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[BIP-45] Approve wstETH collateral for Synthetics

Voting ended almost 2 years agoSucceeded

Summary

Approve wstETH as collateral for baoUSD and baoETH Vaults and Minter with a 90% maximum collateral factor.

disable basket (bSTBL, bETH) collateral deposits

Background

The Annual Agenda (https://discord.com/channels/784449645157285898/1187774342260592701) mandated risk evaluations for new collaterals for our synthetics before approval as we sunset baskets.

The wstETH risk evaluation can be found here: https://info.bao.finance/bao-technical-docs/

wstETH makes good collateral for Bao synths, scoring well in most areas of the risk evaluation. Mitigations and improvements are also actively being worked on where possible.

Proposed Solution

  • Add wstETH as collateral to baoUSD Vault
  • Add wstETH as collateral to baoETH Vault
  • Set max collateral factor for both to 0.9
  • disable bSTBL deposits for baoUSD and baoETH
  • disable bETH deposits for baoUSD and baoETH
  • Approve wstETH as collateral for the minter when it goes live

Risks

  • A high portion of wstETH is used as collateral. Market volatility can lead to liquidation cascades that imbalance liquidity pools and create bad debt. Lido have a dedicated team to monitor this risk. To mitigate this risk further, liquidity and at risk positions will be monitored regularly by Bao.
  • wstETH has a reliance on Geth which in theory could cause bad blocks to be verified locking wstETH holders into an invalid chain and burning the ETH backing stETH through slashings. This risk is expected to reduce over time as Lido are actively moving to diversify execution layer clients

Off-Chain Vote

Approve
4.24M veBAO100%
Deny
0 veBAO0%
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Discussion

baovotes.eth[BIP-45] Approve wstETH collateral for Synthetics

Timeline

Mar 21, 2024Proposal created
Mar 21, 2024Proposal vote started
Mar 24, 2024Proposal vote ended
Mar 24, 2024Proposal updated