Add wrsETH market to Moonwell on Base & Optimism

Proposals Community Proposal
1

Kelp DAO is seeking community support for adding its Liquid Restaking Token, wrsETH, to Moonwell Markets on Base.

General

  • Token Asset Name -

    • wrsETH

  • A description of the project and the token* -

  • Latest stats:

    • USD 830 Mn+ (~266k Eth) TVL

    • 50K restakers onboarded

    • Live across mainnet and 9 L2s such as Arbitrum, Optimism, Base, Scroll, Linea etc.

    • Withdrawals are enabled on Kelp and rsETH holders can unstake rsETH for any of the LSTs and ETH on KelpDAO

    • Bridging of rsETH across L2s is facilitated by infrastructure by LayerZero

    • KelpDAO has undergone multiple security audits by top-tier audit firms including Sigma Prime, Code4rena, and MixBytes. More about KelpDAO’s security here: Kelp DAO Audit reports

  • Benefits to Moonwell Community*

    • From Moonwell’s perspective, any new asset is a source of additional revenue and expands the ecosystem as a whole. LRTs are a great use case for Moonwell as it is one of the fastest growing ecosystems.

    • With wrsETH being one of the top LRTs, integrating it as a collateral asset will create new demand on Moonwell. This will be beneficial for both Moonwell and Kelp. In addition, wrsETH depositors will accumulate additional Kelp miles and EigenLayer points.

  • Use cases for wrsETHmarket on Moonwell

    • Having wrsETHon Moonwell will allow users to earn Kelp Miles and Eigenlayer points while supplying and borrowing against wrsETH.

  • Resources (Website, Social Media Links, and docs)

  • The proposal author’s contact information

Market Risk Assessment

  • Market cap of the token*
  • Total supply*
  • The largest central and decentralized exchanges where the token is listed and its respective liquidity*
  • Emission schedule - NA

Decentralization

Codebase & On-chain Activity

Security

Oracle Assessment

  • We are working with API3 on providing Oracle access for wrsETH on Base - API3 Market
  • Yes the asset is a wrapped version of rsETH

Market Parameters

  • Looking forward to hearing feedback from Moonwell Community and risk managers regarding parameters-
    • Collateral Factor
    • Liquidation Factor
    • Liquidation penalty
1 Like
2

Thank you for completing the information. Please report back when there is a Chainlink price feed for wrsETH available.

3

Revamped the above proposal to include Chainlink details, Optimism details and feedback from Moonwell’s team.

Updated proposal -

Kelp DAO is seeking community support for adding its Liquid Restaking Token, wrsETH, to Moonwell Markets on Base and Optimism.

General

  • Token Asset Name* -

    • wrsETH

  • A description of the project and the token* -

  • Latest stats:

    • USD 830 Mn+ (~266k Eth) TVL

    • 50K restakers onboarded

    • Live across Ethereum mainnet and 9 L2s such as Arbitrum, Optimism, Base, Scroll, Linea etc.

    • Withdrawals are enabled on Kelp and rsETH holders can unstake rsETH for any of the LSTs and ETH on KelpDAO

    • Bridging of rsETH across L2s is facilitated by infrastructure by LayerZero

    • KelpDAO has undergone multiple security audits by top-tier audit firms including Sigma Prime, Code4rena, and MixBytes. More about KelpDAO’s security here: Kelp DAO Audit reports

  • Benefits to Moonwell Community*

    • From Moonwell’s perspective, any new asset is a source of additional revenue and expands the ecosystem as a whole. LRTs are a great use case for Moonwell as it is one of the fastest growing ecosystems.

    • With wrsETH being one of the top LRTs, integrating it as a collateral asset will create new demand on Moonwell. This will be beneficial for both Moonwell and Kelp. In addition, wrsETH depositors will accumulate additional Kelp miles and EigenLayer points.

  • Use cases for wrsETH market on Moonwell

    • Having wrsETH on Moonwell will allow users to earn Kelp Miles and Eigenlayer points while supplying and borrowing against wrsETH.

