Add mETH market on Ethereum

Jonlkh_mantle · August 27, 2024, 11:41am

Summary

Mantle is seeking community support for adding its Liquid Staking Token, mETH, to Compound v3 on Ethereum for USDT and ETH borrowing. With mETH as one of the top liquid staking tokens in the market, integration of mETH as a collateral asset will drive new synergies between the broader Mantle Ecosystem and Compound. Users can also be rewarded with Powder on our ongoing Metamorphosis Campaign.

Useful Links:

mETH Protocol Website: https://www.mantle.xyz/meth
mETH Protocol Documentation: Overview | mETH Protocol
mETH Protocol Github: mantle-lsp · GitHub
mETH Protocol Audits: Audits | mETH Protocol
mETH Token Address (L1): 0xd5F7838F5C461fefF7FE49ea5ebaF7728bB0ADfa
Staking Contract (L1): 0xe3cBd06D7dadB3F4e6557bAb7EdD924CD1489E8f

Why mETH Protocol

Mantle Liquid Staking Protocol (LSP) is the second core product of Mantle Ecosystem. mETH Protocol is a permissionless, non-custodial ETH liquid staking protocol deployed on Ethereum L1 and governed by Mantle. Mantle Staked Ether (mETH) serves as the value-accumulating receipt token for mETH Protocol.

Since its launch in December 2023, mETH Protocol & mETH had achieved over 500,000 ETH staked and an all-time-high TVL of over $2.195 billion on 12 March 2024, only ~3 months from its initial launch. According to DeFiLlama, mETH is currently ranked 4th among industry-leading liquid staking protocols at $1.646 billion TVL.

Source: DeFiLlama (as of Aug 14, 2024)

This rapid success could be attributed to the employed mETH Double-Dose Drive program, in which Mantle Treasury subsidized the mETH native yield through its treasury assets to achieve ~7.2% APY for 2 months, double that of the market reference rate for ETH liquid staking protocols.

Latest stats

$1.32B USD TVL (491K ETH)
15K stakers onboarded
Live across Mainnet and Mantle L2

Proposed Markets

ETH Market
- mETH Collateral
USDT Market
- mETH Collateral

Specification

Detailed explanation of mETH Protocol’s technical architecture here

mETH Protocol on-chain stats can be viewed on Dune.

Liquidity

Following are liquidity stats for mETH:

mETH has >30M USD liquidity (excluding >100M USD in liquidity on Mantle L2) across several DEXs on mainnet including
- Uniswap V3 - $28.8M
- Pancakeswap v3 (ETH) - $3M
$978K average daily trading volume on Mainnet (Last 7 days on 14th Aug)

Exchange rate mechanism:

Reference Rate

The reference rate is considered the “fair” or “midpoint” rate for mETH to ETH conversions. This is calculated based on the formula:

staking.totalcontrolledETH

https://etherscan.io/address/0xe3cBd06D7dadB3F4e6557bAb7EdD924CD1489E8f#readProxyContract#F30

meth.totalSupply

https://etherscan.io/address/0xd5F7838F5C461fefF7FE49ea5ebaF7728bB0ADfa#readProxyContract#F16

Primary Market Rates

Our Stake Rates (ETH to mETH) and Unstake Rate (mETH to ETH) can be calculated from our reference rate or queried according to the methods outlined in our documentation - mETH Protocol Primary Market Rate

Withdrawals

mETH can be unstaked at any point in time with unlimited capacity (based on amount of mETH in your custody. Settlement time generally requires 1-6 days as per typical unstaking operations - see Unstake Lifecycle.

Audits and Security

mETH Protocol has gone through significant audits by Hexens, Mixbytes and Secure3 for our smart contracts and oracles - mETH Protocol Audits

mETH Protocol also offers bug bounty programs through Immunefi, with maximum payouts of $500,000 - mETH Protocol Immunefi bounty

Oracles

The Mantle Ecosystem

Mantle Network

Since its launch, Mantle has seen more than 104 million transactions and over 5.3 million unique addresses transact on the network. At its peak, it reached 194,158 active addresses. To date, over 6,000 developers have deployed more than 1.2 million contracts.

