Proposal: Support weETH collateral on Venus on ETH Mainnet

[RupertPumpkin]

Summary

ether.fi is seeking community support for adding its Liquid Restaking Tokens (weETH) to Venus Protocol on ETH Mainnet. In addition, anyone who deposits weETH on Venus will accumulate ether.fi and EigenLayer points to be used for future incentives.

Rationale:

eETH is an LRT that allows users to stake their ETH, accrue staking rewards, and receive additional rewards through native restaking on EigenLayer. As of February 21st, approximately 474,234 ETH ($1.4B) in TVL has been deposited into the ether.fi protocol. You can view additional ether.fi stats on https://dune.com/ether_fi/etherfi

Users are given eETH on a 1:1 basis with a minimum deposit of 0.001 ETH. As mentioned above, ether.fi is also the first LSP to natively restake on EigenLayer — a move that helps improve network efficiency and provides stakers with additional rewards for their network contributions. ether.fi has also launched a series of partnerships with DeFi protocols to incentivize users and drive liquidity to various platforms.

ether.fi is the first decentralized, non-custodial delegated staking protocol with an LRT (eETH). One of the distinguishing characteristics of ether.fi is that stakers control their keys. Those who work on the protocol strive for the following:

1. Decentralization is the primary objective. ether.fi will never compromise on the non-custodial and decentralized nature of the protocol. Stakers must maintain control of their ETH.

2. The ether.fi protocol is a real business with a sustainable revenue model. The team is in this for the long haul. No ponzinomics f*ckery.

3. ether.fi will do the right thing for the Ethereum community, always. If and when the team messes up, ether.fi will own it and course correct quickly.

weETH is a non-rebasing wrapped version of eETH designed to interact with DeFi protocols.

Liquidity mining incentive for weETH suppliers

The ether.fi team will bootstrap the pool with $10,000 worth of weETH liquidity and incentivize this pool with $5,000 of weETH for an initial period of 30 days to kickstart the market on Venus.

Motivation

This move is intended to improve asset diversity on Venus and increase liquidity in the ecosystem. By integrating weETH into their markets, Venus Protocols allows its users to earn ether.fi and EigenLayer points which will be used for future incentives, in addition to lending APY on their holdings.

Conclusion

Adding support for weETH allows Venus to be a first-mover in capturing the restaking market. This provides users with a wider range of investment opportunities that match exceeding demand for LRTs.

[Ghaeth]

great Venus protocol

[Thaoz]

Lets do it asap ! Venus team

[Tomm]

amazing Venus!! Glad to see this cooperation.
lending+restaking= $XVS to the moon!!

[ChristoWarriorCrypto]

This is great news, I can’t wait to see this implemented in Venus Protocol.

[Gregor]

As always, all these tokens may bring a lot more liquidity to Venus but we should be even more aware of security risks. I would go forward but with way bigger cautious.

[crazyman61]

big liquidty for venus protocol users. new users will come and bigger TVL we will reach.

[dynmtok]

This is perhaps the most impressive and most exciting proposal I have ever seen on Venus. I give my full support for the good days to come.

[Marcin_RedStone]

Ether.fi and eETH have shown tremendous growth and leading the LRT space. All signs predict they keep that position and will be expanding further.

weETH might become for Venus what stETH has been for Aave - I hope to see the integration happen!

[RicardoBullTraders]

This integration will undoubtedly result in greater liquidity for the Venus protocol as well as a significant expansion in the DeFi

[chaoslabs]

weETH Parameter Recommendations Venus Ethereum LST Isolated Pool

Overview

Chaos Labs supports listing weETH on Venus Ethereum in the LST Isolated Pool. Following is our analysis and risk parameter recommendations for the initial listing.

Note: The following analysis is conducted solely from a market risk viewpoint, excluding centralization and third-party risk considerations. If the community aims to reduce exposure to weETH, adopting more conservative supply and borrow caps should be considered.

Liquidity and Market Cap

The launch of eETH withdrawals, or the native “liquidity pool,” occurred at the end of December 2023. Since then, alongside a speculative point-based incentive structure, EtherFi’s TVL has grown exponentially, reaching $3 billion, while weETH has averaged $10.1 million in daily volume. The limited historical data, alongside the asset’s rapid growth, highlight the need for a more conservative listing approach, as rapid growth driven by speculative incentives could lead to significant and sudden reductions in liquidity down the line.

weETH / ETH Volatility

Collateral Factor and Liquidation Threshold

To optimize the CF and LT setting for LST/Underlying Asset borrowing and allow more leverage for looping, we recommend implementing a calculated price oracle. This oracle would utilize the primary exchange rate to determine the oracle price for weETH in correlation with the price of WETH.

Considering this, we recommend setting the CF similarly to the recommended parameters of wstETH and WETH in the Isolated Pool, at 90%, with LT at 93%

Supply and Borrow Cap

While Chaos Labs’ approach to initial supply caps is generally proposed as setting the Supply Cap at 2x the liquidity available under the Liquidity Penalty price impact, given the minimal weETH historical data, we initially recommend a 1x value. Although on-chain liquidity could allow for higher caps, our preference is to set the caps conservatively to observe user behavior and demand before optimizing them. Should demand scale, we will reassess and parameterize accordingly.

Given the current DEX liquidity profile of weETH and eETH alike, we recommend a supply cap of 7500 weETH.

The utilization rate for LSTs has been historically low on borrow/lend protocols due to obvious additional borrowing costs. Therefore, we have taken a conservative approach toward LST/LRTs borrow caps of 750 weETH. However, if there is a significant increase in demand and utilization, perhaps due to external incentives, we will reassess the caps according to the utilization pattern.

IR Curve Parameters

We recommend aligning the interest rate parameters with that of wstETH to ensure consistency across similar assets on Venus.

Recommendations

Following the above analysis, we recommend listing weETH with the following parameter settings:

Asset	weETH
Collateral Factor	90%
Liquidation Threshold	93%
Supply Cap	7,500
Borrow Cap	750
Kink	45%
Base	0%
Multiplier	9%
Jump Multiplier	75%
Reserve Factor	20%