIN and ADMIN\_DELEGATE roles > - _addTvlModule()_: restricted to ADMIN and ADMIN\_DELEGATE roles > - _removeTvlModule()_: restricted to ADMIN and ADMIN\_DELEGATE roles > - _emergencyWithdraw()_: regular users can make an emergency withdrawal request at the risk of receiving fewer funds than expected. > - _grantRole()_: restricted to the ADMIN role > - _renounceRole()_: restricted to the role holder > - _revokeRole()_: restricted to the ADMIN role > - _processWithdrawals()_: accessible by regular users once withdrawal requests are ready to be finalized > - _registerWithdrawal()_: used to initiate a withdrawal request, accessible by regular users > - _cancelWithdrawalRequest()_: only the one making the withdrawal request can cancel the request > > _VaultConfigurator_ contract contains a custom built-in timelock implementation with various delays ranging from 24 hours to 30 days — which complexifies the codebase, in our opinion. Only the ADMIN and ADMION\_DELEGATE can change the following parameters through this mechanism: > > - _delegateModuleApproval_: the approved delegation modules > - _transfersLock_: whether or not transfers are locked > - _maximalTotalSupply_: the maximum total supply that can be minted > - _depositCallback_: the deposit callback address > - _withdrawalCallback_: the withdrawal callback address > - _withdrawalFeeD9_: the withdrawal fee > - _baseDelay_: the base delay for any change of parameters > - _depositCallbackDelay_: the deposit callback delay > - _withdrawalCallbackDelay_: the withdrawal callback delay > - _withdrawalFeeD9Delay_: the withdrawal fee change delay > - _depositsLockedDelay_: the deposits locked change delay > - _transfersLockedDelay_: the transfers locked delay > - _delegateModuleApprovalDelay_: delegate module approval delay > - _maximalTotalSupplyDelay_: the maximal total supply change delay > - _ratiosOracle_: the ratio oracle address > - _priceOracle_: the price oracle address > - _validator_: the validator address > - _validatorDelay_: the delay for changing the validator address > > _StakingModule_ contract: > > - _convert()_ is restricted to delegate calls only > - _convertAndDeposit()_ is restricted to delegate calls only > > #### 4.2.2 Timelock Duration and Function > > A _TimelockController_ contract from OpenZeppelin is used with a [Hypernative bot](https://www.hypernative.io/) that automates threat detection and response to on-chain attacks. The [emergency shutdown](https://docs.mellow.finance/mellow-lrt-lst-primitive/security) system disables all vault deposits if a threat is detected. [Multisig A](https://etherscan.io/address/0x9437B2a8cF3b69D782a61f9814baAbc172f72003) is both ADMIN and PROPOSER of the [Timelock A](https://etherscan.io/address/0x9cd146fc4a7019fc3610cfc8c72d55f364afcef4), while both [Multisig B](https://etherscan.io/address/0x48bfC7C0C6EBA7486797FdBb75e22A55F20cEE51) and the [Hypernative bot](https://www.hypernative.io/) are assigned the EXECUTOR role of [Timelock A](https://etherscan.io/address/0x9cd146fc4a7019fc3610cfc8c72d55f364afcef4). > > ![image](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/a/a86eb804532c05f8440f4ba4d481edfc5e27d1ec.jpeg) > Mellow Security Fuse, Source: [Mellow documentation](https://mellowprotocol.notion.site/2-Security-fuse-bd80e42255dc448dbec92ad68408f962), January 8, 2025 > > [Timelock A](https://etherscan.io/address/0x9cd146fc4a7019fc3610cfc8c72d55f364afcef4) has a delay of 0 seconds, which essentially disables it: this is because its use is restricted to pausing the protocol in case of threat detected by the Hypernative bot. In that case, all contracts will be paused with a single transaction thanks to the `executeBatch()` method of [Timelock A](https://etherscan.io/address/0x9cd146fc4a7019fc3610cfc8c72d55f364afcef4). > > Deposits can be disabled in two steps with the `stageDepositsLock()` and `commitDepositsLock()` methods in the _VaultConfigurator_ contract, with a 1-hour delay between the calls. > > #### 4.2.3 Multisig Threshold / Signer identity > > [Multisig A](https://etherscan.io/address/0x9437B2a8cF3b69D782a61f9814baAbc172f72003), which administrates the Mellow protocol, has signers from Mellow itself, Gearbox, and Lido contributors ([details](https://research.lido.fi/t/mellow-lido-alliance-proposal/7557/19)). It can perform critical operations such as configuration changes and withdrawal processing. > > Mellow also manages [Multisig B](https://etherscan.io/address/0x48bfC7C0C6EBA7486797FdBb75e22A55F20cEE51) used as the EXECUTOR of [Timelock A](https://etherscan.io/address/0x9cd146fc4a7019fc3610cfc8c72d55f364afcef4), which has the OPERATOR role of the _VaultConfigurator_ contracts. > > **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](https://github.com/llama-risk/aave-research/blob/main/frameworks/aave_v3_framework.md). ## Aave V3 Specific Parameters Not provided at this time ## Price feed Recommendation Not provided at this time ### 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. #### Change log January 17th, 2025: After feedback from the Mellow team, we added a justification for the 0-second timelock and removed mention of the Etherscan verification issue since it is due to Etherscan itself. ---
