[ARFC] Onboarding ETHx to Aave V3 Ethereum

[0xTogbe]

Title: [ARFC] Onboarding ETHx to Aave V3 Ethereum

Author: @0xTogbe - Aave Chan Initiative

Date: 2023-11-27

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Summary

This ARFC proposes the addition of the liquid staking token ETHx from Stader to Aave V3 Ethereum to enhance LST liquidity and asset diversity.

Motivation

ETHx represents Stader’s staked ETH, providing users with liquid staking benefits. Supporting ETHx on Aave V3 continues our advocacy for LST diversity, complementing existing assets like stETH, cbETH and rETH.

Specification

Contract Address: ETHx - 0xA35b1B31Ce002FBF2058D22F30f95D405200A15b

Risk Parameter	Value
Emode	No
Isolation Mode	No
Borrowable in Isolation	No
Stable Borrow	No
Enable Borrow	Yes
Enable Collateral	Yes
Loan To Value (LTV)	71%
Liquidation Threshold	76%
Liquidation Bonus	10%
Reserve Factor	15%
Liquidation Protocol Fee	10%
Supply Cap	15000 ETHx
Borrow Cap	1000 ETHx
Debt Ceiling	N/A
uOptimal	45%
Base	0%
Slope1	7%
Slope2	300%

Next Steps

1. Solicit feedback from the Aave community.
2. If community sentiment is favorable, proceed with the ARFC snapshot.
3. Success in the snapshot leads to the development of an AIP.

Disclaimer

This proposal is powered by Skywards.

The Aave Chan Initiative is not directly affiliated with Stader and did not receive compensation for creation this proposal.

Copyright

Copyright and related rights waived via CC0.

[ChaosLabs]

ETHx

Overview

Chaos Labs supports listing ETHx on AAVE V3 Ethereum as part of the community strategy to increase the offering of Aave protocol with more LSD assets. Following is our analysis and risk parameter recommendations for the initial listing

Liquidity and Market Cap

When analyzing market cap and trading volumes of assets for listing, we look at data from the past 180 days. The average market cap of ETHx over the past 180 days is ~$30M, and the average daily trading volume is ~$130K (CeFi & DeFi).

ETHx has been live since Aug 2023 and its market cap has increased by ~$30M in the past month.

Liquidation Threshold

Considering the volatility and the correlation of ETHx to ETH we recommend setting the LT to 77%, similar to the parameters of other LSTs on Ethereum V3.

ETHx / ETH Volatility

Supply Cap, Borrow Cap, and Liquidation Bonus

Following Chaos Labs’ approach to initial supply caps, we propose setting the Supply Cap at 2x the liquidity available under the Liquidation Penalty price impact.

Given the liquidity of ETHx we recommend a 7.5% Liquidation Bonus and a supply cap of 10,000 ETHx.

Based on our observations, the utilization rate for LSDs has been very low. Therefore, we have taken a conservative approach toward LSDs borrow caps of 1,000 ETHx. However, if there is a significant increase in demand and utilization, we will reassess the caps according to the utilization pattern.

IR Curve Parameters

We recommend aligning the interest rate parameters with those of other LSTs to ensure consistency across similar assets on Aave v3.

E-mode

Due to the asset’s limited history, we do not recommend listing ETHx on E-Mode at this time, We will re-evaluate its inclusion in the ETH-correlated category at a later stage.

Recommendations

Following the above analysis, we recommend listing ETHx with the following parameter settings:

Parameter	Value
Isolation Mode	No
Borrowable	No
Collateral Enabled	Yes
Supply Cap (ETHx)	10,000
Borrow Cap (ETHx)	1,000
Debt Ceiling	-
LTV	74.50%
LT	77.00%
Liquidation Bonus	7.50%
Liquidation Protocol Fee	10.00%
Reserve Factor	15.00%
Variable Base	0.0%
Variable Slope1	7.00%
Variable Slope2	300.00%
Uoptimal	45.00%
Flahloanable	Yes
Siloed Borrowing	No
Borrowed in Isolation	No

[Gauntlet]

Summary

Should the community wish to list ETHx, Gauntlet recommends the following parameters from a market risk perspective. We give further color below.

Assessment

Market Share

ETHx has 0.37% of the overall LST marketshare as of end of Nov, ranking it 8th by market share.

Liquidity

• ETHx circulating supply is ~40k ETHx.
• The primary liquidity venues for ETHx include the ETHx - wstETH (~$26m TVL) and ETHx - WETH pools (~$11m TVL) on Curve.
• A 3.8k (~$8M) swap of ETHx to ETH incurs ~2% slippage.

Staking Yield

Staking yields have hovered around ~4%.

Recommendations

Supply and Borrow Caps

Given its liquidity profile and expected WETH debt borrowed against ETHx, Gauntlet recommends initial supply caps of 10k ETHx, 25% of the circulating supply.

Emode

Given its relatively short price history, Gauntlet does not recommend listing in ETH-correlated emode at this time.

Parameter	Recommendation
Isolation Mode	NO
Borrowable	YES
Borrowable in Isolation	NO
Collateral Enabled	YES
Stable Borrowing	NO
Supply Cap	10000 ETHx
Borrow Cap	1000 ETHx
Debt Ceiling	N/A
LTV	71%
LT	76%
Liquidation Bonus	7.5%
Liquidation Protocol Fee	10%
Reserve Factor	15%
Base Variable Borrow Rate	0
Variable Slope 1	7%
Variable Slope 2	300%
Uoptimal	45%

[techfuture]

Amazing proposal I hope eMode can be enabled soon so that certain strategies like CIAN Protocol become attractive.

[ACI]

This ARFC has been escalated to the ARFC Snapshot stage and vote will start tomorrow.

[ACI]

The ARFC Snapshot for this proposal has ended with Aggressive Option as winning option (458K votes and quorum reached). Next stage will be the potential onboarding through an AIP vote.