LST and LRT Exchange Rate Price vs. Market Price Feeds

After many in-depth discussions with other delegates and collecting community feedback, we have decided to move forward on implementing a hybrid exchange rate oracle for pricing Liquid Staking Tokens (LSTs) that optimizes security and scalability.

We’re thrilled that the Chainlink Labs team proposed an implementation for this oracle design, and we actively sought feedback from Gauntlet. The high-level overview of the proposed implementation is a Chainlink decentralized oracle network (DON) that would track the amount of underlying collateral backing an LST, which is the amount of ETH actively staked on the beacon chain. For increased security assurances for the Compound protocol, the results from the DON could be combined with comparison check conditions against the LST issuer’s on-chain calculated primary exchange rates and/or secondary market rates. Note that this design is subject to change based on feedback from Compound service providers.

Gauntlet has proposed deploying exchange rate pricing oracles across the various current LST/LRT markets while the hybrid exchange rate oracle is still under development. This approach aims to support the growth of Compound's TVL and revenue by enabling wstETH as collateral sooner and protecting other markets from the downsides of market price-dependent risks. Once the hybrid oracle development and audits are complete, the plan would be to transition to the new oracles.