As of the time of writing, Mantle has approximately ~$719 million total value bridged (TVB) and over ~$433 million in total value locked (TVL) across 74 different DeFi protocols, according to DefiLlama. According to L2Beat, Mantle is currently the 5th highest TVL among other L2 ecosystems at ~$1.24 billion. These metrics indicate a thriving ecosystem that Compound could benefit from by tapping into an existing, active user base with mETH.

Source: DefiLlama (as of July 2, 2024)

Bybit

As a close ecosystem partner and sponsor, Bybit works hand-in-hand with Mantle to develop new technologies that let people work, engage, and transact together in new ways. Bybit is committed to supporting the Mantle Ecosystem, which would in turn power and grow the Bybit ecosystem. Bybit aims to act as a seamless gateway for its users to access decentralized applications built on Mantle Network, enabling users access to web3 trading experiences powered by advanced blockchain technology.

Source: Coinmarketcap (as of Aug 14, 2024)

Bybit, currently ranked as the 4th top spot exchange and 2nd top derivatives exchange by Coinmarketcap, offers direct access to Mantle Network. The exchange’s global user base has surged by 300% in a little more than a year, from 10 million users in Q3 2022 to over 30 million as of now. mETH’s deployment on Comound would provide immediate access to this extensive and growing user base due to Bybit’s native support for Mantle Network deposits and withdrawals.

Mantle Treasury

Mantle Treasury is unmatched in terms of size. The treasury holds more than $1.08 billion in assets excluding its own tokens (MNT) — the largest of any other DAO 4 — which means ample runway to weather multiple market cycles. It also has around $2.35 billion worth of MNT tokens, which provides a significant war chest to incentivize and bootstrap ecosystem growth.

Source: Mantle (as of July 2, 2024)

Two proposals, MIP-24, and MIP-25, have since been passed to establish two key authorities that will carry out ecosystem funding and bootstrapping activities.

Mantle EcoFund

Mantle EcoFund is a strategic initiative designed to inject $200 million into Mantle Ecosystem over the next three years. Comprising $100 million from Mantle’s own Treasury and an additional $100 million matched by Strategic Venture Partners, the EcoFund serves multiple key objectives. These include supporting entrepreneurs and technologies within Mantle Ecosystem, accelerating adoption among developers and dApps, and incentivizing strategic partnerships. The fund will act as a seed investor in high-potential, early-stage projects and has the flexibility to provide additional liquidity or follow-on investments to successful ventures.

Mantle Economics Committee

The Mantle Economics Committee (EC) is a specialized sub-governance body operating under Mantle Governance. It will focus primarily on making informed, risk-averse decisions about the allocation of Mantle Treasury assets, without directly holding custody of these assets.

The Committee is authorized to manage mETH Protocol and ETH staking strategies, with allowances up to 250K ETH, and has the flexibility to enter and exit these strategies based on commercial negotiations and risk evaluations. The Committee adopts a highly conservative risk management approach and operates within governance rules that prioritize caution in strategy entries while allowing quicker exits. Its diverse membership will include representatives from Mantle Governance, the Mantle community, and Mantle Core Contributor teams.

As of the time of writing, the EC has since tabled their 3rd proposal (MIP-28) for the DAO to allocate up to:

A combined allowance of $300 million USDx, 250,000 ETH, 2,000 BTC, and 400 million MNT in liquidity support for applications.
A combined allowance of $250 million in USDx seed liquidity for RWA-backed stablecoins.
A combined allowance of $100 million equivalent for market-neutral liquid fund subscriptions.

Jonlkh_mantle · August 29, 2024, 9:02am

Updated to include Chainlink and API3 oracles on Mainnet

sharp · August 29, 2024, 11:21am

mETH as a collateral on ETH market would help in borrowing, if the community supports mETH listing, the growth program can proceed with the collateral development.

DoDAO · September 3, 2024, 1:32pm

“Level 0”(raw/basic) Asset Analysis report for mETH, which can help the community gain some insight into the asset.

https://dune.com/dodao/asset-analysis?token_address=0xd5F7838F5C461fefF7FE49ea5ebaF7728bB0ADfa&reference_token1=0x7f39C581F595B53c5cb19bD0b3f8dA6c935E2Ca0&reference_token2=0xae78736Cd615f374D3085123A210448E74Fc6393

Gauntlet · September 3, 2024, 11:15pm

[Gauntlet] mETH Asset Listing on Compound V3 Ethereum USDT & WETH markets

If the community decides to list mETH on Compound V3 WETH/USDT markets on Ethereum, Gauntlet recommends the risk parameters below.

