# \[Direct to AIP\] Onboard rsETH to Aave V3 Avalanche Instance **URL:** https://governance.aave.com/t/direct-to-aip-onboard-rseth-to-aave-v3-avalanche-instance/23313 **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:** 1 **Showing post:** 2
### 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. --- _[View the full topic](https://governance.aave.com/t/direct-to-aip-onboard-rseth-to-aave-v3-avalanche-instance/23313)._