[RFC] Collateral Basket Change Proposal: Adding Wrapped Super OETH (wsuperOETHb) to the Based ETH Collateral Basket
Summary
This proposal recommends integrating Wrapped Super OETH (wsuperOETHb) into the bsdETH collateral basket to increase yield generation and enhance the diversification of the index LST.
Abstract
Super OETH (superOETHb) is the next iteration of OETH, a superior LST with an extremely tight peg and high yields thanks to a combination of the OETH AMO and DVT direct staking through SSV/P2p. superOETHb yields are able to reach double digit levels, making it an exceptionally perfect token for lending and borrowing against ETH, and for integrating into LST indexes. superOETHb was built reusing 90% of the code from OETH, for which the codebase has already been audited 12+ times, and for which there is also a Reserve RFC currently on the forum.
Super OETH is the first token in a new category of liquid staking: Supercharged LSTs. Supercharged LSTs will have materially higher yield while being designed for L2s, with a similar risk profile to mainnet LSTs. Ethereum liquid staking is amplified with chain-specific, auto-compounded incentives. Deep concentrated liquidity pools guarantee exits with minimal costs - users will never lose ability to convert back to ETH.
wsuperOETHb is a ERC-4626 tokenized vault designed to accrue yield in price rather than in quantity. When you wrap superOETHb, you get back a fixed number of wsuperOETHb tokens. This number will not go up - you will have the same number of wsuperOETHb tokens tomorrow as you have today. However, the number of superOETHb tokens that you can unwrap to will go up over time, as wsuperOETHb earns yield at the same rate as standard superOETHb. The wsuperOETHb to superOETHb exchange rate can be read from the contract (0x7FcD174E80f264448ebeE8c88a7C4476AAF58Ea6, function number 16), or via the OETH dapp.
Current exchange rate as of 9/20/24: 1 wsuperOETHb = 1.00945809 superOETHb
Problem Statement
The bsdETH collateral basket is currently made up of only two types of diversified staking collateral, limiting the risk spread and potential yield enhancement. There is a simple and straightforward opportunity to both further diversify bsdETH, while also increasing its blended yield output.
Rationale
We’ve noticed many LSTs trade below their peg due to DEX fees and slippage, and to reflect the time value of money. LSTs that consistently trade below peg effectively impose a hidden exit fee - certain LSTs often trade ~0.25% below peg, meaning it takes three weeks of staking to break even. This may be ok for long-term holders, but is terrible for users who plan to loop LTSs for additional yield, or for those looking for short term yield. This was not the case with OETH, and it will not be the case with Super OETH.
Using Super OETH on Reserve will produce higher yield than the other top LSTs and have a near perfect ETH peg. Utilizing a concentrated Aerodrome liquidity pool with the tightest tick possible helps make Super OETH the most pegged L2 LST currently available, while being able to reach double digit yields.
The current APY for wsuperOETHb stands at 18.10%, which is significantly higher than bsdETH’s existing components. It seems to be a logical next step to integrate a product such as this into the bdsETH collateral basket.
Enhanced Diversification: Adding wsuperOETHb diversifies the sources of yield within the basket and mitigates risks associated with the concentration of fewer staking platforms.
Yield Improvement: wsuperOETHb is designed to be high yielding, while remaining tightly pegged to ETH. Due to the higher yield than cbETH and stETH, any allocation of wsuperOETHb into bsdETH would improve the yield of the index substantially.
New bsdETH Collateral Basket
| Token | Allocation | APY = 8.08% |
|---|---|---|
| cbETH | 33% | 2.92% |
| Wrapped stETH | 33% | 2.93% |
| wsuperOETHb | 34% | 18.10% |
Source: Reserve./org and Originprotocol./com
Risks
Adding another asset as collateral adds additional counterparty risk and smart contract risk. However, superOETHb and wsuperOETHb were built reusing 90% of the OETH code, which was built reusing 95% of the OUSD code, of which many audits have been done since 2020. Not that long ago, OUSD reached a market cap of $300m without breaking, and without diminishing the APY it was capable of generating. All OETH audits can be found in the audits section of the OETH docs. We have recently retained yAudit to look at our PRs as we code, and OpenZeppelin is also held on retainer to review 100% of the OETH and OUSD smart contract changes. Origin maintains an active bug bounty with rewards ranging in size from $100 OUSD for minor issues to $1,000,000 OUSD for major critical vulnerabilities. The bug bounty program is currently administered by Immunefi, where Origin maintains a median resolution time of 6 hours.
Conclusion
We would be happy to adjust the above parameters based on feedback from the community and core Reserve team and would be happy to answer any questions on Origin Protocol, Super OETH, or the proposal itself. Adding wsuperOETHb as a market for bsdETH collateral will be mutually beneficial for both Reserve and Origin Protocol, as it will increase the utility for superOETHb, while also increasing the Reserve TVL and rollout of bsdETH. The Origin team can be reached at any time via the Origin Discord server.
- I am in favor of adding wsuperOETHb to bsdETH collateral
- I am not in favor of adding wsuperOETHb to bsdETH collateral