Ethereum WETH Comet

Asset	Collateral Factor	Liquidation Factor	Liquidation Penalty	Supply Cap
mETH	88%	90%	5%	5000

Ethereum USDT Comet

Asset	Collateral Factor	Liquidation Factor	Liquidation Penalty	Supply Cap
mETH	80%	85%	5%	4000

Analysis

Mantle Liquid Staking Protocol (LSP) allows users to stake Ethereum (ETH) while maintaining liquidity through the issuance of mETH, an ERC-20 token that represents the staked ETH and accrued rewards. The redemption process for mETH in the Mantle Liquid Staking Protocol generally takes up to 8 days. This delay is due to the protocol’s reliance on the Ethereum Proof of Stake (PoS) network and the mechanics of unstaking ETH, which requires some time to ensure security and proper execution. The exact timing can vary slightly depending on network conditions and the queue for unstaking source 1, source 2.

mETH carries risks such as depegging, where it may lose its 1:1 value with ETH, particularly in volatile markets. Smart contract vulnerabilities could lead to unintended behaviors or loss of funds. Additionally, mETH may face liquidity challenges, making large trades difficult without impacting the price.

The value of mETH relative to USDT can be highly volatile due to fluctuations in the broader cryptocurrency market. mETH, being tied to the price of ETH, is subject to ETH’s inherent volatility. Any sharp movements in ETH’s price can cause significant swings in the value of mETH when measured against USDT.

Liquidity Sources

The following table summarizes the liquidity sources for mETH across various decentralized exchanges (DEXs) on Ethereum:

pool_name	pool_type	pool_url	pool_tvl_usd	volume_24h_usd
mETH / WETH 0.05%	uniswap_v3	Link	$26.48M	$988.44K
mETH / WETH 0.01%	pancakeswap-v3-ethereum	Link	$2.78M	$677.59K

Total DEX TVL (Ethereum): $28M

Total DEX Volume 24H ($) (Ethereum): $1.67M

Volatility Analysis

mETH → WETH

Metric	Value
Min Price Change Log	-0.96%
Max Price Change Log	0.61%
Daily Log Volatility	2.83%
30D Log Volatility	2.76%

The volatility metrics for mETH indicate that it deviates from the price of WETH with a 30-day volatility of 2.76%, indicating minimal deviations from the mean price over the past month.

mETH → USDT

Metric	Value
Min Price Change Log	-10.63%
Max Price Change Log	17.19%
Daily Log Volatility	55.59%
30D Log Volatility	69.13%

Supply Cap and Liquidation Penalty (LP)

Based on the available liquidity, we recommend setting a supply cap that would cause 5% slippage, ensuring that the total slippage, should the entire supply get liquidated, remains less than the Liquidation Penalty. Given the above liquidity sources, Gauntlet recommends a supply cap of 4,000 for Ethereum USDT Comet and 5,000 for Ethereum WETH Comet, with the optionality to increase them if the market shows demand. This level is aligned with the liquidity available and aims to balance liquidators’ incentives with minimal slippage risk.

Liquidation Factor (LF) and Collateral Factor (CF)

Gauntlet recommends setting the Liquidation Factor at 90% and the Collateral Factor at 88% for Ethereum WETH Comet, and the Liquidation Factor at 85% and the Collateral Factor at 80% for Ethereum USDT Comet, to balance risk management with capital efficiency. The 2% buffer between the Liquidation Factor and Collateral Factor on the WETH Comet ensures a safety margin that guards against sudden market fluctuations, while still allowing users to leverage their assets effectively. For the USDT Comet, a slightly lower Collateral Factor of 80% is recommended due to USDT’s different liquidity dynamics and potential for higher volatility compared to ETH, which necessitates a more conservative approach to minimize the risk of liquidation during periods of market stress. This strategy is designed to optimize capital utilization while maintaining the protocol’s resilience against market movements.

Next Steps

We welcome community feedback on the proposed risk parameters for mETH Asset Listing on Compound V3 Ethereum USDT & WETH markets.

Note: The data provided in this document is accurate as of the publication date. Market conditions and liquidity levels may change, and it is advisable to regularly review these parameters to ensure they remain appropriate.

Gauntlet · November 10, 2024, 10:20pm