  • Resources (Website, Social Media Links, and docs)

  • The proposal author’s contact information

Market Risk Assessment

Decentralization

Codebase & On-chain Activity

Security

Oracle Assessment

  • We are working with ChainLink for an Oracle on Base -
    • RSETH / ETH - 0xd7221b10FBBC1e1ba95Fd0B4D031C15f7F365296
    • rsETH / ETH Exchange Rate - 0x99DAf760d2CFB770cc17e883dF45454FE421616b
  • On Optimism with ChainLink as well-
    • RSETH/ETH - 0x03fe94a215E3842deD931769F913d93FF33d0051
  • Yes the asset is a wrapped version of rsETH

Average Daily Trading Volume:

  1. wrsETH on Base - Avg Daily trading volume per day - $8.8K/day (Per day average based on last 7 days - DeXScreener)
  2. wrsETH on Optimism - Avg Daily trading volume per day - $20K/day (Per day average based on last 7 days - DeXScreener)

Top 10 Token Holders: The post does not provide a list of the top 10 token holders, the percentage held by each, and tags if known.

  1. List of top 10 wrsETH holders on Base
  2. List of top 10 wrsETH holders on Optimism

Privileged Roles:

None of the privileged roles have custody of user funds at any point.

The timelock proposer is a community multisig responsible for upgrading contracts after a 10-day timelock delay. This proposer has doxxed signers from the broader community, not just Kelp.

Manager is responsible for changing configurations of contracts. This includes the frequency with which staking happens etc.

Operators are responsible for operations at a smart contract level. This include making calls to auto-compound rewards, stake ETH, process withdrawals etc-

Pausability

All Kelp contracts are pausable by the manager multisig. This is done so the team can respond to emergencies if any. However, it is only the Timelock Proposer that can unpause the contracts. This means that the team can only pause the contracts to prevent any damage etc. The resumption can only happen after the community leaders come together and agree it’s safe to resume the protocol. There is no blacklisting mechanism of any sort at Kelp.

Upgradability

As mentioned above, only the timelock contract has the power to upgrade the contracts. The timelock delay is 10 days and the proposer is the community multisig.

Chainlink Oracle Price Feed

Base -

RSETH / ETH - 0xd7221b10FBBC1e1ba95Fd0B4D031C15f7F365296

rsETH / ETH Exchange Rate - 0x99DAf760d2CFB770cc17e883dF45454FE421616b

Optimism -

RSETH / ETH - 0x03fe94a215E3842deD931769F913d93FF33d0051

Depeg Events

There is no specific exclusive event for depegging. The Llama Risk Report covers some risks that apply to most staking pools. You can find the report here

Collateral Risk Assessment - Kelp DAO Restaked ETH (rsETH) - Llama Risk

4

Wow, another liquid staked eth product. Weren’t we warn about the risk of having too many of these?

5

Based on the recent Snapshot, Kelp’s wrsETH saw immense support from the Moonwell community; with community members and super delegates also voting for the proposal. The snapshot saw overwhelming support from 18 community members with a total of ~15Mn $WELL voting for the snapshot. The snapshot initially saw just 2 voters (with 5Mn $WELL) against the proposal, until the final against vote (of 40m $WELL) was posted by a user.

Unfortunately, the vote was unsuccessful due to a large vote by the user holding wallet address - 0x92f18b5c34a2CC9d01A69C63bC421f6e2BcB1334.

Addition of wrsETH to the Moonwell markets bring a lot of benefits, namely -

  1. Increased TVL inflow with asset listing, growing the overall Base lending market
  2. Making Moonwell the hub for leading LRTs on Base & Optimism by supporting their Lending & Borrowing
  3. Higher Kelp Miles & EigenLayer points for Moonwell Community users to tap into

Following an analysis of wallet 0x92f18b5c34a2CC9d01A69C63bC421f6e2BcB1334, it appears that the holder cast their vote shortly before the snapshot closed. Notably, this individual is one of the largest holders of $WELL. We invite constructive dialog from the Moonwell community and voters that can help both the protocols grow vis-a-vis down voting for unknown reasons. We would also like to invite the 40m $WELL voter to share his thought process for voting nay with the community.

