# \[Direct to AIP\] Onboard rsETH to Aave V3 Avalanche Instance **URL:** \ **Category:** New Asset\ **Created:** [October 27, 2025, 5:13pm UTC](https://governance.aave.com/t/direct-to-aip-onboard-rseth-to-aave-v3-avalanche-instance/23313 "2025-10-27T17:13:28Z")\ **Posts on this page:** 3\ **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:** [October 27, 2025, 5:13pm UTC](https://governance.aave.com/t/direct-to-aip-onboard-rseth-to-aave-v3-avalanche-instance/23313/1 "2025-10-27T17:13:28Z")
# [Direct to AIP] Onboard rsETH to Aave V3 Avalanche Instance ### Author: ACI ### Date: 2025-10-27 > Proposal updated with latest Risk Parameters by Risk Service Providers 2025-11-14 * * * ## Summary This proposal seeks to onboard rsETH to the Aave V3 deployment on the Avalanche network. As the onboarding of rsETH has already been approved and executed on the Ethereum, Arbitrum, and Base Aave V3 instances, this proposal follows the Direct-to-AIP path to extend rsETH support to the Avalanche instance without repeating the full ARFC process. ## Motivation rsETH is a liquid staking token issued by Kelp DAO, offering users access to rewards from ETH staking while maintaining liquidity and DeFi composability. Its integrations on Aave across other networks have proven successful in terms of risk profile and utility. Given that rsETH has already passed governance and risk assessments for Ethereum, Arbitrum, Linea, and Base this proposal aims to onboard rsETH to Avalanche V3 under the same configuration parameters used for other L2s, adjusted for market conditions where appropriate. ## Specification > Proposal updated with latest Risk Parameters by Risk Service Providers 2025-11-14 | **Parameter** | **Value** | | --- | --- | | Asset | wrsETH | | Isolation Mode | No | | Borrowable | No | | Collateral Enabled | Yes | | Supply Cap | 5,000 | | Borrow Cap | - | | Debt Ceiling | - | | LTV | 0.05% | | LT | 0.10% | | Liquidation Penalty | 7.0% | | 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 | see below | ### wrsETH/WETH E-Mode | **Parameter** | **wrsETH** | **WETH** | | --- | --- | --- | | Collateral | Yes | No | | Borrowable | No | Yes | | Max LTV | 93% | - | | Liquidation Threshold | 95% | - | | Liquidation Bonus | 1.0% | - | ### CAPO | **maxYearlyRatioGrowthPercent** | **ratioReferenceTime** | **MINIMUM\_SNAPSHOT\_DELAY** | | --- | --- | --- | | 9.83% | monthly | 7 days | ## Useful Links - [[ARFC] Add rsETH to Aave V3 Ethereum](https://governance.aave.com/t/arfc-add-rseth-to-aave-v3-ethereum/17696) - [[ARFC] Onboard rsETH to Ethereum and Arbitrum and Base V3 Instances](https://governance.aave.com/t/arfc-onboard-rseth-to-arbitrum-and-base-v3-instances/20741) - rsETH Documentation: [https://docs.kelpdao.xyz/](https://docs.kelpdao.xyz/) ### Disclaimer: This proposal is powered by Skywards. The Aave Chan Initiative is not directly affiliated with Kelp DAO and did not receive compensation for creation of this proposal. ### Next Steps 1. Publication of the proposal (current stage) collect community & service providers feedback. 2. 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:** [October 30, 2025, 9:59pm UTC](https://governance.aave.com/t/direct-to-aip-onboard-rseth-to-aave-v3-avalanche-instance/23313/2 "2025-10-30T21:59:22Z")
## Summary LlamaRisk supports the onboarding of wrsETH to the Avalanche instance. wrsETH’s architecture follows the same OFT design seen in rsETH on other L2s onboarded. Avalanche supply at the time of writing was approximately 6,723, with ~96% of onchain liquidity deposited in an Euler vault. DEX liquidity is highly concentrated in a single pool, which creates a singular liquidity dependency in the event of liquidations. At the time of writing, we noted that 314 wrsETH (~$1.2M) could be