**Author:** ![ChaosLabs](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/chaoslabs/32/6850_2.png) [@ChaosLabs](https://governance.aave.com/u/ChaosLabs)\ **Post date:** [January 17, 2025, 1:44am UTC](https://governance.aave.com/t/arfc-onboard-rsteth-to-aave-v3-prime-instance/20539/3 "2025-01-17T01:44:11Z")
## **Overview** Chaos Labs does not support listing rstETH on Aave V3’s Ethereum Lido instance at this time. Below we present our analysis. ## Technical Overview Mellow Protocol is a liquid restaking platform offering a series of vault smart contracts tailored to various risk profiles and managed by curators. Each vault’s system parameters are configured within its corresponding `VaultConfigurator` contract using a two-stage update process: a staging stage for proposing changes and a committing stage for finalizing them after a delay period. Deposits are made using `underlyingTokens` at ratios determined by the `ratiosOracle`, with LP tokens issued based on oracle-verified valuations. Deposits can also be paused by enabling the `isDepositsLocked` flag. Two types of withdrawals can happen: regular withdrawal via the `registerWithdrawal` function and emergency withdrawal via the `emergencyWithdraw` function. Regular withdrawals involve a process where the system ensures that sufficient `underlyingTokens` are available to meet the user’s request. These withdrawals are processed by risk curators in batches within 1-4 days, although historically, the majority of withdrawals have been processed within 12 hours. If this process is delayed beyond the`emergencyWithdrawalDelay`(90 Days), users have the option to initiate an emergency withdrawal. However, emergency withdrawals only handle ERC-20 tokens. This limitation means users could lose access to non-ERC-20 assets during emergencies. ![image - 2025-01-16T204047.521](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/4/41dbe7bcd439fa6e6817ce97cba5856daf36bfa9.png) The Vault admin can add or remove supported tokens and TVL modules, but tokens can only be removed if their `underlyingTvl` value is zero, or the system reverts with a `NonZeroValue` error. TVL modules are components that calculate the TVL of each asset in a vault (`ERC20TvlModule`for standard tokens, `DefaultBondTvlModule` for bond-based assets). Mellow also includes a `ManagedTvlModule` to adjust the vault’s TVL artificially, either reducing or increasing it to mitigate potential losses from slashing events. For instance, administrators can apply a risk adjustment to conservatively value assets, ensuring the TVL accounts for potential losses and enhances stability during adverse conditions. ![image - 2025-01-16T204053.571](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/5/5c554cc31f392a01ffaef84c1aa774a656b12128.jpeg) [**Mellow Protocol Architecture**](https://docs.mellow.finance/mellow-lrt-lst-primitive/lrt-contracts) rstETH is one of Mellow Protocol’s restaking vaults, curated by [P2P.org](http://p2p.org/). Depositors in this vault earn rewards comprising stETH APR, Symbiotic Points, Mellow Points, and additional restaking APR. The vault’s underlying asset is wstETH, with a total limit of 80,000. ![Screenshot 2024-12-31 at 1.50.26 AM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/a/ad3fb4e2d6c2496421297d25415627d7a74d1fde.png) **Restaking Vault ETH** ## **Market Cap & Liquidity** Currently, the rstETH vault is the largest restaking vault on Mellow, accounting for 31% of Mellow’s total TVL. ![Screenshot 2024-12-30 at 3.41.27 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/8/8449b4e13915bde25bc3d09bddaef2dfc64cb265.png) **rstETH Vault Share Over Time** The TVL of rstETH has shown an overall growth trend since its inception. Between early and mid-December 2024, it experienced significant growth, peaking at $270M. As of the time of writing, the total TVL of the rstETH vault stands