Add osETH as a collateral on Ethereum Mainnet

General

Token Asset Name: Staked Ether from StakeWise, osETH

A description of the project and the token

StakeWise was the first non-custodial liquid staking solution to launch on Ethereum back in early 2021. In November 2023, the StakeWise V3 upgrade went live and transitioned the protocol into a fully white label liquid staking solution, enabling any entity to leverage the StakeWise smart contract infrastructure to offer trustless, non-custodial staking-as-a-service. Alongside the V3 upgrade, osETH was launched as the protocol’s primary liquid staking token, creating a single-layer of composability across the StakeWise staking ecosystem. osETH features overcollateralization to protect holders against slashing and accrues yield from a highly diverse, and fully permissionless, node operator set. The liquidity and integrations for osETH are provided by StakeWise DAO. Whether it is a commercial operator offering liquid staking directly to their institutional clients or a solo staker liquid staking on their own node, osETH provides access to the DeFi ecosystem for everyone.

Benefits to Compound Community

The most popular use-case of staked ETH assets in DeFi is borrowing ETH for leveraged staking. Several structured products are built specifically on top of this use-case and leveraged staking in general has acted as an important growth pathway for both money markets and staking protocols. StakeWise is working closely with the teams over at CIAN and Sommelier to ensure that products are built on top of the ability to utilize osETH on money markets, which will directly benefit Compound.

Compound will also further diversify its exposure to staked ETH assets and unlock important use-cases to solo stakers, with osETH the only LST that solo stakers can use to access the value of their staked capital.

osETH is a productive asset as it will appreciate in value over time based on the rewards from a highly diversified set of node operators. This re-pricing mechanism will not only make osETH easy to integrate into Compound, but it will help reduce the risks of default over time as osETH generates staking yield. osETH is overcollateralized to protect against possible slashing losses and reduces the risk of using osETH as collateral to borrow against, especially when borrowing ETH given the high price correlation.

Resources (Website, Social Media Links and docs)

The proposal author, their contact info and the relationship between the author of the new market proposal and the token*

Proposal written by Jordan Sutcliffe (@Jstar, Telegram and Twitter on behalf of StakeWise DAO.

Market Risk Assessment

Market Cap of the token

The current supply of osETH is ~33k ETH (~$130M). Note, the minting of osETH is optional - stakers only need to mint and pay for osETH if they want to access DeFi, thus the TVL of osETH is < TVL of StakeWise Vaults (which is currently ~100k ETH). There is no set emissions schedule for osETH.

Minimum and maximum market cap of the token within the last 6 months.

The market cap of osETH is fairly consistent vs the total ETH staked on StakeWise, however jumps in supply are experienced when new DeFi opportunities come online, such as when the first incentivized liquidity pools went live, or when the token was added to Eigenlayer for restaking.

The largest exchanges where the token is listed and its respective liquidity*

osETH has ~$90M of foundational liquidity in place across Balancer ($70M of osETH-ETH), Curve ($20M of osETH-rETH), and UniSwap ($500k of osETH-USDC).

Decentralization

How is this asset distributed amongst token holders? List the top 10 holders, the percentage of each holder, and tag any of them if they are known.*

The top 10 token holders are as follows:

HolderAddress osETH Balance Entity
0x57ba429517c3473b6d34ca9acd56c0e735b94c02 18,403.16 Whale
0xba12222222228d8ba445958a75a0704d566bf2c8 8,053.31 Balancer
0xe080027bd47353b5d1639772b4a75e9ed3658a0d 2,431.19 Whale
0xbbbbbbbbbb9cc5e90e3b3af64bdaf62c37eeffcb 598.251904 Morpho
0x71add67302162637bedcf47fd39b49fd5d321904 509.4525 Whale
0xd60f0a53c7e97f78fe4ac9013f5749920c601494 500.3975 Opium
0xc477024facfc3c0ae190d3d8ef90d36a53276eee 200.145988 Whale
0xb5e4295546d3eec23fbb4a1b15fb40fb72b1413c 148.144972 Whale
0x7f1400ec966be8d906afcbf04b0789c6f2b475e2 126.344455 Whale
0x341c05c0e9b33c0e38d64de76516b2ce970bb3be 113.665774 Index Coop (dsETH)

List all of the privileged roles in the token contract. This can include whitelisted EOAs, Multi-sigs or DAOs.*

The contracts related to osETH are immutable, are not pausable, and does not have a blacklist/whitelist.