swapped within a 7.5% price impact. In contrast to the near $26M onchain, this compounds the dependency risk associated with the single available pool. Therefore, we recommend onboarding rsETH with conservative parameters due to the lack of unallocated rsETH (required for liquidity migrations from Euler) and DEX availability. ## **1. Asset Fundamental Characteristics** ### **1.1 Asset** **[wrsETH](https://snowscan.xyz/token/0x7bFd4CA2a6Cf3A3fDDd645D10B323031afe47FF0)** is the wrapped version of the liquid restaking token rsETH, backed by LSTs such as ETHx, stETH, and native ETH. Extensive analyses of rsETH have been conducted in the past, with previous reports detailing its design and risk considerations, including: **[Add rsETH to Aave V3 Ethereum](https://governance.aave.com/t/arfc-add-rseth-to-aave-v3-ethereum/17696/8)**, **[Onboard wrsETH to ZKsync V3 Instance](https://governance.aave.com/t/arfc-onboard-wrseth-to-zksync-v3-instance/20727/2)**, **[rsETH Collateral Risk Assessment](https://www.llamarisk.com/research/collateral-risk-rseth)**, and **[Onboard wrsETH to Aave v3 Plasma Instance](https://governance.aave.com/t/direct-to-aip-onboard-wrseth-to-aave-v3-plasma-instance/23183/2)**. ### **1.2 Architecture** rsETH is bridged through LayerZero infrastructure and utilizes the Omnichain Fungible Token (**[OFT](https://docs.layerzero.network/v2/developers/evm/oft/quickstart)**) standard. Since OFTs are already present on Aave markets, the bridging mechanism poses little additional architectural risk. ### **1.3 Token Holder Concentration** ![image](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/9/930000500c1e172bebbf6a5ee8be4c861be1001a.png) _Source: wrsETH Holder Distribution, [Snowscan](https://snowscan.xyz/token/tokenholderchart/0x7bFd4CA2a6Cf3A3fDDd645D10B323031afe47FF0), October 30th, 2025_ A total of ~6,723 wrsETH (~$26M) is currently available circulating on Avalanche, with 119 accounts registered as holders. An **[Euler Vault](https://snowscan.xyz/token/0x6e65eb6cac41a19e0b8bb16f3b5ad150f9124d3d#balances)** holds ~96% of the onchain supply. The remaining ~4% is in a Blackhole **[Algebra](https://snowscan.xyz/address/0xa2d7ddf3757dd94199a2a3874605ad4fd8a26a9f#code)** liquidity pool. Current onchain liquidity depth that isn’t allocated is shallow. As Euler represents a direct competitor, onboarding rsETH would require users to migrate liquidity to Aave. The incentives for users, therefore, would have to exceed what they currently receive from Euler; in turn, this may prompt Euler to increase incentives to retain liquidity. ## **2. Market Risk** ### **2.1 Liquidity** Approximately 314 wrsETH worth ~$1.2M can be swapped within a 7.5% price impact. ![image](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/f/f37567e412dbdab2cec596d77ec4f6525cc1001a.png) _Source: wrsETH/WETH swap, **[Kyberswap](https://kyberswap.com/swap/avalanche/0x7bfd4ca2a6cf3a3fddd645d10b323031afe47ff0-to-weth.e)**, October 30th, 2025_ Liquidity on Avalanche is limited to a single **[wrsETH/WETH.e pool](https://snowtrace.io/address/0xa2d7ddf3757dd94199a2a3874605ad4fd8a26a9f)**. Relative to the ~$26M TVL, DEX liquidity is notably limited and reliant on a single venue. The pool currently has a TVL of $2M. ![image](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/f/f7bd138cd2fafdc83a2bc02915667c8feda1c83c.png) _Source: wrsETH Liquidity Pools, **[GeckoTerminal](https://www.geckoterminal.com/avax/pools/0xa2d7ddf3757dd94199a2a3874605ad4fd8a26a9f)**, October 30th, 2025_ ![image](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/8/8478861b2baf2efbe746ea600d18ec4796b8de67.png) _Source: wrsETH/WETH Blackhole pool TVL, [Debank](https://debank.com/profile/0xa2d7ddf3757dd94199a2a3874605ad4fd8a26a9f?chain=avax), October 30th, 