LIP-003: Vote on whether to list wstETH as a classic collateral

Summary:

This proposal’s purpose is to get Lido’s wstETH which has recently been canonically available on BNBChain, listed on ListaDAO as a classic collateral asset for the minting of lisUSD.

References

(1) Website: https://lido.fi (2) Whitepaper: https://lido.fi/static/Lido:Ethereum-Liquid-Staking.pdf (3) Docs: https://docs.lido.fi/ (4) Twitter: https://twitter.com/LidoFinance (5) Github: https://github.com/lidofinance (6) wstETH Token Contract: https://bscscan.com/token/0x26c5e01524d2E6280A48F2c50fF6De7e52E9611C?a=0x5A9d695c518e95CD6Ea101f2f25fC2AE18486A61)

Audits

(1) wstETH L2Token Cyfrin Audit Report https://github.com/wormhole-foundation/example-wormhole-axelar-wsteth/blob/main/audits/2024-06-10-cyfrin-audit-2024-06-wormhole-axelar-wsteth-l2token.pdf (2) Wormhole Transceiver Cyfrin Audit Report https://github.com/wormhole-foundation/wormhole-audits/blob/main/2024-04-11-cyfrin-wormhole-evm-ntt.pdf (3) Wormhole Transceiver Cantina Audit Report https://github.com/wormhole-foundation/wormhole-audits/blob/main/2024-04-cantina-wormhole-evm-ntt.pdf (4) Wormhole Cyfrin Audit Report https://github.com/wormhole-foundation/wormhole-audits/blob/main/2024-07-23-cyfrin-wormhole-evm-ntt-diff-v1.1.0.pdf (5) Axelar Transceiver Cyfrin Audit Report: https://github.com/wormhole-foundation/example-wormhole-axelar-wsteth/blob/main/audits/2024-07-01-cyfrin-wormhole-axelar-wsteth-axelar-transceiver-v2.pdf

Abstract:

Lido Staked Ether (stETH) is the token minted when a user deposits their Ether into the protocol. stETH is a transferable rebasing utility token that represents a share of the total ETH staked through the protocol. wstETH is the wrapped non-rebaseable version of stETH. wstETH keeps a users balance of stETH fixed and uses an underlying share system to reflect your staking rewards which is reflected once unwrapped.

wstETH is a popular collateral in Defi. As of time of writing - over 2.7m wstETH is being used as collateral in Defi in lending markets as well as for minting of CDPs. wstETH essentially is a value-accruing version of ETH with value accrual coming in the form of rewards from validation activity. Having wstETH on ListaDAO as a classic collateral is enabling users access to a highly demanded and liquid token to mint lisUSD so that they’re able to be more efficient with the leverage they are taking on.

Implementation of wstETH as a collateral for minting lisUSD will be executed by Lista DAO core contributors using the suggested risk parameters stated below.

Specification:

Suggested Parameters Load Limit: 5M lisUSD MCR: 150% Borrow Interest Rate: 7% Min deposite Amount: 0.1 wstETH

Motivation:

The listing of wstETH as a classic collateral on ListaDAO will give users another popular collateral option for minting CDPs. As wstETH is a value-accruing token, users are able to additionally earn rewards on Ethereum validation activities.

Benefits (Pros):

1. Capital Efficiency
2. Access to using the 8th largest crypto market cap token as collateral
3. Potential of increased user base on Lista Protocol

Downside (Cons):

As with most tokens there are risks associated with it. The following are some of the risks associated with wstETH as a collateral.

1. Smart Contract Risks: wstETH on BNBChain is naturally subjected to smart contract risks. This is mitigated through the multiple audits and verification reports
2. Slashing Risk: As with every liquid staked token, wstETH is also subjected to slashing risks from the validators. This is mitigated through the stringent selection of node operators. Lido also has a cover fund of approximately 6.4k stETH that could be used to cover some of the slashing estimated risks
3. Market Risks: Volatility as well as unwinding of positions in the market could affect stETH’s stability. Historically stETH has consistently traded within 100 bps of ETH’s price.

Additional Resources

Permissions and Signers for wstETH on BNBChain: https://docs.lido.fi/multisigs/emergency-brakes/#110-emergency-brakes-binance-smart-chain-bsc

Voting:

1. Yes: Approving this proposal will list wstETH as a classic collateral option on the ListaDAO platform.
2. No: Rejecting this proposal will keep wstETH off the list of classic collateral options on ListaDAO.