Lido contributors would like to propose the addition of wstETH to Venus Protocol as a core market asset on zkSync.
Motivation:
Lido’s wstETH is the leading LST on zkSync with 2.3k wstETH in bridged TVL at time of writing.
By bringing wstETH to Venus on zkSync, users will be able to take advantage of wstETH as a high quality yield bearing collateral asset, both for regular defi use cases and for LST looping.
Benefits:
There are currently no LST’s on Venus’s zkSync deployment, so this proposal will enable the Venus community to take advantage of one of Defi’s most popular and reliable collateral assets.
The addition of using a reward bearing collateral asset like wstETH increases capital efficiency and lending use cases for Venus Protocol.
The addition of wstETH enables both Lido and Venus to support each other’s growth on zkSync.
Additionally, incentives would be used for the purposes of bootstrapping.
About Lido
Lido.fi is a decentralized liquid staking platform behind stETH & wstETH that allows users to participate in Ethereum staking to earn ETH rewards without sacrificing liquidity.
Chaos Labs supports listing wstETH on Venus’s ZkSync Core pool. Below we provide our analysis and recommendations.
wstETH
wstETH is one of the most popular collateral assets in DeFi and is already deployed on multiple Venus pools; we recently recommended listing the asset on the Base Core pool.
As discussed in that recommendation, Chaos Labs supports a shift in strategy by listing wstETH in Core pools on Venus’s various deployments. While the protocol may still face difficulties in attracting leveraged yield seekers because of its lower CF and LT relative to other protocols that can use E-Mode, listing in Core will give wstETH depositors access to greater liquidity, including stablecoins.
Market Cap and Liquidity on ZkSync
There are currently 2,504 wstETH on ZkSync, with 1,628 deposited on Aave. The asset’s on-chain DEX liquidity has improved significantly since the start of January, coinciding with the ZK Ignite incentive program.
We recommend setting the supply cap equivalent to 2x the liquidity available at a price impact equivalent to the pool’s Liquidation Penalty. This leads to a recommendation of 350 wstETH. We recommend setting the borrow cap to 10% of this value given the limited demand for borrowing of yield-accruing assets.
Other Parameters
We recommend setting the asset’s collateral parameters more conservatively than on Arbitrum, with a CF of 71% and LT of 76%. This is because the asset’s liquidity is still significantly lower than on other networks and may decrease rapidly at the conclusion of the ZK Ignite program. We recommend aligning all other parameters with those of its existing Arbitrum listing.
Specification
Parameter
Value
Asset
wstETH
Chain
ZkSync
Pool
Core
Collateral Factor
71.00%
Liquidation Threshold
76.00%
Supply Cap
350
Borrow Cap
35
Kink
45%
Base
0.0
Multiplier
0.09
Jump Multiplier
3.0
Reserve Factor
25%
Disclaimer
Chaos Labs has not been compensated by any third party for publishing this recommendation.