This ARFC proposes the addition of wstETH (wrapped staked ETH) From Lido to the Aave V3 Base Network to enrich the diversity of the ecosystem’s liquid staking solutions.
Motivation
The onboarding of wstETH will give Aave users more options for earning staking rewards on their collateral, reinforcing Aave’s position as a diverse and inclusive DeFi protocol.
We support the listing of wstETH on Base, following its launch on the network.
As liquidity is still building up on the network, we recommend launching with conservative parameters which can be later optimized.
Given the currently low liquidity levels (~320 wstETH) and leaning on past recommendations for other networks, we recommend the following launch parameters:
Risk Parameter
Value
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
8%
Reserve Factor
15%
Liquidation Protocol Fee
10%
Supply Cap
100 wstETH
Borrow Cap
10 wstETH
Debt Ceiling
N/A
uOptimal
45%
Base
0%
Slope1
7%
Slope2
300%
Chaos Labs will update the recommendations prior to the publication of the AIP to account for up-to-date liquidity.
Very much in favor of adding wstETH to Aave on Base.
In response to @Gauntlet: I generally agree with the analysis except for lowering the LTV compared to what was originally proposed. I don’t see the need to bring this down to 67% from 71%.
If the reason is to not have a higher LT/LTV compared to cbETH - which I agree is a very sensible approach - then there are other options. Specifically, I’d suggest to increase the LTV of cbETH rather than lower that of wstETH versus what was suggested in the OP.
Why?
The liquidity for wstETH is rapidly improving. This trend is expected to continue as more LP rewards are being directed to Base like Aerodrome. User adoption is also expected to pick up due to the inherent advantages of wstETH for the end user compared to cbETH (i.e. higher yield).
Liquidity snapshot as of now:
Last week, Moonwell (a Compound v3 clone) has supported wstETH with 75% LTV, based on Gauntlet’s recommendations. Indicating that a 71% LTV would still be within reason.