Smart contract risks

Codebase & On-chain Activity:

Provide a Github repository for the underlying token contracts and provide Etherscan links with verified contracts*

Provide a test suite with code coverage:
StakeWise V3 is on testnet on Holesky.

Give the age of the token in days and the number of transactions in the contract to date
osETH contract is 130 days old and has ~6.5k total transactions to date.

Security Posture:

What audits, if any, were performed? Provide links to the reports if they exist.
Audits were performed by Sigma Prime and Halborn - these are public and available here. Several other audits have been performed privately by companies integrating the StakeWise V3 protocol. There was also a public audit competition ran through Hats Finance, found here.

Does the project have an active bug bounty program?
Yes, $200k bug bounty available through ImmuneFI.

Provide emergency contacts with their responsiveness levels and response availabilities
Dmitri Tsumak (Founder and CTO): Telegram - response 24/7
Kirill Kutakov (Co-Founder): Telegram - response 24/7

Multi-Chain Strategy

Will the token include implementations on other networks?
Yes, StakeWise is finalizing the development work and audits for bridging osETH to other networks using Wormhole and follow the security standards as outlined by Wormhole: Wormhole

Token contract Behavior:

Does the token have more than one address1?*
Not on Mainnet.

Does the token use a compiler version greater than 0.8.0 or the SafeMath?
Yes, compiler greater than 0.8.0

During the execution of the token’s functions, does the token execute external code chosen by the caller or receiver?2 If so, please explain the reasoning behind this decision*
No

How does the token contract deviate from a standard implementation of ERC20? Any additional features that the Compound DAO should know about? Is it burneable?
No deviation, additional features, and osETH is burneable

Does the token contract have a fallback function? If so, when does it revert?3
No

Does it have a fixed supply? If no, who can mint?*
No, anyone who stakes into a StakeWise Vault is allowed to mint osETH - the platform is fully permissionless.

Is it a rebasing token?*
No, osETH is a repricing token (c-style).

Does the token charge fees on transfers?*
No.

Does it implement any transfer hooks? Or hooks on any method?
No

Is the contract performing arbitrary delegatecalls? If the answer is yes, indicate who can make these calls and to what contracts.
No

Is it flash mintable? If yes, please provide more information on this feature*
No

Is it flash loanable? If yes, please indicate who offers the service.*
No

What are the typical gas costs for calling each of the standard ERC20 functions?
~45,000 for a simple transfer, for example.

Price Feed Behavior

  • osETH has a feed by Redstone with a 24hr heartbeat and 0.5% deviation threshold.
  • osETH also has a native feed using the GetRate() function on the osETH Rate provider contract: 0x8023518b2192FB5384DAdc596765B3dD1cdFe471.

Upgradability:

Is it upgradeable?*
Contracts related to osETH are not upgradeable.

Which components are upgradable?
The Vault deployer contracts and the individual Vault contracts on StakeWise V3 are upgradeable. For a Vault contract to be upgraded, first the StakeWise DAO must approve an upgrade followed by the approval of the Vault admin. This ensures that entities that offer staking as a service via the StakeWise protocol are in full control of the upgradeability of their Vault smart contract.

2 Likes

[Gauntlet] - osETH Asset Listing Recommendation on Ethereum Mainnet

Simple Summary

Gauntlet recommends listing this asset within the existing WETH Comet with the following parameters:

Parameter Value
Collateral Factor 80%
Liquidation Factor 85%
Liquidation Penalty 10%
Supply Cap 10,000

osETH TVL in pools has been trending upwards. The below table outlines major osETH/WETH pools and their TVLs.

Dex Category TVL (mil) URL
balancer_ethereum 72.91 Link
curve 20.30 Link
uniswap_v3 0.53 Link

Total TVL: 93.75mil

The Balancer osETH-WETH pool stands out as the primary liquidity source with $93.7M worth of WETH. It’s worth noting that there are additional liquidity pools involving LST/LRT pairs that contribute to the overall liquidity profile of osETH. These peripheral sources of liquidity are not accounted for in the list above. The withdrawal queue for osETH redemption on StakeWise typically depends on the current network conditions and the number of users exiting their staking positions. For Ethereum-based staking withdrawals, it can take from a few days to about a week for smaller exit volumes, and up to around seven days for larger volumes of withdrawals, as observed with other staking protocols (Main Hub | StakeWise V3) (ethereum.org).

