Overview
Chaos Labs supports listing wrsETH on Aave’s ZkSync instance. We do not recommend listing WBTC at this time. Below, we provide an analysis and recommendation.
WBTC
WBTC’s liquidity on ZkSync is very low, with just 113 WBTC on the network as of this writing. A swap of 1 WBTC for a stablecoin currently incurs a price impact of 4%, indicating that its DEX liquidity is not sufficient to justify a listing on Aave at this time. Should its liquidity improve, we will reassess this asset.
wrsETH
Chaos Labs has previously provided a risk assessment for rsETH on Ethereum, finding that it was suitable for listing. wrsETH is the wrapped version of rsETH available on ZkSync; rsETH on ZkSync is a token utilizing the OFT standard, and 99.2% of its supply is held as wrsETH. The assets can be wrapped and unwrapped at a 1:1 ratio.
rsETH’s popularity on Aave has grown rapidly, almost entirely driven by its E-Mode with wstETH, allowing users to leverage rsETH against the previously little-borrowed wstETH.
Following this demonstrated demand on Ethereum, we propose a listing that allows users to leverage the asset on ZkSync.
Market Cap and Liquidity on ZkSync
wrsETH currently has a total supply of 2,034 on ZkSync, though this is likely to increase following its listing on Aave. wrsETH’s liquidity is primarily concentrated on SyncSwap and Koi, on which it is paired with WETH. Its liquidity has improved significantly since mid-December.
LTV, Liquidation Threshold, and Liquidation Bonus
We recommend setting the asset’s non-E-Mode LTV and LT to 0.05% and 0.10%, respectively, aligning the values with those in the Prime instance. This will prioritize leveraged strategies while effectively eliminating uncorrelated borrowing that could strain the asset’s DEX liquidity in event of liquidations.
E-Mode
We recommend aligning the asset’s E-Mode with that on Ethereum.
Supply Cap and Borrow Cap
We recommend setting the asset’s supply cap to 2x the liquidity available at a price impact equivalent to the asset’s Liquidation Penalty. This leads to a recommendation of 700 wrsETH. We do not recommend allowing borrowing given limited use cases and demand.
Specification
Following the above analysis, we recommend the following parameter settings:
| Parameter | Value |
|---|---|
| Isolation Mode | No |
| Borrowable | No |
| Collateral Enabled | Yes |
| Supply Cap | 700 |
| Borrow Cap | - |
| Debt Ceiling | - |
| LTV | 0.05% |
| LT | 0.10% |
| Liquidation Bonus | 7.50% |
| Liquidation Protocol Fee | 10.00% |
| Variable Base | - |
| Variable Slope1 | - |
| Variable Slope2 | - |
| Uoptimal | - |
| Reserve Factor | - |
| E-Mode Category | wrsETH/wstETH |
wrsETH/wstETH E-Mode
| Parameter | Value | Value |
|---|---|---|
| Asset | wrsETH | wstETH |
| Collateral | Yes | No |
| Borrowable | No | Yes |
| LTV | 92.50% | - |
| LT | 94.50% | - |
| Liquidation Penalty | 1.00% | - |
Disclaimer
Chaos Labs has not been compensated by any third party for publishing this ARFC.
Copyright
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