Overview
In light of the upcoming adoption of Capped Oracle in the Arbitrum and ZkSync instances, we cover the parameters for the relevant assets in the following recommendation.
zkETH
Dinero’s zkETH is an LST native to the zkSync Elastic Chain, providing a way for users to earn Ethereum staking rewards on zkSync.
The exchange rate growth of zkETH reflects staking rewards earned through native Ethereum staking. These rewards primarily originate from the Ethereum Beacon Chain and can be broadly categorized as follows:
- Consensus Layer Rewards - These are stable and predictable, determined by protocol-defined parameters and directly linked to the total amount of staked ETH. They form the core of the staking yield and provide a relatively steady source of rewards.
- MEV and Execution Layer Rewards - These rewards are more volatile, less frequent, and influenced by external market conditions. They introduce short-term variance to the yield profile, contributing to occasional spikes in the APY.
zkETH’s historical yield data is analyzed using a 14 day smoothing window to reduce noise and capture a more stable representation of staking rewards. Based on the past 180 days of data, the maximum observed 14 day annualized yield is selected, and the standard deviation of the one day APY series is added.
The resulting Annual Growth Rate used for the Capped Oracle is 7.3%.
A snapshot interval of 30 days is selected, allowing the reference exchange rate to be updated monthly and minimizing the risk of prolonged deviation from the true on-chain growth rate.
To avoid prematurely capping legitimate growth immediately after deployment, we apply a snapshot gap equivalent to one month of yield at the selected annual growth rate. This corresponds to 0.44%.
As such, for zkETH, we recommend the following Capped Oracle Parameters:
| Parameter |
Value |
| Annual Growth Rate |
7.3% |
| Snapshot Interval |
30d |
| Snapshot Gap |
0.44% |
weETH
The exchange rate growth of weETH reflects staking rewards earned through EtherFi’s native Ethereum staking. These rewards are sourced directly from the Ethereum Beacon Chain and primarily include:
- Consensus layer rewards, which are stable and predictable. These are determined by protocol defined parameters and are a direct function of the total amount of staked ETH.
- MEV and execution layer rewards, which are volatile, infrequent, and subject to external market dynamics. These rewards introduce short term variance and are responsible for occasional spikes in the APY.
While EtherFi enables users to opt into restaking protocols such as EigenLayer, restaking rewards are not baked into the exchange rate of weETH. As such, restaking related yields are excluded from this analysis and do not contribute to the APY considered for the Capped Oracle.
weETH’s historical yield data is analyzed using a three day smoothing window to reduce noise. Based on the past 180 days of data, the maximum observed three day annualized yield is selected, and the standard deviation of the one day APY series is added. This methodology captures the stable baseline while accounting for transient yield spikes.
The resulting Annual Growth Rate used for the Capped Oracle is 5.3%.
A snapshot interval of 30 days is selected, allowing the reference exchange rate to be updated monthly and minimizing the risk of prolonged deviation from the true on-chain growth rate.
To avoid prematurely capping legitimate growth immediately after deployment, we apply a snapshot gap equivalent to one month of yield at the selected annual growth rate. This corresponds to 0.44%.
The yield distribution of wstETH is consistent across chains. Hence, the recommended parameters can be adopted for other wstETH markets on Venus.
As such, for weETH, we recommend the following Capped Oracle Parameters:
| Parameter |
Value |
| Annual Growth Rate |
5.3% |
| Snapshot Interval |
30d |
| Snapshot Gap |
0.44% |
wstETH
The exchange rate growth of wstETH is primarily influenced by staking rewards earned on the Ethereum Beacon Chain. These rewards originate from two distinct sources:
- Consensus layer rewards, which are stable and predictable. These are determined by protocol defined parameters and are a direct function of the total amount of staked ETH.
- MEV and execution layer rewards, which are volatile, infrequent, and subject to external market dynamics. These rewards introduce short term variance and are responsible for occasional spikes in the APY.
wstETH’s historical yield data is analyzed using a three day smoothing window to reduce noise introduced by sporadic MEV events. Based on the past 180 days of data, the maximum observed three day annualized yield is selected, and the standard deviation of the one day APY series is added. This methodology captures the stable baseline while accounting for transient yield spikes.
The resulting Annual Growth Rate used for the Capped Oracle is 6.7%.
A snapshot interval of 30 days is selected, allowing the reference exchange rate to be updated monthly and minimizing the risk of prolonged deviation from the true on-chain growth rate.
To avoid prematurely capping legitimate growth immediately after deployment, we apply a snapshot gap equivalent to one month of yield at the selected annual growth rate. This corresponds to 0.55%.
The yield distribution of weETH is consistent across chains. Hence, the recommended parameters can be adopted for other weETH markets on Venus.
As such, for wstETH, we recommend the following Capped Oracle Parameters:
| Parameter |
Value |
| Annual Growth Rate |
6.7% |
| Snapshot Interval |
30d |
| Snapshot Gap |
0.55% |
wUSDM
The exchange rate growth of wUSDM is primarily influenced by staking rewards earned from Treasury Bond Yield.
wUSDM’s historical yield data appears fairly inconsistent, with significant periods of lack of rewards. Based on the past 180 days of data, the maximum observed three day annualized yield is selected, and the standard deviation of the one day APY series is added. This methodology captures the stable baseline while accounting for transient yield spikes.
The resulting Annual Growth Rate used for the Capped Oracle is 6.1%.
A snapshot interval of 30 days is selected, allowing the reference exchange rate to be updated monthly and minimizing the risk of prolonged deviation from the true on-chain growth rate.
To avoid prematurely capping legitimate growth immediately after deployment, we apply a snapshot gap equivalent to one month of yield at the selected annual growth rate. This corresponds to 0.49%.
As such, for wUSDM, we recommend the following Capped Oracle Parameters:
| Parameter |
Value |
| Annual Growth Rate |
6.1% |
| Snapshot Interval |
30d |
| Snapshot Gap |
0.49% |
Disclaimer
Chaos Labs has not been compensated by any third party for publishing this recommendation.
