Overview
Chaos Labs supports listing pufETH on Venus Protocol’s Ethereum deployment as part of the Liquid-Staked ETH pool. Below are our analysis and recommendations for initial risk parameters.
Ethereum Liquidity
The current supply of pufETH on Ethereum is 518,000, with 57K holders and 492K transfers. Its DEX liquidity is primarily paired against wstETH and WETH, with its two most liquid pairs being on Curve.
Currently, holding, supplying, and LPing pufETH is incentivized with points, adding a speculative element to pufETH’s on-chain supply and liquidity.
pufETH Volatility
Relative to ETH, pufETH demonstrated sustained volatility and poor peg stability. We measured a 30-day annualized volatility of 7.15%, compared to 18.4% since March.
Its maximum price drop relative to ETH was 2.47% over the past 180 days.
Collateral Factor, Liquidation Threshold, and Liquidation Bonus
Given the asset volatility and frequent asset discount to its underlying, we recommend setting conservative parameters of 80% CF, 85% LT, and a 2% Liquidation Bonus.
Interest Rate Curve
As pufETH is an interest-bearing asset, we do not expect high borrow demand. Hence, we recommend aligning the Interest Rate to similar assets in the pool and setting the Kink at 45%.
Supply and Borrow Cap
Given the ongoing speculation and lack of withdrawal function, setting the initial supply cap at 2x the liquidity available under the Liquidation Bonus would result in a high recommendation that may become excessive when the points program ends. Thus, we recommend setting an initial supply cap of 3000 pufETH.
Being pufETH an interest-bearing asset and not expecting a high borrow demand, we recommend setting a conservative initial borrow cap of 300 pufETH.
Pricing pufETH
Given pufETH’s lack of an active withdrawal function and the sustained depeg from its underlying, we recommend using a market rate oracle.
Recommendation
| Asset | pufETH |
|---|---|
| Chain | Ethereum |
| Pool | Liquid-Staked ETH |
| Collateral Factor | 80% |
| Liquidation Threshold | 85% |
| Liquidation Incentive | 2% |
| Supply Cap | 3,000 |
| Borrow Cap | 300 |
| Kink | 45% |
| Base | 0 |
| Multiplier | 4.5% |
| Jump Multiplier | 2.0 |
| Reserve Factor | 20% |