Kelp’s representatives also actively participated during the recent Moonwell Governance Call (6th Sept) to provide the community further insights into the utility and rewards that the addition of wrsETH brings to the Moonwell markets.

For next steps - We’ll be posting another snapshot proposal next week after garnering more community support and feedback over the next few days.

6

Gauntlet’s wrsETH Recommendation

Gauntlet has conducted a market risk analysis for rsETH initial asset listing

Summary

We recommend onboarding wrsETH as collateral on Moonwell Base deployment with the following risk recommendations.

Risk Parameter Recommendations

Parameters Values
CF 74%
Supply Cap 1075
Borrow Cap 430
Protocol Seize Share 3%

IR Recommendations

IR Parameters Recommended
Base 0
Kink 0.35
Multiplier 0.15
Jump Multiplier 4.5
Reserve Factor 0.15

Supporting Data

Market Overview

Metric Value
Circulating Supply (rsETH) 238k
TVL $590M

The TVL within KelpDAO has been growing up and to the right with over 400k ETH and its derivatives deposits into the protocol.

image
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Supply and Borrow Caps

Screenshot 2024-10-04 at 4.20.40 PM
Screenshot 2024-10-04 at 4.20.40 PM1008Ă—486 46.7 KB

Gauntlet assumes the use of Market Rate Oracles, and therefore recommend setting the supply cap at notional value that would cause a 25% slippage against WETH. We recommend setting the supply cap at 1075 wrsETH. Based on the recommended kink, we suggest setting the borrow caps at 430.

Collateral Factor

rsETH/WETH returns and volatilty

Screenshot 2024-10-04 at 4.46.46 PM
Screenshot 2024-10-04 at 4.46.46 PM1130Ă—685 31.2 KB

The daily log vol for rsETH/WETH is 13.4%, discounting the volatility during march, the Annualized 30D Log volatility shows high parity with the underlying. The below Exchange rate to market rate graph also shows that rsETH’s market rate has closely maintained peg to it’s Exchange Rate. However, the daily annualized vol for rsETH Exchange Rate/rsETH market rate is about 12.21%.

To calculate the Collateral Factor we would like to employ the following formula

$\text{Collateral Factor} = 1 - (\text{Liquidation Incentive} + \text{Annualized Vol rsETH}{\text{Exchange Rate}}/\text{rsETH}{\text{Market Rate}})$

This would result in a CF of ~78%, which is closer to the CFs we have recommended for LSTs. However, we recommend aligning the CF to that of weETH.

rsETH Exchange rate vs Market rate

Screenshot 2024-10-04 at 5.39.38 PM
Screenshot 2024-10-04 at 5.39.38 PM953Ă—762 42.9 KB

IR Parameter Specifications

We recommend setting the IR curves to align with that of weETH.

rsETH IR Curves

Screenshot 2024-08-02 at 2.52.42 PM

Utilization Borrow APR Supply APR
0% 0 0
35% 5.25% 1.56%
100% 278.25% 236.51%
1 Like
7

Gauntlet’s wrsETH Recommendation - Optimism

Gauntlet has conducted a market risk analysis for rsETH on Optimism for the initial asset listing

Summary

We recommend onboarding wrsETH as collateral on Moonwell OP deployment with the following risk recommendations.

Risk Parameter Recommendations

Parameters Values
CF 74%
Supply Cap 400
Borrow Cap 160
Protocol Seize Share 3%

IR Recommendations

IR Parameters Recommended
Base 0
Kink 0.35
Multiplier 0.15
Jump Multiplier 4.5
Reserve Factor 0.15

Supporting Data

Supply and Borrow Caps

DEX Liquidity as of 10/9/24

Dex Category TVL(mil) URL
beethoven_x_optimism (Balancer) 2.21 Link
beethoven_x_optimism (Balancer) 1.14 Link
velodrome-finance-v2 0.56 Link

Total TVL: $3.91M

Gauntlet assumes the use of Market Rate Oracles, and therefore recommend setting the supply cap at 400 wrsETH and borrow cap at 160 wrsETH.

Collateral Factor, IR Parameters

We recommend aligning the CF and IR Parameters for the rsETH Optimism instance to that of the Base instance.