[Gauntlet] pufETH Asset Listing on Compound V3 Ethereum WETH markets
Summary
Gauntlet’s recommendations are contingent upon the implementation of pufETH withdrawal functionality, as the ability for ETH stakers to redeem their staked assets is a critical requirement for maintaining adequate liquidity and mitigating systemic risk.
If the community decides to list pufETH on Compound V3 Ethereum, Gauntlet recommends the following risk parameters for listing pufETH on the Compound V3 Ethereum WETH market:
Ethereum WETH Comet
| Asset | Collateral Factor | Liquidation Factor | Liquidation Penalty | Supply Cap |
|---|---|---|---|---|
| pufETH | 88% | 91% | 5% | 4500 |
Analysis
pufETH is a liquid restaking token within the Puffer Finance ecosystem. It represents staked ETH (Ethereum) in Puffer’s liquid staking protocol, where users can earn staking rewards while still retaining liquidity through the pufETH token. This restaking model enables users to maximize their yield by participating in both staking and additional DeFi opportunities without locking up their ETH.
In Ethereum staking, unstaking requires validators to exit the active validator set. For ETH staking, this process can take time due to Ethereum’s queue system. Users can expect an unbonding period (usually 7 to 14 days based on common liquid staking practices), during which ETH is still earning rewards but cannot be immediately withdrawn.
If a user prefers to avoid the unbonding period, pufETH can potentially be sold on secondary markets. However, the liquidity available on these markets is key to minimizing slippage and ensuring a fair price.
At present, withdrawals are not yet available for pufETH. The Puffer team has been working to develop a withdrawal system for ETH stakers, which is expected to be available in early Q4. Gauntlet advises the community to consider listing pufETH once the withdrawal feature is enabled.
Onchain Market Cap
- pufETH has ~$1.2B onchain market cap on ETH.
Liquidity Sources
Ethereum
| pool_name | pool_type | pool_url | pool_tvl_usd | volume_24h_usd |
|---|---|---|---|---|
| pufETH / wstETH | curve | Link | $92.82M | $657.76K |
| pufETH / wstETH | curve | Link | $6.70M | $15.62K |
| pufETH/wstETH / wstETH / pufETH 0.02% | balancer_ethereum | Link | $3.67M | $0.00 |
| pufETH / WETH | curve | Link | $1.33M | $20.15K |
| pufETH / WETH 0.3% | uniswap_v3 | Link | $1.27M | $5.65K |
Total DEX TVL : $105.78M
Total DEX Volume 24H ($) : $699.19K
Volatility Analysis
pufETH → WETH
| Metric | Value |
|---|---|
| Min Price Change Log | -1.77% |
| Max Price Change Log | 2.26% |
| Annualized Daily Log Volatility | 8.38% |
| 30D Log Volatility | 4.90% |
The volatility metrics for pufETH indicate that it deviates from the price of WETH with a 30-day volatility of ~5%, indicating minimal deviations from the mean price over the past month.
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.
Based on the available liquidity sources, Gauntlet suggests setting a supply cap of 4,500 (~$10M) for Ethereum WETH Comet, with the option to raise it if market demand increases.
Liquidation Factor, Collateral Factor and Liquidation Penalty
Gauntlet recommends setting the Liquidation Factor at 91% and the Collateral Factor at 88% for Ethereum WETH Comet to balance risk management with capital efficiency. The 3% 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.
Next Steps
We welcome community feedback on the proposed risk parameters for pufETH Asset Listing on Compound V3 Ethereum WETH market.
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.