Since users can’t use stETH or the underlying ETH to pay for transaction fees, I think it will have a different market compared to ETH, so that’s why I think using the altcoin interest rate curve is best for now.
Around the time of the merge, we can change the interest rate to one similar to ETH’s.
Thoughts?
Change ETH IRM to the stablecoin IRM, yes
cStETH deployed to 0x6924c66ed77F5E45186b2E9a2b826ee061884624.
npx saddle match 0x6924c66ed77F5E45186b2E9a2b826ee061884624 CErc20Delegator 0xae7ab96520DE3A18E5e111B5EaAb095312D7fE84 0x3d9819210a31b4961b30ef54be2aed79b9c9cd3b 0xd956188795ca6f4a74092ddca33e0ea4ca3a1395 200000000000000000000000000 "Compound stETH" cStETH 8 0x6d903f6003cca6255d85cca4d3b5e5146dc33925 0xa035b9e130f2b1aedc733eefb1c67ba4c503491f "0x" -n mainnet
Tyler you never cease to amaze me, thank you so much for your dedication and focus
I reached out in the discord Governance channel but figured I would do the same here for coverage.
I am with Lido as part of business development and wanted to discuss the process to reengage this proposal? We have a lot of updates since the last conversations here and it looks like there was already work done on the ctoken contracts.
Happy to update data or provide additional insight that would be beneficial.
Hello all
I am just wondering what the current status is of the stETH integration in Compound. Would be a great addition.
cWstETH has been deployed to 0xc7b9bE4b75280733655368F8a64645990944e3ca. Now we’re just waiting for Chainlink oracle support.
Hi @TylerEther @massnomis has the plan to support stETH on Compound v2 been abandoned? I know it’s supported in Compound v3, but with $470M+ in ETH supplied and only $16M borrowed in v2, adding (w)stETH in v2 would be an easy way to boost the utilization rate (and fees).
Would appreciate any relevant info here and feedback on the best way to get this proposal back on track.
Hi @lucas, the initiative to add wstETH to Compound v2 was abandoned after over a year of effort. The primary issues were 1. adding enough liquidity to Uniswap v2 for the anchor to be reliable, or adding/changing the anchor source and 2. finding enough reporters to operate the custom feed.
The custom oracle contract was upgraded to use Uniswap v3 as an anchor quite a while ago, and I see that there’s sufficient liquidity for it to be reliable now. So the next step is to convince enough reporters to run the custom feed.
I remember one reporter was willing to run the custom feed, although they were looking for around $30k/month to run it. One reporter is insufficient as they’d have sole control over the price +/- 15% of the Uniswap v3 1h TWAP. Any sort of reporting error can be detrimental.
If enough reporters can be convinced to run the feed, the next step is to convince Chainlink to deploy a new custom oracle (UAV) contract. Getty handled the interactions with Chainlink, so I can’t discuss this further.
If the above steps can be completed, then a series of proposals are needed. The first proposal is the UAV upgrade, and the second is the market listing (assuming the cWstETH contract I deployed doesn’t need any updates).
I hope this helps!
Hi @TylerEther appreciate your response.
Will do some research on potential cost/benefit of paying for these custom feeds to understand if it is attractive enough for Compound to support.
Will also reach out to a few Chainlink reporters to see if the cost could be lower than $30k/month since it sounds highly overpriced if that’s the case. Would welcome any feedback from @getty or other people with experience managing Chainlink support.
Hopefully we can make this work as the high amount of ETH available to be borrowed from Compound v2 seems like an untapped opportunity for protocol growth.
Hi @TylerEther in order to support an asset within the Compound protocol, could you kindly provide guidance on the optimal number of operators or reporters required?
In addition it would also be beneficial to know Approximately how many requests (ie, price feed updates) per day would the protocol need. Furthermore will the price updates be time-based, or triggered by user actions?
Hi @Pedro, it might be better to ask some of these questions to someone from Chainlink, but I’ll try my best to answer your questions.
Deciding on an optimal number of reporters is difficult. Utilizing game theory, the value at stake by the set of reporters plus any additional costs (such as moving the anchor price) must be greater than the value that can be extracted or lost due to reporting problems. This is difficult to measure when it comes to a reporter’s reputation.
