[ARFC] Add rsETH to Aave V3 Ethereum

[ARFC] Add rsETH to Aave V3 Ethereum

Author: ACI (Aave Chan Initiative)

Date: 2024-08-12

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ARFC has been updated with Risk Parameters provided by both Risk Service Providers after having reservations with exchange rate oracles. 2024-08-12

Summary

Kelp DAO is seeking community support for adding its Liquid Restaking Token, rsETH, to Aave V3 on Ethereum. In addition, rsETH depositors into Aave will accumulate additional Kelp miles and EigenLayer points.

Motivation

KelpDAO (https://www.kelpdao.xyz/restake/) is one of the largest liquid restaking protocol built on top of the Eigen Layer. Restakers on Kelp get access to multiple benefits like restaking rewards, staking rewards and DeFi yields.

Latest stats:

• USD 800 Mn+ (~270k Eth) TVL
• 20K+ restakers onboarded
• Accepts ETHx, stETH, sfrxETH, and Native ETH as collateral
• Live across mainnet and L2s such as Arbitrum and Polygon zkEVM

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

The motivation for this proposal is to introduce a new asset class LRT (Liquid restaking tokens) to Aave and add to the diversity of LST/ LRT category.

Restaking Innovation

KelpDAO’s innovation in the restaking ecosystem has been focused on bringing about the following benefits to users and services-

• Restakers
  • Liqudity for restaked assets (stETH, ETHx, sfrxETH and Native ETH)
  • Access to additional staking rewards
  • Participate in DeFi using rsETH
• AVSs
  • Bootstrap economic security
  • Lowered incentive spends
• Operators
  • Higher revenue earning potential
  • Service onboarding and community support
  • Marketing for node delegation

Specification

> Risk Parameters have been provided by Risk Service Providers on 2024-08-09 and ARFC has been updated. It is recommended listing rsETH using an exchange rate oracle.

Parameter	Value
Isolation Mode	No
Borrowable	Yes
Collateral Enabled	Yes
Supply Cap	19,000
Borrow Cap	1,900
Debt Ceiling	-
LTV	72%
LT	75%
Liquidation Penalty	7.5%
Liquidation Protocol Fee	10.00%
Variable Base	0.0%
Variable Slope1	7.00%
Variable Slope2	300.00%
Uoptimal	45.00%
Reserve Factor	15.00%
Stable Borrowing	Disabled
Flashloanable	Yes
Siloed Borrowing	No
Borrowable in Isolation	No
E-Mode Category	ETH-Correlated

CAPO

maxYearlyRatioGrowthPercent	ratioReferenceTime	MINIMUM_SNAPSHOT_DELAY
9.83%	monthly	14 days

Detailed explanation on Kelp’s technical architecture - Technical Architecture - Kelp

KelpDAO will have its own token $Kelp that will be the main governance token of Kelp protocol. Kelp token holders will be able to participate in governance related matters including Whitelisting/ delisting of Assets, Node operators, AVS’, setting and updating fees for Kelp protocol.

Kelp’s on-chain stats can be viewed on Dune.

Liquidity Pools for rsETH

Following are liquidity stats for rsETH:

• rsETH has >55 Mn USD liquidity across several DEXs on the mainnet including
  • Balancer - $38 Mn
  • Uniswap V3 - $12.42 Mn
  • Balancer - $5 Mn
  • Few others
• ~$10 Mn+ average daily trading volume (Last 7 days on 12th May)

Oracles:

rsETH is supported by Chainlink and Redstone oracles. Posted links below to the Oracle contracts:

Chainlink calculated price feed: https://etherscan.io/address/0x78C12ccE8346B936117655Dd3D70a2501Fd3d6e6

Chainlink market feed: https://data.chain.link/feeds/ethereum/mainnet/rseth-eth

Redstone market feed:

https://app.redstone.finance/tokens#/app/token/rsETH\\ETH

rsETH exchange rate mechanism:

rsETH exchange rate is defined based on the underlying assets and rewards generated by those assets.

Accepted assets include ETH, stETH, ETHx, sfrxETH.

Exchange rate calculation -

A → Total ETH + Staking rewards accumulated from the chain

B → [Amount of ETHx] * [Value of 1 ETHx in ETH]

C → [Amount of sfrxETH] * [Value of 1 sfrxETH in ETH]

D → [Amount of stETH] * [Value of 1 stETH in ETH]

E → Total supply of rsETH

Exchange rate (rsETH / ETH) = [A + B + C + D] / E

Withdrawals and risks

Prior to this ARFC, the only way to exit rsETH was via DEXs.

Nevertheless, KelpDAO users can now unstake rsETH, with an unbonding period of 7 to 8 days, due to Eigenlayer withdrawal period. That also means that any of the LST’s including stETH, ETHx or sfrxETH from Eigenlayer can be unstaked as well.

Proof of Liquidity and Deposit Commitments:

Anyone who deposits rsETH into Aave will accumulate additional Kelp miles and EigenLayer points.

Useful Links:

• KelpDAO’s Dapp
• Contract Address: 0xA1290d69c65A6Fe4DF752f95823fae25cB99e5A7
• GitHub Docs

Disclaimer:

This proposal is powered by Skywards. The Aave Chan Initiative is not directly affiliated with Kelp DAO and did not receive compensation for creation this proposal.

Next Steps

1. Publication of a standard ARFC, collect community & service providers feedback before escalating proposal to ARFC snapshot stage
2. If the ARFC snapshot outcome is YAE, publish an AIP vote for final confirmation and enforcement of the proposal

Copyright:

Copyright and related rights waived under CC0