at 53,305 wstETH, equivalent to $217M, reaching 67% of its 80,000 wstETH limit. ![Screenshot 2024-12-30 at 3.27.14 PM](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/f/f682ea90f3e41de408028f4c3baebbb19e3c7d70.png) **rstETH Vault TVL Over Time** The DEX liquidity of rstETH is limited and concentrated in a single [pool](https://balancer.fi/pools/ethereum/v2/0x4216d5900a6109bba48418b5e2ab6cc4e61cf4770000000000000000000006a1) on Balancer, which includes other Mellow LRTs (amphrETH, Re7LRT, and steakLRT) and wstETH. The pool’s TVL experienced growth after inception, peaking at around $2.2M, but has been declining since late August. As of the time of writing, the pool’s TVL stands only at $622K, with rstETH accounting for 25% of the total and roughly $90K of wstETH buy liquidity being shared across 4 LRTs with similar risk profiles. ![image - 2025-01-16T204117.442](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/0/0826d7b87a151092df86c2bfeb3d5a244f45dc72.png) ## Recommendation Given the extremely limited on-chain liquidity and the asset’s stagnation over time, we do not recommend listing it on Aave at the current time. Chaos Labs will continue monitoring the market and adjust our recommendation if liquidity sees significant growth. ## **Disclaimer** Chaos Labs has not been compensated by any third party for publishing this ARFC. ## **Copyright** Copyright and related rights waived via [CC0](https://creativecommons.org/publicdomain) ---
**Author:** ![ACI](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/aci/32/4780_2.png) [@ACI](https://governance.aave.com/u/ACI)\ **Post date:** [January 29, 2025, 10:47am UTC](https://governance.aave.com/t/arfc-onboard-rsteth-to-aave-v3-prime-instance/20539/4 "2025-01-29T10:47:25Z")
After evaluating both @LlamaRisk and @ChaosLabs feedback as Risk Service Providers, and being ACI the proposer of the current proposal, we have decided to pause it, until better conditions are met. ---
**Author:** ![ChaosLabs](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/chaoslabs/32/6850_2.png) [@ChaosLabs](https://governance.aave.com/u/ChaosLabs)\ **Post date:** [February 26, 2025, 11:00pm UTC](https://governance.aave.com/t/arfc-onboard-rsteth-to-aave-v3-prime-instance/20539/5 "2025-02-26T23:00:18Z")
# Overview Chaos Labs now supports the listing of rstETH on Aave V3’s Ethereum Lido instance because of a significant improvement in available liquidity. Below, we outline our reassessment based on the updated liquidity conditions. ## Motivation Our initial recommendation advised against listing rstETH on Aave V3 due to insufficient DEX liquidity, which would have posed risks to performing liquidations in the event of a temporary price deviation or a loss of underlying caused by a potential slashing event. While rstETH’s technical architecture remained sound, the constrained liquidity prevented us from supporting its listing. Since the previous assessment and the pausing of this ARFC, rstETH’s on-chain liquidity has grown substantially, directly addressing our primary concern. Given this increase, we have revisited our analysis to include additional market properties and update the previously covered ones. All previously assessed technical elements remain unchanged and robust, reinforcing our view that the asset meets the necessary requirements for listing. ## Withdraw Time Similarly to what was shown in the previous analysis, the average withdrawal time from the vault remains short, around 3 hours, with over 20,000 rstETH having been credited to withdrawers under that time. This quick withdrawal time drastically reduces the need to rely on the asset’s DEX liquidity as, thanks to the lowered duration risk, more entities are prone to arbitraging the pool during heightened market volatility, effectively replenishing the DEX liquidity and improving the pricing during liquidations. ![image (6)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/b/bbab50a3ad3ed545ad73ac1eb13931279b40f9f8.png) ## **Market Cap & Liquidity** rstETH has experienced a slowdown in demand and transaction volume since our previous analysis; however, with a current supply of 21,500 rstETH and a market cap of $62M, it remains sufficient to support a listing, and we expect the integration with Aave to boost the asset’s demand and supply. ![image (7)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/5/5f41a46fa3dbb1a8bd98faea8c141ebc113758e4.png) The DEX liquidity of rstETH has grown significantly after the creation of the more recent rstETH/waEthLidowstETH Balancer