TEMP CHECK: Add support for Wrapped Super OETH (wsuperOETHb) to Aave v3

Governance New Asset
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TEMP CHECK: Add support for Wrapped Super OETH (wsuperOETHb) to Aave v3

Author: Peter from the Origin Protocol core team

Date: 2024-09-20

1. Simple Summary

This is a proposal for adding supply/borrow support for wsuperOETHb on the Aave v3 Base Instance

2. Motivation/Background

Super OETH (superOETHb) is the next iteration of OETH, a superior LST with an extremely tight peg and high yields thanks to a combination of the OETH AMO and DVT direct staking through SSV/P2p. superOETHb yields are able to reach double digit levels, making it an exceptionally perfect token for lending and borrowing against ETH. superOETHb was built reusing 90% of the code from OETH, for which the codebase has already been audited 12+ times, and for which there is also an Aave Temp Check currently on the forum.

Super OETH is the first token in a new category of liquid staking: Supercharged LSTs. Supercharged LSTs will have materially higher yield while being designed for L2s, with a similar risk profile to mainnet LSTs. Ethereum liquid staking is amplified with chain-specific, auto-compounded incentives. Deep concentrated liquidity pools guarantee exits with minimal costs - users will never lose ability to convert back to ETH.

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 projects who plan to integrate the LSTs, or for users who plan to loop LTSs for additional yield. This is not the case with OETH, and it will not be the case with Super OETH.

Using Super OETH on Aave will produce higher yield than the other top LSTs and have a near perfect ETH peg. Utilizing a concentrated Aerodrome liquidity pool with the tightest tick possible helps make Super OETH the most pegged L2 LST currently available, while being able to reach double digit yields. Our vision for Super OETH is for it to become the most trusted LST for those seeking to use an LST for leveraged staking.

Obtaining superOETHb is effortless, users can convert their ETH into Super OETH via any of the following methods:

wsuperOETHb is a ERC-4626 tokenized vault designed to accrue yield in price rather than in quantity. When you wrap superOETHb, you get back a fixed number of wsuperOETHb tokens. This number will not go up - you will have the same number of wsuperOETHb tokens tomorrow as you have today. However, the number of superOETHb tokens that you can unwrap to will go up over time, as wsuperOETHb earns yield at the same rate as standard superOETHb. The wsuperOETHb to superOETHb exchange rate can be read from the contract (0x7FcD174E80f264448ebeE8c88a7C4476AAF58Ea6, function number 16), or via the OETH dapp.

Current exchange rate as of 9/20/24: 1 wsuperOETHb = 1.00945809 superOETHb

Security Considerations

superOETHb and wsuperOETHb were built reusing 90% of the OETH code, which was built reusing 95% of the OUSD code, of which many 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.

Through its integration with Aerodrome, Super OETH is able to ensure a 1:1 peg with ETH at any scale. The Super OETH AMO holds a portion of the protocol’s underlying collateral in a concentrated liquidity pool with an extremely tight price range within a single tick above 1.0000 WETH. This allows anyone to sell superOETHb into the pool for at least 1 WETH (minus swap fees). The Aerodrome TWAP quoter, which works the same as the Uniswap TWAP oracle, can be used to derive the price of superOETHb on chain, and a superOETHb Tellor oracle is also available. superOETHb is also derived from OETH, which has mainnet oracles from Chainlink, Tellor, and Dia.

Chainlink has actually recommended protocols treat superOETHb to be 1:1 with ETH rather than use an oracle, as Aave has done with stETH. Super OETH likely qualifies for a Correlated-Asset Price Oracle (CAPO) based on similar LSTs that have qualified.

By design, superOETHb is the most pegged L2 LST:

Screenshot 2024-09-18 at 3.34.44 PM

image

Performance

Super OETH has seen incredible growth since launch. Proof of Yield tracks the distribution of each Super OETH rebase event and displays the compounded yield on an annualized basis each day. The current Super OETH TVL sits at $182m with a native yield of 18.10% APY:

Super OETH has reached the number one spot by TVL on Defillama for yield projects on Base and accounts for a large amount of the Aerodrome Slipstream TVL.

Screenshot 2024-09-20 at 2.19.07 PM

There has been incredible demand for borrowing ETH against Super OETH for leverage looping on money markets. Utilization has been 100% the last week, any ETH added is almost immediately borrowed:

Ionic - Ionic

Origin also has managed to integrate and onboard Super OETH into smaller projects, including:

Spectra - Spectra

Pooltogether - Pooltogether

Benefits of listing Super 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 wsuperOETHb on Aave will provide a new market for OETH holders and Super OETH holders, and add a new platform for leverage looping ETH. This new Super OETH market would lead to additional increased TVL for Aave’s Base instance, which is currently the 8th largest instance, additional revenue to the Aave Protocol and DAO from active loans and liquidations, and will attract a wider user base due to Super OETH being significantly higher yielding over the other Aave supported LSTs.

Proof of Liquidity (POL) and Deposit Commitments

While no incentives have been used within any Super OETH integrations due to the high native yield of Super OETH, the Origin Protocol team is open to providing both token incentives and seed liquidity to jumpstart the Super OETH market on Aave once wsuperOETHb 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 fourth proposal, after proposing to add OGN as an Aave asset in 2021, proposing to add OUSD as an Aave asset in January 2023, and proposing to add OETH as an Aave asset in September 2024.

Additional relevant links:

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

  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

6. Copyright

Copyright and related rights waived under CC0.

3 Likes
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Wow, this is a great idea. Fully support

1 Like
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Hi Peter,

in general I would echo my comment made here [TEMP CHECK]: Add support for Wrapped OETH (wOETH) to Aave v3 - #3 by EzR3aL

But also, how exactly is Super OETH able to reach these double digit yields?
Whats the risk associated with it? Usually this is being discussed at ARFC but im trying to understand if it makes sense to push SuperOETH to ARFC or wait for OETH first and see how much demand there is.

1 Like
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Thank you, Llamarisk is currently analyzing superOETHb. Super OETH was built reusing 90% of the code from OETH, for which a Llamarisk risk reeport and addendum can be found here: Addendum to Collateral Risk Assessment - Wrapped Origin ETH (wOETH) - Llama Risk

superOETHb is able to reach double digit yields thanks to a combination of wOETH Beacon Chain staking, the AMO, and from those opted-out of receiving yield.

There is counterparty risk and smart contract risk. As mentioned above in the proposal, superOETHb was built reusing 90% of the code from OETH, for which the codebase has already been audited 12+ times

Super OETH is the first token in a new category of liquid staking that we’re calling Supercharged LSTs. Supercharged LSTs will have significantly higher yields, with a similar risk profile to mainnet LSTs. At the current Super OETH APY and the current cost to borrow ETH on Aave’s Base instance, users can easily achieve yields of 45% APY and greater by looping wsuperOETHb.

2 Likes
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In the 7 days that have passed since posting this proposal, the Super OETH TVL has grown almost $100m. It would be great if other delegates and Aave users, and @LlamaRisk could add their input.

2 Likes