title: [Risk Stewards]wstETH/wETH eMode Update - Ethereum, Arbitrum & Base Instances
author: @TokenLogic
created: 2025-02-10
Summary
This publication proposes improving the capital efficiency of the wstETH/wETH eMode on Ethereum, Arbitrum and Bases instances of Aave v3. This proposal is to be implemented by the Risk Stewards after this proposal to create liquid eModes is live.
Motivation
TokenLogic proposes updating the wstETH/WETH eMode parameters on Ethereum, Arbitrum, and Base to enhance capital efficiency across Aave instances.
With the Aave v3.2 upgrade enabling targeted collateral-debt combinations and Lido’s expanded operator set reducing slashing risk, there is an opportunity to optimise wstETH collateral and wETH debt yield strategies by increasing wstETH’s LTV and LT.
Prime has been the most successful growth avenue for wstETH, largely due to the favorable terms of its wETH eMode, offering efficient leverage loops using wstETH as collateral. The strategy is highly sensitive to LTV changes — raising the LT from 95.50% to 96% boosts yield by 9.9% (APY from 12.7% to 14.0%) with a health factor of 1.03.
On Arbitrum, Base, and Core, wstETH competes directly with weETH due to identical eMode configuration. Given Lido’s reputation for providing the most secure ETH staking asset and the yield strategy’s sensitivity to parameter adjustments, wstETH should command a modest premium over newer LRT assets. The Aave DAO’s efforts to join the Lido Alliance further aligns with recognising wstETH’s lower risk profile.
A modest increase wstETH’s LTV and LT will unlock more WETH debt, attract additional wstETH deposits, and address low ETH utilisation across Aave instances. In turn, this will support broader ecosystem growth by enabling Kelp and Renzo to efficiently source wstETH liquidity for their respective rsETH/wstETH and ezETH/wstETH eModes.
Specification
The wstETH LTV & LT on Prime, Core, Arbitrum and Base instances are to be amended as outlined below:
wstETH/wETH E-Mode on Prime Instances
| Parameter | Current | Proposed |
|---|---|---|
| LTV | 93.50% | 94.50% |
| LT | 95.50% | 96.00% |
wstETH/wETH E-Mode on Core and Arbitrum Instances
| Parameter | Current | Proposed |
|---|---|---|
| LTV | 93.00% | 94.50% |
| LT | 95.00% | 96.00% |
wstETH/wETH E-Mode on Base Instance
| Parameter | Current | Proposed |
|---|---|---|
| LTV | 90.00% | 94.50% |
| LT | 93.00% | 96.00% |
Disclosure
TokenLogic does not receive any payment for this proposal.
Next Steps
- Gather feedback from the community.
- Risk Stewards periodically implement updates to achieve specified parameter configuration.
Copyright
Copyright and related rights waived via CC0.