2025_ Analyzing the pool’s LP deposits, a single EOA supplies a large proportion of the pool’s TVL (Arkham has currently only priced WETH). In the event that liquidity is withdrawn from this pool, Aave would be exposed to liquidations being constrained. ![image](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/1/1f978407c3984eed18c6c5d6c6aeb4fa950d044b.png) _Source: Blackhole wrsETH/WETH pool, **[Arkham Intelligence](https://intel.arkm.com/explorer/address/0xa2d7dDf3757Dd94199a2a3874605aD4fd8a26a9f)**, October 29th, 2025_ ### **2.2 Volatility** The price history for wrsETH on Avalanche is limited, with the single pool being a little over a month old. ![image](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/e/eb8dca4aa590f8215a0603d2686a1691640cc288.png) _Source: wrsETH/WETH pool, **[Dexscreener](https://dexscreener.com/avalanche/0xa2d7ddf3757dd94199a2a3874605ad4fd8a26a9f)**, October 29th, 2025_ ## **3. Technological Risk** ### **3.1 Smart Contract Risk** 5 **[audits](https://kelp.gitbook.io/kelp/audits)** have been completed on rsETH’s codebase. We have previously covered audit details, and descriptions can be found [here](https://www.llamarisk.com/research/collateral-risk-rseth#:~:text=4.1.1%20Protocol%20Audits) (for SigmaPrime, Code4rena, and MixBytes) and [here]([https://Smart](https://Smart) Contract Risk) (for the most recent SigmaPrime audits) ### **3.2 Bug Bounty Program** Layerzero and Kelp DAO bug bounties have max bounties worth **[$15.5M](https://immunefi.com/bug-bounty/layerzero/scope/#top)** and **[$250K](https://immunefi.com/bug-bounty/kelp-dao/scope/#top)**, respectively. ### **3.3 Price Feed Risk** A Chainlink **[wrsETH/ETH](https://snowtrace.io/address/0xFA38289Fe9f043aD8CCD8e81b28C1D02666D51b6)** exchange rate price feed is available on Avalanche. The custom feed has a deviation threshold of 0.05% and a 24-hour heartbeat. Additionally, an **[ETH/USD](https://snowtrace.io/address/0x976B3D034E162d8bD72D6b9C989d545b839003b0)** price feed is available that has a 0.1% deviation threshold and a 24-hour heartbeat. ## **4. Counterparty Risk** ### **4.1 Access Control Risk** #### **4.1.1 Contract Modification Options** Deployed Kelp DAO contracts on Avalanche: **[RSETHPoolV3](https://snowscan.xyz/address/0x6e401189c8a68d05562c9bab7f674f910821eacf#code)**: the deposit pool for rsETH. **[RSETH\_OFT](https://snowscan.xyz/address/0xc430c78da6e4af49bd115f0329d154bb135f1363)**: LayerZero ERC20 contract for rsETH. **[rsETHWrapper](https://snowscan.xyz/address/0xabaad1bd3e221cc213e2b73e3326f0adc40d4bec#code)**: is deployed behind a TransparentUpgradeableProxy contract. **[RSETHRateReceiver](https://snowscan.xyz/address/0x2a2f37d29143aea599c57169817a48c04664150b)**: contract acts as RsETH’s oracle. RSETH\_OFT is owned by **[Multisig A](https://snowscan.xyz/address/0xb2bb1425514ab5903be6bbdb6b44958e71103561#readProxyContract)**. The owner has access to functions related to LayerZero’s OFT (e.g., cross-chain functionality, fees, and pause abilities) and OpenZeppelin’s Ownable (e.g., transfer ownership and renounce ownership) privileges. rsETHWrapper has the following roles: - DEFAULT\_ADMIN\_ROLE: can assign roles and unpause the contract. Assigned to **[Multisig A](https://snowscan.xyz/address/0xb2bb1425514ab5903be6bbdb6b44958e71103561#readProxyContract)**. - BRIDGER\_ROLE: deposits bridged rsETH from L1 to collateralize wrsETH on L2. Assigned to **[EOA A](https://snowscan.xyz/address/0x7AAd74b7f0d60D5867B59dbD377a71783425af47)**. - MINTER\_ROLE: allows the role holder to mint wrsETH. Not currently assigned (users can mint wrsETH via asset deposits). - TIMELOCK\_ROLE: can change supported assets. Not currently assigned - MANAGER\_ROLE: is defined but does not have assigned functions or accounts. While