[TEMP CHECK] Add rsETH to Aave V3 Ethereum

Governance New Asset
1

[TEMP CHECK] Add rsETH to Aave V3 Ethereum

Author: Kelp DAO & ACI (Aave Chan Initiative)

Date: 2024-02-20

Summary

Kelp DAO is seeking community support for adding its Liquid Restaking Token, rsETH, to Aave V3 on Ethereum. In addition, rsETH depositors into Aave will accumulate additional Kelp miles and EigenLayer points.

Motivation

KelpDAO (Liquid restaking | Restake ETH or LSTs, mint rsETH and earn Kelp Miles!) is one of the largest liquid restaking protocol built on top of the Eigen Layer. Restakers on Kelp get access to multiple benefits like restaking rewards, staking rewards and DeFi yields.

Latest stats:

  • USD 470 Mn+ (~168k Eth) TVL
  • 18K restakers onboarded
  • Accepts ETHx, stETH and sfrxETH and Native ETH as collateral
  • Live across mainnet and L2s such as Arbitrum and Polygon zkEVM

KelpDAO has undergone multiple security audits by top tier audit firms including Sigma Prime, Code4rena. More about KelpDAO’s security here: Kelp DAO Audit reports.

The motivation for this proposal is to introduce a new asset class LRT (Liquid restaking tokens) to Aave and add to the diversity of LST/ LRT category.

Restaking Innovation

KelpDAO’s innovation in the restaking ecosystem has been focused on bringing about the following benefits to users and services-

  • Restakers
    • Liqudity for restaked assets (stETH, ETHx, sfrxETH and Native ETH)
    • Access to additional staking rewards
    • Participate in DeFi using rsETH
  • AVSs
    • Bootstrap economic security
    • Lowered incentive spends
  • Operators
    • Higher revenue earning potential
    • Service onboarding and community support
    • Marketing for node delegation

Specification

Detailed explanation on Kelp’s technical architecture - Technical Architecture - Kelp

KelpDAO will have its own token $Kelp that will be the main governance token of Kelp protocol. Kelp token holders will be able to participate in governance related matters including Whitelisting/ delisting of Assets, Node operators, AVS’, setting and updating fees for Kelp protocol.

Kelp’s on-chain stats can be viewed on Dune.

Liquidity Pools for rsETH

Following are liquidity stats for rsETH:

  • rsETH has >12 Mn USD liquidity across several DEXs on mainnet including
  • $3.5 Mn average daily trading volume (Last 7 days on 17th Feb)

rsETH exchange rate mechanism:

Exchange rate is calculated basis the formula:

rseth / eth = [(asset amount in protocol * asset price in ETH)rsETH total supply]

rsEth relies on multiple contract exchange rates for:

  1. stEth: As this is a rebasing token, the balance of stETH changes over time and the asset price is taken as 1stETH = 1 ETH.

  2. ETHx: Asset price is taken from getExchangeRate( ) method in - Stader Labs: Staking Pool Manager | Address 0xcf5EA1b38380f6aF39068375516Daf40Ed70D299 | Etherscan

  3. Sfrxeth: Asset price is taken from pricePerShare( ) method in - $3,152.97 | Staked Frax Ether (sfrxETH) Token Tracker | Etherscan

Withdrawals and risks

As of today, the only way to exit rsETH is via DEXs. KelpDAO is going to enable withdrawals by mid-March 2024 after which users can withdraw Eth or any LSTs via KelpDAO dapp.

Proof of Liquidity and Deposit Commitments:

Anyone who deposits rsETH into Aave will accumulate additional Kelp miles and EigenLayer points.

Useful Links:

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 this proposal.

Next Steps

  1. If consensus is reached on this [TEMP CHECK], escalate this proposal to the Snapshot stage.
  2. If the Snapshot outcome is YAE, this proposal will be escalated to ARFC stage
  3. Publication of a standard ARFC, collect community & service providers feedback before escalating proposal to ARFC snapshot stage
  4. If the ARFC snapshot outcome is YAE, publish an AIP vote for final confirmation and enforcement of the proposal

Copyright:

Copyright and related rights waived under CC0

7 Likes
2

Very excited to have rsETH on Aave v3 markets. KelpDAO will ensure Kelp miles and EL points are provided to rsETH depositors oon Aave. Will actively work with vault partners to enable leverage restaking strategies on rsETH. Looking forward to hearing feedback from Aave community.

3 Likes
3

Extremely valuable proposal. That would attract a lot of capital to Aave without posing any significant risks. KelpDAO is known to be a top tier protocol so looking forward using rsETH as collateral!

3 Likes
4

Strongly in favor of this proposal. I can say upfront that we are committed to building strategies around rsETH, with the core requirement to be listed on AAVE V3. Security-wise, I think it is fair to say that Kelp/Stader’s team already proved themselves as quite reliable & proactive. Eager to see this one come true!

2 Likes
5

Following the governance discussion & feedback, the current proposal has been escalated to TEMP CHECK Snapshot

Voting will start tomorrow. We encourage everyone to participate.

6

This is a complex way to calculate a price feed with exposure to several assets feed incorporated into one. in our context, an index never decreases risk it actually increase the surface of risk.

this raise concerns and i’d prefer to wait for more maturity before proceeding further.

This makes the asset pricing even more complex and non-eligible to CAPO implementation.

While I do understand strategic & business consideration for rsETH to be in Aave, and The ACI is proudly a partner of sister project Stader, We advocate in favor of the DAO waiting a bit more before opening the gates to rsETH in Aave.

2 Likes
7

Agree with Marc here,

Given the complexity of the exchange rate and mix of underlying assets, we’d feel more comfortable revisiting this listing once withdrawals are live.

8

Following Snapshot monitoring, the current TEMP CHECK Snapshot has just ended, not reaching Quorum and/or YAE as winning option with 320K votes.

Therefore the TEMP CHECK Snapshot has not passed.

9

After a couple of months since latest TEMP CHECK Snapshot, and specially after reviewing latest LST market improvements and the onboarding of another LST assets on Aave, ACI will reopen the TEMP CHECK Snapshot to add rsETH to Aave V3 Ethereum.

If the TEMP CHECK Snapshot passes, next step will be the publication of an ARFC, with special focus on Risk Parameters by Risk Service Providers and the strategic & business consideration for rsETH to be in Aave.

TEMP CHECK Snapshot

Vote will start tomorrow, we encourage everyone to participate.

10

@ACI, has the exchange rate complication for rsETH reduced, and are withdrawals now live? I.e., have the concerns from the previous vote been alleviated?

1 Like
11

Yes. Unstaking of rseth and withdrawals of lsts has gone live last week.

2 Likes
12

Hello,

I’m still concerned about exchange rate calculations but withdrawals have been activated this makes the asset more mature and worth escalation to ARFC stage to allow risk & bgd to conduct a deeper analysis on the asset imho.

2 Likes
13

Thank you, fully aligned on this and voted in favour!

1 Like
14

After Snapshot monitoring, the current TEMP CHECK Snapshot recently ended, reaching both Quorum and YAE as winning option, with 647K votes.

Next step will be the publication of an ARFC, to collect both community & service providers feedback before escalating proposal to ARFC snapshot stage.