We can instead look at Chainlink’s stETH/USD price feed, where we see that it’s performed flawlessly with a requirement of at least 13 reporter responses. Past performance may not be a definite predictor, but it’s often the most reliable one. So I’d say 13 reporters is sufficient.
Chainlink’s feeds update based on either time or percent change. It looks like the stETH/USD feed updates at a minimum of once an hour, or when the price moves by 1%. In times of stability, one can expect 24 updates per day.
Lastly, if I recall correctly, the main difficulty is that Compound doesn’t support rebasing tokens, so wstETH must be used, but it doesn’t look like there’s a wstETH price feed, or a stETH-wstETH feed on mainnet, which makes it costly to start up a feed. I think rather than creating a new wstETH-USD feed, a cheaper wstETH-stETH feed could be created, and then the UAV could be modified to support that conversion.
Given the community’s interest in deprecating the V2 market and the capital efficiency and risk management enhancements that Compound V3 offers compared to V2, if the community is interested in adding new markets and assets like stETH, we suggest proposing it for Compound V3 instead of V2.
Given the lack of quality collateral in crypto in general, basically being btc, eth and stable coins indeed it makes sense to add wsteth to pretty much all comets. If somebody going to sit on eth collateral for a long term being exposed to price risk, it makes financial sense to do it in staked eth rather than in plain eth. It is really strange to me that Compound do not have it still as collateral asset across all comets, while having something like matic, chainlink or uniswap, none of which is or going to be great collateral any time soon. Not that we should not be open to having some options for some “wanna be collateral” tokens, but seriously there is hardly any candidates to join btc, eth, their derivatives and stablecoins group in foreseeable future.
So i am as well for adding staked eth to v3. Which particular staked eth is open question, but lido would surely be one of the first to consider. Possibly coinbase and rocketpool versions might be another ones to consider as well.
I understand that the primary emphasis is currently on Compound V3. However, considering the substantial amount of idle liquidity in the Compound V2 ETH market and the fact that it’s been over a year since the V3 launch, there seems to be a noteworthy opportunity for the protocol to harness this unused liquidity.
I reached out to several Chainlink node operators, and unfortunately they ended up offering support to cwstETH feeds for even higher costs than $30k/month. Nonetheless, we conducted an analysis of one scenario to assess how the reserve growth for the DAO would be impacted if the DAO were to bear this expense and introduce this market.
One of the key benefits of introducing stETH as collateral is that it should increase ETH borrows, and the protocol’s reserves along with it. For this proposal to make sense for Compound, the incremental reserve growth obtained from supporting stETH collateral should be greater than the cost of paying for the custom feeds.
As people take advantage of leverage staking, we can expect users to borrow ETH at most up to the point where borrowing costs equal the stETH APY. Given the interest rate curve currently in effect for ETH in Compound v2, the ETH borrow APY would reach 3.5% (slightly below the current stETH APY) at a utilization ratio of just 7%.
Under a scenario (option 1) where stETH collateral is added without any changes to the utilization ratio and the amount of ETH loans increases until the borrow APY reaches 3.5%, the projected reserve growth would be lower than the cost of the custom feeds. This clearly wouldn’t be beneficial for Compound.
However, if stETH is integrated as collateral and the borrow curve for ETH is optimized, then the results are likely to be positive. In option 2, I explore what the reserve growth could be if the slope for ETH borrow rates were less steep, reaching a 3.5% borrow APY at 72% utilization rate. In this scenario, then the projected borrowing demand would be much larger.
| Option | Cost | Reserve Growth | Total |
|---|---|---|---|
| Option 1 | ($30k*12)= $360k | (3.5%*$31M)*20%= $223K | -$136K |
| Option 2 | ($30k*12)= $360k | (3.5%*$323M)*20%= $2.26M | $1.9M |
Option 2 would bring greater risks due to potentially larger ETH liquidations, but the potential reserve growth could be large enough to make this worth it.
These are simplified projections, but given the popularity of leverage staking and the hundreds of millions of idle ETH in v2, Compound is very likely to benefit from this scenario where wstETH is added as collateral and ETH borrow rates are optimized.
@tylerEther would you think it is worth pushing this approach forward? It would also be possible to support stETH and then progressively improve ETH borrow rates in separate proposals, but I’d be curious to hear your thoughts.