the BRIDGER\_ROLE is assigned to an EOA, the minting of wrsETH is limited by `maxAmountToDepositBridgerAsset()` check, which ensures 1:1 collateralization of deposited assets to prevent manipulation of backing ratios. #### **4.1.2 Timelock Duration and Function** No time locks are implemented directly in the wrsETH contract. #### **4.1.3 Multisig Threshold / Signer identity** **[Multisig A](https://snowscan.xyz/address/0xb2bb1425514ab5903be6bbdb6b44958e71103561#readProxyContract)** has a 3/ 6 threshold. Signers are comprised solely of the KelpDAO core team. Signers include: [0xFCc1C98F887C93C38Deb5e38A6Fb820AD3fB9DFD](https://snowscan.xyz/address/0xFCc1C98F887C93C38Deb5e38A6Fb820AD3fB9DFD) [0x51C59785639CCa31c09D0833749e76A5D945C9F3](https://snowscan.xyz/address/0x51C59785639CCa31c09D0833749e76A5D945C9F3) [0x601767c4ba4134cc2E906ea7cf25EaB845152A7C](https://snowscan.xyz/address/0x601767c4ba4134cc2E906ea7cf25EaB845152A7C) [0x0e4B97563723eF7f0a7FDe4c7bD3B17a5bF63fBf](https://snowscan.xyz/address/0x0e4B97563723eF7f0a7FDe4c7bD3B17a5bF63fBf) [0x7AAd74b7f0d60D5867B59dbD377a71783425af47](https://snowscan.xyz/address/0x7AAd74b7f0d60D5867B59dbD377a71783425af47) [0x1f7A03b70C5448DFd0a2C5a7865169253c2C769b](https://snowscan.xyz/address/0x1f7A03b70C5448DFd0a2C5a7865169253c2C769b) **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 [can be accessed here](https://github.com/llama-risk/aave-research/blob/main/frameworks/aave_v3_framework.md). ## Aave V3 Specific Parameters Parameters will be presented jointly with Chaos Labs, including wrsETH/WETH and wrsETH/Stablecoins Emodes. ## Price Feed Recommendation We recommend using the internal exchange rate of rsETH together with CAPO, in conjunction with Chainlink ETH/USD price feed, as has been utilized for other rsETH markets ### Disclaimer This review was independently prepared by LlamaRisk, a DeFi risk service provider 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. ---
**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:** [November 13, 2025, 6:15pm UTC](https://governance.aave.com/t/direct-to-aip-onboard-rseth-to-aave-v3-avalanche-instance/23313/3 "2025-11-13T18:15:52Z")
### Overview Chaos Labs supports listing wrsETH on Aave V3’s Avalanche instance. Below, we present our analysis and initial risk parameter recommendation. ### Motivation The addition of Kelp DAO’s restaked ETH as a collateral asset on the Avalanche instance aims to increase the instance’s utility by offering additional options for collateralizing WETH debt. As wrsETH has been listed on multiple Aave instances, including Ethereum Core, Linea, Arbitrum, Plasma, and Base, it has consistently proven to be a strong driver of WETH borrowing demand. At the time of writing, over 80,000 tokens are supplied across these instances, excluding Ethereum Core, which alone holds more than 160,000 tokens. ![image (3)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/b/b9ba614222554b5628ee9a0d11124a2de289b2af.png) ### Asset Overview wrsETH is the wrapped representation of rsETH, which represents a claim on underlying rsETH, backed by native-staked ETH and select LSTs(e.g., wstETH), and restaked via Kelp DAO to secure additional services. Holders accrue the combined staking and restaking yields (net of protocol fees) through an appreciating exchange rate, while the wrapped format provides a non-rebasing ERC-20 suitable for DeFi collateral and integrations. As mentioned previously, the asset is widely used on other Aave instances, primarily in leveraged restaking strategies, where users collateralize WETH or wstETH debt with wrsETH and earn a spread between the underlying yield of wrsETH and the borrow rates of the debt assets. ### Liquidity & Dislocations At the time of writing, Avalanche has one