Add support for the KelpDAO rsETH market to Venus Protocol on Ethereum Mainnet
Rationale
rsETH is a Liquid Restaked Token (LRT) issued by Kelp DAO designed to offer liquidity to illiquid assets deposited into restaking platforms, such as EigenLayer. It aims to address the risks and challenges posed by the current offering of restaking
Kelp has more than 300k ETH worth of assets restaked by over 25k users.
DeFi integrations across Balancer, Uniswap, Curve, Pendle, and Maverick with $50Mn+ in liquidity
Presence on 9 L2s including Arbitrum, Optimism, Blast, Scroll, and Mode
LRTs are a great use case for Venus as it is one of the fastest-growing ecosystems.
With rsETH being one of the top LRTs, integrating it as a collateral asset will create new demand on Venus which will be beneficial for both protocols.
The addition of the rsETH market is aimed at enhancing asset diversity on Venus and increasing liquidity in the Venus ecosystem.
Through rsETH, users on Venus will be able to earn EigenLayer Points and Kelp Miles which will represent future incentives. Additionally, borrowing demand from rsETH will create an attractive deposit yield for Venus’ lenders.
This is a great offer. I think there will be a decent group of ETH holders who will happily take the opportunity to increase the efficiency of their rsETH
Chaos Labs is providing risk parameter recommendations for adding rsETH to the Venus Staked ETH Pool on Ethereum, should the Venus community decide on its addition. Following is our analysis and risk parameter recommendations for the initial listing.
Liquidity and Market Cap
Over the last 180 days, rsETH’s average market cap has been $461M, and its average daily trading volume has been $7.6M. Its supply decreased briefly in May as withdrawals were opened but has since increased.
Relative to ETH, it has exhibited a daily annualized volatility of 13.13% and a 30-day daily annualized volatility of 4.03%, with a maximum one-day drop of 2.46%.
Given the asset’s limited history and volatility relative to ETH, we recommend a slightly more conservative collateral factor and liquidation threshold than other assets in this pool.
Supply Cap and Borrow Cap
Under Chaos Labs’ usual approach to setting initial supply caps for new assets, we propose setting the supply cap at 2X the on-chain liquidity available under the Liquidation Incentive (configured to 10%) price impact. Additionally, we recommend setting the borrow cap at 45% of the supply cap, to accomodate potential demand similar to what is observed on other LRTs.
This leads us to recommend an 8,000 rsETH supply cap and 800 rsETH borrow cap.
IR Curves
We recommend setting the IR curve in line with those of similar assets in the Staked ETH Pool:
