MIR-19┃Add wstETH as collateral on Mimo on Ethereum

Summary:

This proposal aims to add wstETH as new collateral on Mimo on Ethereum.

Rationale:

​​Lido protocols enhance the security of the Ethereum network by enabling more users to stake ETH. When they stake ETH through the Lido Protocol software they receive stETH. stETH tokens are fungible and liquid. The total balance of stETH in existence is based on the total amount of ETH staked via the Lido protocols plus total staking rewards minus any slashing applied on validators. stETH rebases daily.

Due to the rebasing nature of stETH, a user’s stETH balance changes daily as staking rewards are received. As some DeFi protocols require a constant balance mechanism for tokens, Lido protocols offer wstETH, which is a wrapped version of stETH. wstETH keeps a user’s token balance fixed and uses an underlying share system to reflect users’ received staking rewards.

You can learn more about these mechanisms in their documentation / whitepaper.

Once the vote is accepted on Snapshot, we will determine the associated liquidation ratio, minimal collateral ratio, debt ceiling, liquidation bonus on a second MIR discussion.

Project Presentation:

Protocol name : Lido Finance Token requested : wstETH Token contract address : stETH : https://etherscan.io/token/0xae7ab96520de3a18e5e111b5eaab095312d7fe84 wstETH : https://etherscan.io/token/0x7f39c581f595b53c5cb19bd0b3f8da6c935e2ca0 Audit(s) links : https://github.com/lidofinance/audits Chain requested : Ethereum Relation with the project : None. Website: https://lido.fi/ Github: https://github.com/lidofinance Twitter : https://twitter.com/LidoFinance Discord : https://discord.com/invite/vgdPfhZ

Token metrics & Risk assessment:

The risk assessment is considered on the principal asset: stETH

• Smart Contract risk: B+

stETH launched on Ethereum on 19 December 2020. The code has multiple audits from Quantstamp, ChainSecurity, Mixbytes, Oxorio, Sigma Prime and StateMind (cf. https://github.com/lidofinance/audits). Lido is the core contract which acts as a liquid staking pool. The contract is responsible for Ether deposits and withdrawals, minting and burning liquid tokens, delegating funds to node operators, applying fees, and accepting updates from the oracle contract. Node Operators' logic is extracted to a separate contract, NodeOperatorsRegistry. stETH has generated more than 669k transactions.

• Counterparty risk: A-

Lido relies on a set of oracles to report staking rewards to the smart contracts. Lido on Ethereum is a protocol that runs on the Ethereum blockchain and it is upgradable. The Lido DAO controls the ability to implement day-to-day changes and upgrade the protocol with a successful DAO vote. The Lido DAO is an Aragon organization and the roles and addresses can be checked in the Aragon UI. To mitigate withdrawal risks, Lido staking went live on December 18th through a withdrawal key ceremony performed by a group of the industry’s most trusted builders. stETH currently has 158k holders on Ethereum.

• Market Risk: B

stETH is currently ranked 1st in the list of Ethereum Liquid Staking assets with a capitalization of $8,5B. Furthermore, wstETH is the wrapped version of stETH and is redeemable at any time, the price is correlated to the ETH since stETH is the representation of ETH staked through Lido. When withdrawals from the Beacon chain will be introduced (cf EIP Shanghai), it will be possible to redeem ether by burning stETH at the same 1:1 ratio. For these reasons, we consider the risks of stETH mitigated by his principal collateralized assets: ETH. The cumulative (stETH & wstETH) liquidity available is nearly $1.1B with approximately $75M of volume per day on Ethereum.

Ethereum Staking wars : https://www.defiwars.xyz/wars/eth

• Chain Risk : A

Ethereum had 0 outages over the last 6 months. (https://etherscan.com/chart/blocks)

• Liquidity Risk of PAR on Ethereum: A

The PAR-USDC UniV3 pool has 1,68M$ in concentrated liquidity, composed of 50% PAR and 50% USDC. The PAR-USDC Curve pool has 425k$ in liquidity, composed of 52,1% PAR and 47,9% USDC at the time of writing. The MIMO-PAR Balancer pool has 310k$ in liquidity, composed of 80% MIMO and 20% PAR.

This provides the following price impact on the following trade sizes:

1000 USDC → PAR: 0.00% 10000 USDC → PAR: 0.03% 25000 USDC → PAR: 0.07% 50000 USDC → PAR: 0.14%

• Overall Risk : A-

The Overall Risk is the average of the points mentioned above.

• Community size :

Twitter: 122,4k followers Discord: 42,8k members

Means:

• Human resources: Multisig DAO signers will need to sign and execute transactions to add wstETH as collateral on Mimo.
• Treasury resources: There is no cost for the treasury to add wstETH on Mimo Ethereum.

Technical implementation:

1. Add stETH in the ConfigProvider Contract with all parameters decided by the Mimo governance.
2. Set the chainlink oracle related to the wstETH into PriceFeed Contract → wstETH-ETH price feed | ETH-USD price feed

Voting options:

• Add wstETH as new collateral on Mimo on Ethereum
• Against adding wstETH as new collateral on Mimo on Ethereum
• Abstain

Authors: @starny & @JeanBrasse from Mimo Labs