significant [wrsETH/WETH pool](https://snowtrace.io/address/0xa2d7ddf3757dd94199a2a3874605ad4fd8a26a9f) with a net TVL of approximately $950,000, holding 237 wETH and 286 WETH. Additionally, according to DEX aggregator quotes, a sell order of 230 wrsETH would incur approximately 2.5% slippage. In order to illustrate the synchronization between the DEX and oracle prices on chains different from the native redemption venue, we provide the pricing dynamics on Linea. As can be observed in the plot below. While limited price dislocations are common, the price trajectories exhibiting substantial levels of synchronization as the pool is continuously adjusted to the exchange rate, which serves as the main pricing venue for wrsETH. The dislocations are typically limited by approximately 15 basis points, supporting moderate levels of market efficiency. We additionally notice that the pricing within the DEX pool was measurably discounted, which likely represents the indirect time costs of unstaking wrsETH. ![image (4)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/1/1d8590f3ae0b87692f052d04ff4fb14e4aac779d.png) As the markets mature, we expect pricing on Avalanche to become efficient. Chaos Labs will monitor the pricing dynamics and adjust the asset’s risk parameters accordingly. ### **LTV, Liquidation Threshold, and Liquidation Bonus** We recommend setting the asset’s base LTV and LT to 0.05% and 0.10%, respectively, while additionally introducing a dedicated wrsETH/WETH E-Mode, aligning the values with those in the Arbitrum, Base, and Plasma instances. Such a configuration will enable us to limit the utility of the asset outside of the leveraged restaking strategies, thereby mitigating the risks associated with uncorrelated assets. ### Oracle Pricing We recommend pricing wrsETH using a combination of a [wrsETH/ETH exchange rate feed](https://snowtrace.io/address/0xFA38289Fe9f043aD8CCD8e81b28C1D02666D51b6) and the [ETH/USD price feed](https://snowtrace.io/address/0x976B3D034E162d8bD72D6b9C989d545b839003b0) to derive the USD price for wrsETH. As can be observed in the plots below, both oracle updates have expected frequencies. Since ETH/USD is a highly volatile pair, the updates are consistently within the 0.1% range of the previously reported price. In contrast, the exchange rate updates are always positive and minimal in magnitude due to its predictable and monotonically increasing nature. ![image (5)](https://europe1.discourse-cdn.com/flex013/uploads/aave/original/2X/5/54559585bdeddca71c46275ffaa1c8e1d03bdc33.jpeg) ### Recommendation Chaos Labs supports listing wrsETH on Aave V3’s Avalanche instance. The asset has shown strong adoption and stable performance across other Aave markets, supporting leveraged restaking demand while maintaining low risk. We recommend constraining its collateral-utility outside of a wrsETH/WETH E-Mode, consistent with other deployments, to concentrate usage within correlated ETH markets and minimize risks. ## Specification | **Parameter** | **Value** | | --- | --- | | Asset | wrsETH | | Isolation Mode | No | | Borrowable | No | | Collateral Enabled | Yes | | Supply Cap | 5,000 | | Borrow Cap | - | | Debt Ceiling | - | | LTV | 0.05% | | LT | 0.10% | | Liquidation Penalty | 7.0% | | 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 | see below | ### wrsETH/WETH E-Mode | **Parameter** | **wrsETH** | **WETH** | | --- | --- | --- | | Collateral | Yes | No | | Borrowable | No | Yes | | Max LTV | 93% | - | | Liquidation Threshold | 95% | - | | Liquidation Bonus | 1.0% | - | ### CAPO | **maxYearlyRatioGrowthPercent** | **ratioReferenceTime** | **MINIMUM\_SNAPSHOT\_DELAY** | | --- | --- | --- | | 9.83% | monthly | 14 days | ## **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)