Support EIGEN as collateral on Venus Protocol Ethereum Core Pool

Proposals
1

Summary:

EIGEN is a universal intersubjective work and governance token for the Eigenlayer ecosystem. We propose to list EIGEN on Venus Protocol Ethereum Core Pool.

Motivation:

  • Liquidity: EIGEN has strong liquidity on Ethereum mainnet, with ~$12m at time of writing.
  • Market Acceptance: A widely distributed token, with its recent transferability unlocked, EIGEN positions itself as an asset that can drive significant volume and utility to Venus Protocol.
  • Listing EIGEN expands the asset offering on Venus, enhancing its position as a leading DeFi protocol.

Risks

  • Volatility Risk: EIGEN is a new token and like many governance tokens, is subject to price volatility which could affect the stability of the Venus platform.
  • EIGEN’s liquidity is still growing. Risk parameters need to be put in place to ensure that this offering is capped inline with its liquidity.
  • Smart Contract Risks: As with any new token, there are inherent smart contract risks. However EIGEN has undergone multiple audits and follows stringent security measures.

Benefits

  • Increased Asset Diversity: The addition of EIGEN provides Venus users with another asset to use as collateral or borrow, catering to different risk profiles.

  • DeFi Innovation: The inclusion of cutting-edge tokens like EIGEN signals Venus’s commitment to supporting innovative projects within the Ethereum ecosystem.

Background

EigenLayer is a restaking platform that allows ETH stakers to opt into providing security services to other decentralized protocols and services such as data availability. This model enhances Ethereum’s economic security by enabling stakers to earn additional rewards without needing to unstake their ETH. EIGEN is the governance token of the EigenLayer protocol, facilitating decisions related to protocol upgrades, parameter adjustments, and more.

Specifications

Contract address: 0xec53bf9167f50cdeb3ae105f56099aaab9061f83

Oracle & Price Feeds: Implementation expected with Redstone

Community Involvement

We recommend that the Venus community support this proposal and, if agreed, request Chaos Labs to analyze and provide risk parameters for the safe integration of EIGEN into Venus Protocol.

We look forward to the community’s feedback and the successful adoption of EIGEN.

7 Likes
2

This may be a good proposal that the Venus team can consider to list EIGEN on Ethereum.

3

Given the high popularity of the asset and the huge user base, I think this proposal is a good one to increase liquidity on Ethereum, let’s launch a snapshot

4

love it, we should push more assets for listing

5

I support the idea to list EIGEN as it the aligns with Venus’s goal to diversify assets and support DeFi innovation. Let’s see Chaoslabs analysis, hopefully this goes to VIP. It is a yes for me :blush:

6

Hi - Brianna here, VP of Growth at the Eigen Foundation. Love to see this proposal and will support with co-marketing if accepted by the community.

2 Likes
7

Let’s do it, we definitely need more markets on Ethereum Core Pool, especially popular ones.

8

Overview

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

EIGEN

Eigen Labs first introduced the EIGEN token in April 2024, describing it as token to address “intersubjective faults” in blockchain systems: issues that cannot be resolved solely through objective, on-chain mechanisms. While ETH restaking in EigenLayer secures tasks with objectively attributable faults by expanding ETH’s utility, the EIGEN token introduces methods like intersubjective staking and slashing-by-forking to handle faults that require broad agreement among participants. The token features universality for use across various applications, a two-token system for isolation to prevent externalities, metering to deter malicious challenges, and compensation mechanisms for affected users.

Initially, the token was non-transferable and non-forkable, and users were encouraged to participate in the “Stakedrop”, with 5% of the initial supply allocated to restakers based on a block snapshot on March 15, 2024. There were multiple rounds of the Stakedrop, distributing tokens to users and protocols that had restaked ETH, as well as a variety of other criteria, such as active Discord members and Dune dashboard creators. The Eigen Foundation announced on September 17 that its Programmatic Incentives program would distribute 66.9M EIGEN (4% of initial supply) to ETH and LST stakers and operators, as well as EIGEN stakers and operators, to be distributed weekly each Tuesday. Finally, the EIGEN token was made transferable on October 1.

Ethereum Liquidity

EIGEN is the newly launched governance token for the Eigenlayer ecosystem. It was launched in early October and currently represents a market cap of $650M and a fully diluted valuation of $5.8B. Its 24-hour trading volume is $168M, the majority of which is on Binance ($40M). Currently, its liquidity is concentrated on Uniswap V3.

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Uniswap V3

Volatility

EIGEN is a relatively new asset, naturally increasing its volatility values. Its daily annualized volatility since launch stands at 139.1%.


This level of volatility calls for conservative parameters; in the likely case that volatility decreases over time, we will recommend updated collateral parameters.

Collateral Factor, Liquidation Threshold, and Liquidation Bonus

Given the asset’s relatively short lifespan and high volatility, we recommend adopting conservative listing parameters. We recommend setting the asset’s collateral factor to 50% and liquidation threshold to 60%, aligned with other highly volatile assets like TWT. Additionally, we recommend a liquidation bonus of 10% — again aligned with other volatile assets — to ensure liquidations are processed efficiently.

Interest Rate Curve

It is unclear whether the asset will have significant borrowing demand. Similar volatile assets have shown weak demand, though EIGEN can be staked for 7% APY, which may boost demand. To prevent heavy shorting of the asset, we propose an IR curve in line with similar highly volatile assets, such as the to-be-migrated TWT. This ensures that borrowing becomes costly when utilization exceeds the Kink, set to 45%.

Supply and Borrow Cap

We recommend setting the supply cap at 3M, twice the liquidity available below the liquidity bonus, and the borrow cap at 1.5M, slightly above demand at the kink. This increase is backed by Chaos Labs’ risk simulations, which consider the user’s behavior, on-chain liquidity, and price impact, ensuring that the higher cap does not introduce additional risk to the platform.

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Recommendation

Asset EIGEN
Chain Ethereum
Pool Core
Borrowable Yes
Collateral Factor 50%
Liquidation Threshold 60%
Liquidation Incentive 10%
Supply Cap 3,000,000
Borrow Cap 1,500,000
Kink 45%
Base 0.02
Multiplier 0.15
Jump Multiplier 3.0
Reserve Factor 25%

Disclaimer

Chaos Labs has not been compensated by any third party for publishing this recommendation.

1 Like