pool that currently maintains a TVL of $4M, of which $2M of it represents buy-side liquidity. ![image (8)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/4/44ef3380cbe61df4bab8945537e3e64c3db80c5f.png) ## **Volatility** Currently, we can assess rstETH’s volatility only through its price in the Balancer Pools. rstETH’s price displays some fluctuations, with the largest observed price discount at 0.9850 relative to wstETH. However, in these situations, rsETH’s price relative to wstETH has quickly reverted to its underlying value of 1. ![image (9)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/8/8f0c63d26c404ee3b2499195a6cae81249e9a27d.png) ## E-Mode We recommend creating an isolated Liquid E-Mode for rstETH and wstETH to facilitate the expected looping use case for rstETH. In this setup, rstETH would be designated solely as collateral, while wstETH would be exclusively borrowable. ## **LTV, Liquidation Threshold, and Liquidation Bonus** **E-mode Category: rstETH/wstETH** Overall, rstETH’s increased liquidity and quick withdrawals would lead us to recommend less conservative listing parameters; however, due to its novelty, we recommend slightly more conservative parameters than other LRT assets listed in the Lido Instance. Specifically, we recommend setting an LT of 90%, an LTV of 93%, and a Liquidation Bonus of 1% **Non E-mode Configuration** We do not recommend using rstETH as collateral outside of E-Mode in the Lido instance, as this deviates from its intended use case and introduces unnecessary risk. Therefore, in the non E-mode configuration, we suggest setting the LT to 0.10% and the LTV to 0.05%. ## **Supply and Borrow Cap** Based on our standard methodology, which involves setting the cap at 2x the liquidity available under the Liquidation Bonus, we would recommend an initial supply of 1,000. However, thanks to the limited enabled use cases, the extreme degree of correlation between rstETH and its only borrowable asset, wstETH, and the short withdrawal times registered so far, we can recommend an initial supply of 5,000 rstETH. We recommend disabling borrowing for the asset, given the low expected borrowing demand. ## Pricing Given the asset’s backing being wstETH, we recommend the following 3-step structure to pricing the asset: - rstETH internal exchange rate, available through the `convertToAssets`function in the [rstETH smart contract](https://etherscan.io/address/0x7a4effd87c2f3c55ca251080b1343b605f327e3a#readProxyContract#F7), which refers to its wstETH backing. - wstETH internal exchange rate, which refers to its WETH backing. - ETH/USD Chainlink Oracle feed ## CAPO Given rstETH’s current lack of yield to its underlying wstETH, we recommend using wstETH CAPO parameters for the initial listing. As such, Chaos Labs will continue monitoring the market and provide updated CAPO parameters following the introduction of Mellow’s underlying yield. ## Specification Following the above analysis, we recommend the following parameter settings: ### E-Mode Category: rstETH/wstETH | Parameter | Value | Value | | --- | --- | --- | | Asset | rstETH | wstETH | | Collateral | Yes | No | | Borrowable | No | Yes | | LTV | 90% | - | | LT | 93% | - | | Liquidation Penalty | 1% | - | ### rstETH Risk Parameters (Non E-mode) | Parameter | Value | | --- | --- | | Asset | rstETH | | Isolation Mode | No | | Borrowable | No | | Collateral Enabled | Yes | | Supply Cap | 5000 | | Borrow Cap | - | | Debt Ceiling | - | | LTV | 0.05% | | LT | 0.1% | | Liquidation Penalty | 7.5% | | 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 | rstETH/wstETH | | MINIMUM\_SNAPSHOT\_DELAY | ratioReferenceTime | maxYearlyRatioGrowthPercent | | --- | --- | --- | | 7 days | monthly | 9.68% | # **Disclaimer** Chaos Labs has not been compensated by any third party for publishing this recommendation. # **Copyright** Copyright and related rights waived via [CC0](https://creativecommons.org/publicdomain) ---
**Author:** ![ACI](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/aci/32/4780_2.png) [@ACI](https://governance.aave.com/u/ACI)\ **Post date:** [March 3, 2025, 12:18pm UTC](https://governance.aave.com/t/arfc-onboard-rsteth-to-aave-v3-prime-instance/20539/6 "2025-03-03T12:18:41Z")
The current proposal has been escalated to [ARFC Snapshot](https://snapshot.box/#/s:aave.eth/proposal/0xdb00f5ac1e1778d1cbe731e347f69d4bbdcbf673a38052443a6024912580a842). Vote will start tomorrow, we encourage everyone to participate. ---
