TEMP CHECK: Add support for Wrapped OETH (wOETH) to Aave v3
Author: Peter from the Origin Protocol core team
Date: 2024-09-18
1. Simple Summary
This is a proposal for adding supply/borrow support for wOETH on:
- Aave v3 Main Ethereum Instance
If the onboarding of OETH to Aave is successful, Origin hopes to discuss an additional onboarding of wOETH to:
- Aave v3 Lido Instance
- Aave v3 EtherFi Instance
2. Motivation/Background
Origin Ether (OETH) was launched in May 2023 and is an ERC20 that generates yield while sitting in your wallet. Similar to stETH, OETH yield is paid out daily and automatically (sometimes multiple times per day) through a positive rebase in the form of additional OETH, proportional to the amount of OETH held.
Until a proposal earlier this year, OETH was an LST aggregator that earned yield by tapping into blue-chip protocols while being collateralized by other LSTs. Over the weeks following, the ability to deploy OETH collateral to other projects was removed and LST collateral was divested back to ETH, as OETH transitioned into a full-fledged LST with an extremely tight peg (1:1 redemptions to ETH thru Origin’s ARM) and high yields thanks to DVT direct staking through SSV/P2p.
We’ve noticed many LSTs trade below their peg due to DEX fees and slippage, and to reflect the time value of money. LSTs that consistently trade below peg effectively impose a hidden exit fee - certain LSTs often trade ~0.25% below peg, meaning it takes three weeks of staking to break even. This may be ok for long-term holders, but is terrible for users who plan to loop LTSs for additional yield. This will not be the case with OETH.
Using OETH on Aave will produce higher yield than other top LSTs and have a near perfect ETH peg. OETH ARM mechanics and gas optimizations will ensure the best possible prices for traders looking for instant exit liquidity, while DVT staking will achieve greater risk-adjusted yield. Our vision for OETH is for it to become the most trusted LST for those seeking to use an LST for leveraged staking.
Obtaining OETH is seamless, users can convert their ETH into OETH via any of the following methods:
- Minting on OETH.com
- Swapping on Curve OETH/ETH: Curve.fi
- Swapping on Uniswap OETH/ETH: Uniswap
- Swapping on Curve OETH/frxETH : Curve.fi
wOETH is a ERC-4626 tokenized vault designed to accrue yield in price rather than in quantity. When you wrap OETH, you get back a fixed number of wOETH tokens. This number will not go up - you will have the same number of wOETH tokens tomorrow as you have today. However, the number of OETH tokens that you can unwrap to will go up over time, as wOETH earns yield at the same rate as standard OETH. The wOETH to OETH exchange rate can be read from the contract (function number 16), or via the OETH dapp.
Current exchange rate as of 9/18/24: 1 wOETH = 1.104402 OETH
Security Considerations
There is no set emission schedule for OETH. Similar to stETH, OETH is minted on demand when users lock their ETH into the protocol, and burned on demand when users exit OETH for the collateral. The OETH protocol is upgradeable by a 5 of 8 multi-sig and there is a 48-hour timelock before any changes go into effect. You can read more about that in the admin section of the OETH docs.
OETH and wOETH was built reusing 95% of the OUSD code, of which 10+ audits have been done since 2020. Not that long ago, OUSD reached a market cap of $300m without breaking, and without diminishing the APY it was capable of generating. All OETH audits can be found in the audits section of the OETH docs. We have recently retained yAudit to look at our PRs as we code, and OpenZeppelin is also held on retainer to review 100% of the OETH and OUSD smart contract changes. Origin maintains an active bug bounty with rewards ranging in size from $100 OUSD for minor issues to $1,000,000 OUSD for major critical vulnerabilities. The bug bounty program is currently administered by Immunefi, where Origin maintains a median resolution time of 6 hours.
OETH/wOETH price feeds are available by ChainLink across Mainnet, Arbitrum and Base. OETH price feeds are also available via alternative oracle providers Tellor and Dia Data. OETH likely qualifies for a Correlated-Asset Price Oracle (CAPO) based on similar LSTs that have qualified.
Performance
The current OETH TVL sits comfortably at $71m with a native yield of 4.43% APY:
OETH features the highest native APY on Defillama for LST projects with over $6m in TVL. Proof of Yield tracks the distribution of each OETH rebase event and displays the compounded yield on an annualized basis each day:
Origin has managed to integrate and onboard OETH and wOETH to a range of verticals across Defi, including vaults, restaking, and money markets :
Eigenlayer - Eigenlayer
Karak - Karak
Pendle - Pendle
Morpho - Morpho
Silo - Silo
Shezmu - Shezmu
Fraxlend - Fraxlend
Dolomite - Dolomite
Euler - Euler
Benefits of listing OETH
Since 2021, Origin has streamed millions of dollars in stablecoin to Aave markets via OUSD strategies, generating millions in yield and significantly boosting Aave’s TVL.
Enabling lend and borrow support for wOETH on Aave will provide a new market for OETH holders and a new platform for leverage looping ETH. This new OETH market would lead to additional increased TVL for Aave, additional revenue to the Aave Protocol and DAO from active loans and liquidations, and will attract a wider user base due to OETH being higher yielding over the other Aave supported LSTs.
Proof of Liquidity (POL) and Deposit Commitments
The Origin Protocol team is open to providing both token incentives and seed liquidity to jumpstart the wOETH market on Aave once wOETH is onboarded. More accurate amounts will be discussed with the Aave team and the ACI and can be shared during the ARFC stage of the proposal process.
3. Useful Links
This is Origin’s third proposal, after proposing to add OGN as an Aave asset in 2021 and proposing to add OUSD as an Aave asset in January 2023.
Additional relevant links:
- Origin Core Website
- OETH Website
- dApp
- OETH Analytics
- Gitbook
- Github
- OETH Contract
- wOETH Contract
- Audits
- Blog
- Discord
- Telegram
4. Disclaimer
Peter is a member of the core Origin Protocol team. No additional compensation was received for publishing this proposal. This proposal is following the ACI Skyward process and framework.
5. Next Steps
- If consensus is reached on this [TEMP CHECK], escalate this proposal to the Snapshot stage.
- If the Snapshot outcome is YAE, this proposal will be escalated to ARFC stage
- Publication of a standard ARFC, collect community & service providers feedback before escalating proposal to ARFC snapshot stage
- If the ARFC snapshot outcome is YAE, publish an AIP vote for final confirmation and enforcement of the proposal
6. Copyright
Copyright and related rights waived under CC0.