Supply Cap and Liquidation Penalty

A 5% slippage would amount to ~$42M worth of osETH being sold. Given the above liquidity sources, we recommend setting the supply cap that would cause 5% slippage i.e half of the liquidation penalty although our methodology allows for higher supply caps. This means that the total slippage should the entire supply get liquidated needs to be < LP. Gauntlet recommends a supply cap of 10,000 osETH, this swap would cause a slippage of ~5% vs a liquidation penalty of 10%.

Liquidation Factor (LF) and Collateral Factor (CF)

Metric Value
Annualized Volatility 5%
Max Drawdown from Exchange Rate 1%

Given the above metrics along with the proposed Liquidation Penalty, Gauntlet recommends

Liquidation Factor = 1 - (LP+Volatility)

This would give an LF of 85%, and a CF of 80%

Use of Exchange Rate Oracles

If exchange rate oracles are implemented, Gauntlet can recommend more capital efficient parameters as the asset remains insulated from market movements, although exposes it to tail-end risks. The exchange rate based risk parameters could facilitate higher caps and Liquidation Factors along with more conservative Liquidation Penalties. Gauntlet supports exchange rate oracles for rsETH within this correlated Comet if the community decides to move forward with this strategy.

Yield Risk

The yield from staking ETH and earning osETH can be volatile and is influenced by various factors such as validator performance, network conditions, and staking competition. Yield rates can fluctuate, and there is no guarantee of consistent returns. Gauntlet would like flag this potential risk to the community.

Next Steps

We welcome community feedback.

1 Like

Mainnet osETH collateral

PR - On-chain add osETH collateral to WETH Mainnet market by dmitriy-woof-software · Pull Request #871 · compound-finance/comet · GitHub

Actions

  1. Run Slither. Fails. :x:. On-chain add osETH collateral to WETH Mainnet market · woof-software/comet@c65f1b3 · GitHub
  2. Forge test. Success.:white_check_mark: On-chain add osETH collateral to WETH Mainnet market · woof-software/comet@c65f1b3 · GitHub
  3. Gas Profiler. Success.:white_check_mark: On-chain add osETH collateral to WETH Mainnet market · woof-software/comet@c65f1b3 · GitHub
  4. Scan. Success.:white_check_mark: On-chain add osETH collateral to WETH Mainnet market · woof-software/comet@c65f1b3 · GitHub
  5. mainnet-weth Scenario. Success.:white_check_mark: On-chain add osETH collateral to WETH Mainnet market · woof-software/comet@c65f1b3 · GitHub
  6. Unit tests. Success.:white_check_mark: On-chain add osETH collateral to WETH Mainnet market · woof-software/comet@c65f1b3 · GitHub
  7. Eslint. Success.:white_check_mark: On-chain add osETH collateral to WETH Mainnet market · woof-software/comet@c65f1b3 · GitHub
  8. Contract linter. Success.:white_check_mark: On-chain add osETH collateral to WETH Mainnet market · woof-software/comet@c65f1b3 · GitHub
  9. Prepare. Success.:white_check_mark: Prepare Migration · woof-software/comet@c65f1b3 · GitHub
    Enact Migration with impersonate - Success :white_check_mark:. Enact Migration · woof-software/comet@c65f1b3 · GitHub

Description we use:

Add osETH as collateral into cWETHv3 on Mainnet\n\n

Proposal summary\n\n

Compound Growth Program [AlphaGrowth] proposes to add osETH into cWETHv3 on Ethereum network. This proposal takes the governance steps recommended and necessary to update a Compound III WETH market on Ethereum. Simulations have confirmed the market’s readiness, as much as possible, using the Comet scenario suite. The new parameters include setting the risk parameters based on the recommendations from Gauntlet osETH.\n\n

Further detailed information can be found on the corresponding proposal pull request and forum discussion osETH.\n\n\n

Proposal Actions\n\n

The first action adds osETH asset as collateral with corresponding configurations.\n\n

The second action sets new Annual Supply Interest Rate Slope High to 100%.\n\n

The third action sets new Annual Borrow Interest Rate Slope High to 115%.\n\n

The fourth action deploys and upgrades Comet to a new version.