Support eBTC collateral on Venus on ETH Mainnet

RupertPumpkin · October 7, 2024, 1:08pm

Summary

ether.fi is seeking community support for adding its Liquid Restaking Token eBTC to Venus Protocol on ETH Mainnet. In addition, anyone who deposits eBTC on Venus will accumulate Babylon, Lombard, Ether.fi, Symbiotic and Veda points as part of ongoing incentive campaigns.

eBTC is ether.fi’s flagship Bitcoin-backed liquid restaking token. Created to service the growing demands of alternate collateral within restaking, eBTC simplifies yield optimization and expands utility. eBTC is backed by LBTC, through a partnership with Lombard, to bring the first dual yield (staking + restaking) Bitcoin product to market. Staking will be conducted through Babylon, with restaking serviced through a combination of Eigen Layer, Symbiotic, and Karak. Users are able to deposit LBTC, WBTC, FBTC, & CBBTC.

Rationale:

eBTC is an LRT that allows users to restake their BTC, accrue staking rewards, and receive additional rewards through restaking on EigenLayer, Symbiotic and Karak. As of Oct 4th, approximately 2,300,000 ETH ($5.8B) in TVL has been deposited into the ether.fi protocol with 2500 BTC ($150M) dedicated to the eBTC LRT. You can view additional ether.fi stats on Dune.

Users are given eBTC on a 1:1 basis with their chosen BTC deposit asset. As mentioned above, ether.fi is also the first LSP to natively restake on EigenLayer, Symbiotic, and Karak — 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 for eBTC to various platforms.

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

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.
The ether.fi protocol is a real business with a sustainable revenue model.
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.

Key benefits brought by the Symbiotic protocol:

Flexibility through Modularity: Networks control all aspects of their (re)staking implementation, including collateral assets supported, node operator selection mechanics, rewards, slashing, and associated resolving mechanisms. All participants can flexibly opt in and out of shared security arrangements coordinated through Symbiotic.
Risk Minimization through Immutability: Non-upgradeable core contracts on Ethereum remove external governance risks and single points of failure. Our simple yet flexible contract design minimizes execution layer risks.
Capital Efficiency through Restaked Collateral and Reputation-Based Curation: A permissionless, multi-asset, and network-agnostic design enables scalable and capital-efficient sourcing of economic security. An evolving operator-centric cross-network reputation system will further enhance capital efficiency for network builders.

The ether.fi team will bootstrap the pool with $25,000 worth of eBTC and add eBTC on Venus as an integration partner to kickstart the market on Venus.

Motivation

This move is intended to improve asset diversity on Venus, increase liquidity in the ecosystem, and generate fees through borrows of other BTC assets. By integrating eBTC into their markets, Venus protocol allows its users to participate in providing economic security to differing assets, support the restaking landscape, and earn incentives in addition to lending APY on their holdings.

Token

eBTC token address: 0x657e8c867d8b37dcc18fa4caead9c45eb088c642

Audits

Conclusion

Adding support for eBTC allows Venus to be a first-mover in capturing the next wave of BTC-Fi emerging from synergies and yield sourced from BTC staking & restaking. This also provides users with a wider range of opportunities to gain restaking exposure that match exceeding demand for LRTs.

Oranges · October 7, 2024, 1:56pm

Great proposal, I don’t see why Venus shouldn’t accept eBTC as collateral, assuming it hits minimum liquidity requirements.

Tomm · October 7, 2024, 11:27pm

Yes, I agree this proposal. Adding support for eBTC allows Venus protocol to be a first-mover in capturing the next wave of BTC-Fi and enrich Venus’ ecosystem.

chaoslabs · October 11, 2024, 2:24pm

Overview

Chaos Labs supports listing eBTC on Venus Protocol’s Ethereum deployment in the Core pool. Below are our analysis and recommendations for initial risk parameters.

Ethereum Liquidity

eBTC is a BTC LRT offered by ether.fi in partnership with Lombard, currently receiving Babylon, Lombard, ether.fi, Symbiotic, and Veda points, adding a speculative element to its current supply. Its supply has grown rapidly, breaking $150M recently (the chart below shows it in ETH terms).

Source: https://dune.com/ether_fi/etherfi

Its liquidity is concentrated on Curve.

Curve

According to its Whitepaper, the token carries a 7-day withdrawal period, though “most withdrawals will complete well before this maximum window.”

eBTC Volatility

Although eBTC is a relatively new asset, making its volatility values less reliable, its volatility against BTC has been fairly low, indicating acceptable peg adherence. The 30-Day Daily Annualized Volatility stands at 4.45%.

On decentralized exchanges, eBTC shows similar stability, with a maximum daily drop of 0.62% against BTC. While the size of this depeg is not particularly concerning, it took three days for the asset to return to its peg, suggesting weaker mean reversion properties. This slow recovery highlights potential challenges in maintaining a consistent peg.

Collateral Factor, Liquidation Threshold, and Liquidation Bonus

Given the asset’s relatively short lifespan and weak mean reversion observed on DEXs, we recommend adopting more conservative parameters than WBTC. Hence, we suggest setting the LT at 72% and the CF at 68% while matching WBTC’s Liquidation Bonus at 10%.

Chaos Labs is prepared to facilitate a LT and CF increase if the asset shows prolonged stability and peg adherence.

Interest Rate Curve

Since the most common use case for borrowing eBTC on competing lending protocols is to deposit it into Pendle, we recommend setting the Interest Rate slightly lower than Pendle’s APY to attract borrowers. However, we still suggest maintaining the Kink at 45% while we assess the level of demand for this specific strategy.

Supply and Borrow Cap

We recommend setting supply caps according to our usual methodology, at two times the liquidity available below the liquidity bonus and the borrow cap slightly higher than the demand at the kink. Thus, we arrive at a recommendation of 25 eBTC for the supply caps and 12.5 eBTC for the borrow cap. While this is somewhat conservative relative to supply, we are prepared to facilitate supply cap increases if the user’s behavior allows it.

Pricing eBTC

Given eBTC’s available withdrawals, we recommend using the asset’s exchange rate to avoid liquidation cascades in the event the token depegs.

Recommendation

Asset	eBTC
Chain	Ethereum
Pool	Core
Collateral Factor	68%
Liquidation Threshold	72%
Liquidation Incentive	10%
Supply Cap	25
Borrow Cap	12.5
Kink	45%
Base	0%
Multiplier	9%
Jump Multiplier	2.0
Reserve Factor	20%

DomVSPM · October 22, 2024, 12:22pm

It will be nice to have eBTC as a collateral on Venus.

FREDY · February 19, 2025, 12:27am

Hello

Has this ever gone though Governance and voting ?
Since the risk analysis has been published what lacks to move ahead and be listed ?

eBTC is an interesting asset backed by a know platform and gives the opportunity to eBTC holders to use as collateral instead of other BTC tokens.

Masala · February 20, 2025, 6:50am

eBTC is now available on Venus core pool at Ethereum mainnet!!