DIP044 - New asset (rETH, cbETH) onboarding to dForce Lending

Summary

This proposal presents the community with the opportunity to add support to RETH and CBETH to dForce Lending.

Overview

Liquid staking derivatives represent a user's staked assets and can be used in DeFi activities, enabling them to earn additional yield on top of their staking rewards. Since the Ethereum Shapella upgrade, there has been a boost in interest in liquid staking, with Lido reaching a high of over $12 billion in TVL, followed by cbETH and rETH.

rETH

Rocket Pool is a next generation decentralised staking pool protocol for Ethereum, offering dForce users an alternative to Lido’s wstETH.

Rocket Pool ETH (rETH) is the Rocket Pool protocol’s liquid staking token. The rETH token represents an amount of ETH that is being staked and earning rewards within Ethereum Proof-of-Stake. As Rocket Pool node operators, stake Ethereum on Proof-of-Stake the resulting rewards increase the value of rETH relative to ETH. Rocket Pool’s liquid staking token allows holders to benefit from the returns of the Ethereum Proof-of-Stake.

rETH is now the 3rd largest ETH liquid staking derivatives by market cap (Source: Dune Analytics), with more than $924m (or 450K ETH) locked by Rocket Pool, and 24H trading volume of $2.6m at the time of writing.

cbETH

Coinbase Wrapped Staked ETH (“cbETH”) is a utility token that represents Ethereum 2 (ETH2), which is ETH staked through Coinbase.

With cbETH, Coinbase aims to contribute to the broader crypto ecosystem by supporting high-utility wrapped tokens and open sourcing smart contracts. Coinbase customers can wrap their locked staked ETH to receive cbETH, which can be in DeFi and other dapps.

cbETH follows the cToken model, which allows it to be ERC-20 compliant and easier to integrate with DeFi more broadly. cbETH can be unwrapped for staked ETH plus accrued rewards net of Coinbase staking fees and any network-imposed penalties. Rewards and penalties affecting Coinbase staked ETH change the conversion rate between cbETH and underlying staked ETH.

cbETH is now the 2nd largest ETH liquid staking derivatives by date (Source: Dune Analytics), with $2.1b market capitalization and 24H trading volume of $11m at the time of writing.

Most cbETH’s trading volume comes from Coinbase and Uniswap, according to Coingecko.

Motivation

There is a meaningful amount of demand for borrowing against LSDs (liquid staking derivative).

Following Lido’s wstETH, rETH and cbETH are prime candidates to add diversity to dForce and offer a source of additional revenue through rewards-maximizing strategies.

For example, users are able to supply rETH or cbETH as collateral to borrow ETH for leveraged staking yields, or borrow rETH or cbETH and participate in yield strategies beyond lending protocols.

Risk Parameters

rETH

• Network: Ethereum
• Collateral enabled: Yes
• Supply cap: 1,500
• Borrow cap: 1,000
• LTV: 70%
• Borrow factor: 100%
• Reserve factor: 15%
• Close factor: 50%
• Liquidation incentive: 7%

cbETH

• Network: Ethereum
• Collateral enabled: Yes
• Supply cap: 1,500
• Borrow cap: 1,000
• LTV: 70%
• Borrow factor: 100%
• Reserve factor: 15%
• Close factor: 50%
• Liquidation incentive: 7%

Forum Discussions

• rETH
• cbETH