**Author:** ![Michigan\_Blockchain](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/michigan_blockchain/32/7913_2.png) [@Michigan\_Blockchain](https://governance.aave.com/u/Michigan_Blockchain)\ **Post date:** [March 7, 2025, 6:17am UTC](https://governance.aave.com/t/arfc-onboard-rsteth-to-aave-v3-prime-instance/20539/7 "2025-03-07T06:17:14Z")
As Michigan Blockchain, we support onboarding rstETH to Aave V3 Prime Instance. Obviously, it will increase demand for wstETH borrowing on the Aave v3 Prime instance. On the Prime instance, 100% of the borrows against rsETH is in wstETH, an amount of $50.1m. Also, %99.9 of the borrows against ezETH is in wstETH, an amount of $343.89m. Both are restaked ETH tokens which is the same category as rstETH, so clearly, onboarding rstETH will increase borrowing demand for wstETH. However, the total supply of rstETH has been decreasing. At its peak, the total supply was more than 66000 and is currently 21713, so there is clearly a downtrend. This is a concern for onboarding to the Aave V3 Prime instance, as users are clearly losing interest in Mellow Protocol’s rstETH. However, the current supply of 21713 is enough for onboarding and integration with Aave will probably increase the supply of rstETH because of having additional DeFi utility. Another concern is that the top holders hold a very high concentration of rstETH. **![](https://lh7-rt.googleusercontent.com/docsz/AD_4nXcR2xMeSH3LNsa1w-jJyz5xZTLq7tabU5hw_FVu4vyaV2969im0O1BbG6QOrmvfxdABgu_hWR0Og8GGZuoYQJdqaQpqLMVwJvnsID18k6c27N-0uffFBNVqdKqRrm4UIEAE0gjT2Q?key=nzKDf9b7uPXhiE4LLgSr6ZTH)** _Retaking Vault ETH Top holders,_ [_Etherscan_](https://etherscan.io/token/tokenholderchart/0x7a4EffD87C2f3C55CA251080b1343b605f327E3a) This could cause problems if they were to withdraw large amounts of liquidity. One of the main concerns about onboarding rstETH to Aave V3 Prime Instance was that it had very low DEX liquidity. Thin DEX liquidity could cause temporary price deviations which could lead to liquidations. However, that has now been solved and there is a rstETH/waEthLidowstETH Balancer pool that has a TVL of $3.7m, of which $2.13M of it is in rstETH. **![](https://lh7-rt.googleusercontent.com/docsz/AD_4nXeZdnKMt_8xpXXotQal6ejiPfSP_DrqGyBxGbUL879AJyDrVKP-634-_EBqKO44u5yQcuXMGT7QFGwIGaaRUQXKxzaSm7kTeeOPPYMR5nPzpxN4E750q557K3U_FSOSQyVBdn6Zsg?key=nzKDf9b7uPXhiE4LLgSr6ZTH)** [_Balancer_](https://balancer.fi/pools/ethereum/v3/0x121edb0badc036f5fc610d015ee14093c142313b) Also, since the average withdrawal time from the vault is around 3 hours which is fairly short, and since whales will get a price impact selling on the DEX, they will avoid relying on the DEX for trading rstETH which decreases the risk of temporary price fluctuations which also means there is a lower risk of liquidations happening on Aave V3 Prime instance for rstETH as collateral. While the supply has been decreasing and while the top holder concentration is fairly centralized, DEX liquidity problem has been solved and the withdrawal time is fairly short so there is a very low risk of significant price deviations, making it safe for onboarding rstETH to Aave V3 Prime instance. Also, we expect total supply of rstETH to grow as a result, and also expect there to be higher wstETH borrowing demand. -[Kerem Dillice](https://x.com/KeremDillice) ---
**Author:** ![ACI](https://dub1.discourse-cdn.com/flex013/user_avatar/governance.aave.com/aci/32/4780_2.png) [@ACI](https://governance.aave.com/u/ACI)\ **Post date:** [March 8, 2025, 10:01am UTC](https://governance.aave.com/t/arfc-onboard-rsteth-to-aave-v3-prime-instance/20539/8 "2025-03-08T10:01:16Z")
After Snapshot monitoring, the current [ARFC Snapshot](https://snapshot.box/#/s:aave.eth/proposal/0xdb00f5ac1e1778d1cbe731e347f69d4bbdcbf673a38052443a6024912580a842) recently ended, reaching out both Quorum and YAE as winning option, with 836.2K votes. Therefore [[ARFC] Onboard rstETH to Aave V3 Prime Instance ](https://governance.aave.com/t/arfc-onboard-rsteth-to-aave-v3-prime-instance/20539) has PASSED. Next step will be the publication of an AIP for final enforcement and confirmation of the proposal. ---
**Author:** ![system](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/e/e11637c36f45ffa158f2146f5c19438d46e0824d.svg) [@system](https://governance.aave.com/u/system)\ **Post date:** [April 7, 2025, 10:01am UTC](https://governance.aave.com/t/arfc-onboard-rsteth-to-aave-v3-prime-instance/20539/9 "2025-04-07T10:01:35Z")
Closed on April 7, 2025, 10:01am UTC This topic was automatically closed 30 days after the last reply. New replies are no longer allowed.