[ARFC] Onboarding sfrxETH to Aave V3 Ethereum


Should the community wish to list sfrxETH, Gauntlet recommends the following parameters. We give further color below.


In February, Gauntlet’s analysis indicated that listing sfrxETH may require higher levels of trust compared to stETH. We cautiously suggested delaying any action until frxETH v2’s release.

Following Ethereum’s Shapella upgrade in April 2023, which enabled token withdrawal for stakers, there has been great advancement in Protocols. By November 2023, the value of funds staked via Ethereum LSTs reached around 20 billion USD.

We provide a re-evaluation of the risk parameters for sfrxETH below from a market risk perspective.


Market Share

sfrxETH has ~2.5% of the overall LST marketshare as of end of Nov, ranking it 5th by market share.


  • sfrxETH has a circulating supply of 210k sfrxETH.
  • The primary liquidity venues include two frxETH - ETH/WETH pools on Curve (~$136m TVL).
  • A swap of 20k sfrxETH to WETH incurs ~2% slippage.

Staking yield

sfrxETH has realized yield of 5.83% over 2023, which has been more attractive than its competitors with yield below 5%. sfrxETH’s higher yield is achieved by its unique dual-token model and Frax’s strategy managing liquidity via Curve gauge incentives. The yield generated from all staked ETH by frxETH holders is allocated to sfrxETH holders. Frax’s governance stake and its AMO market-making strategy incentivizes liquidity for frxETH within the Curve platform.

Screenshot 2023-11-30 at 3.30.37 PM


Borrow and Supply Caps

Given its liquidity profile and expected WETH debt borrowed against sfrxETH, we recommend initial supply caps of 55k for sfrxETH, 25% of the circulating supply. Should the community wish to adopt a more conservative view towards sfrxETH due to trust related or other considerations, it may wish to adopt lower caps.

Parameter Recommendation
Isolation Mode NO
Emode ETH-correlated
Borrowable YES
Borrowable in Isolation NO
Collateral Enabled YES
Stable Borrowing NO
Supply Cap 55,000
Borrow Cap 5,500
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%