Support ezETH as collateral on ETH Mainnet and BNB Chain

[kratikl]

Summary

This proposal seeks to introduce ezETH as a supported asset on Venus Protocol on Ethereum Mainnet and BNB. It aims to leverage the innovative features of this reward bearing liquid restaking token to enhance the lending and borrowing ecosystem, provide further diversified collateral options, and foster greater liquidity and user engagement within the Venus Protocol.

Rationale

Renzo is a Liquid Restaking Token (LRT) and Strategy Manager for EigenLayer. It is the interface to the EigenLayer ecosystem securing Actively Validated Services (AVSs) and offering a higher yield than ETH staking.

$ezETH is the liquid restaking token representing a user’s restaked position at Renzo. Users can deposit native ETH or LSTs and receive $ezETH.

Our strategy has focused on distribution and abstraction broadly speaking. Our north star is abstracting away what is otherwise a complex, nuanced, and intensive process of restaking and delegating with operators, making it as easy as possible to restake.

$ezETH currently has $4b+ in TVL and 125+ integrations live across 8 supported networks where we’ve brought significant value, volume, and users to a variety of participating DeFi ecosystems. We believe a listing on Venus for both networks could be one of our more important integrations thus far, and will commit to providing supplemental incentive multipliers and growth activities to funnel users to the platform where they can find additional utility for their $ezETH holdings.

References/Useful links:

Website: https://www.renzoprotocol.com/

Documentation: Intro | Renzo Protocol

GitHub Public Repo: Renzo-Protocol · GitHub

Renzo DeFi integrations: DeFi | Renzo

Chainlink ezETH Price Feed (ETH)

Chainlink ezETH Exchange Rate Price Feed (BNB)

ezETH (ETH) contract

ezETH (xerc20) (BNB) contract

Conclusion

With the demand for LRTs as an asset class in the current DeFi landscape along with Renzo’s pioneering focus on integrations, distribution, and chain expansion, pursuing a listing for $ezETH on Venus for both networks is a no brainer and top priority for the protocol’s growth strategy. We take great care to foster and cultivate relationships with our partners and their communities. We view this as a significant long term collaboration and we expect Venus to be one of Renzo’s top integration partners on both networks moving forward.

[Tomm]

YES, We need ezETH as collateral on ETH Mainnet and BNB Chain!

[mopgawka]

More assets, more opportunities. I like the path Venus Protocol is taking.

[chaoslabs]

Overview

Chaos Labs supports listing ezETH on Venus Protocol’s Ethereum mainnet deployment as part of the Liquid Staked ETH pool. Due to ezETH’s poor liquidity conditions of BNB Chain, we do not recommend listing ezETH on Venus’ BNB Chain deployment at this time. Below is our analysis and initial risk parameter recommendation.

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 ezETH, adopting more conservative supply and borrow caps should be considered.

Liquidity and Market Cap

The amount of ETH locked in the Renzo Protocol has grown rapidly, from 200K ETH at the start of March to 1.06M today. Similarly, ezETH’s market cap has averaged $1.55B over the past six months.

Users may deposit WETH, wbETH, or stETH to receive ezETH, a liquid restaking token (LRT). It is intended to simplify restaking by interacting with EigenLayer and securing a combination of Actively Validated Services (AVSs). Rewards are reflected in the price of the token rather than rebasing. Over the past 180 days, it has registered $66M in average daily volume.

Native ezETH withdrawals were recently enabled.

On Ethereum, its liquidity is concentrated in a Balancer V2 pool with WETH. There is also a Uniswap V3 pool that registers significant volume. This pool is currently incentivized with ezPoints; liquidity may drop if and when these incentives end.

On BNB Chain, ezETH’s liquidity is much lower. Liquidity is centered around a PancakeSwap v3 pool with just $31K in liquidity and $80K of 24-hour volume. This appears to be the only active pool supporting ezETH on BNB chain.

ezETH / ETH Volatility

Relative to ETH, ezETH’s 30-day daily annualized volatility is 4.66%, with a maximum single-day price drop of 2.79%.

Collateral Factor

We recommend setting the CF equal to rsETH in the Liquid Staked ETH pool: set at 80%, with LT at 85%

Supply and Borrow Cap

Chaos Labs’ approach to initial supply caps involves setting the Supply Cap at 2x the liquidity available under the Liquidity Penalty (set at 10%) price impact. This calls for an initial borrow cap of 14,000 ezETH on Ethereum.

Given the limited borrow demand we’ve observed for LRTs, we initialize borrow caps conservatively at 10% of supply. This means a supply cap of 1,400 on Ethereum.

We will monitor this token’s developments closely and may recommend increasing caps should on-chain liquidity, supply, and/or demand grow.

IR Curve Parameters

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

Pricing ezETH

While ezETH’s discount to its ETH exchange rate has narrowed since Renzo enabled withdrawals, a gap persists. For this reason, we recommend pricing ezETH according to its market rate (blue) rather than its exchange rate (red) at the outset. We’d like to see persistent peg stability for a period of months before considering a transition to exchange rate pricing.

Recommendations

Following the above analysis, we recommend listing ezETH on Ethereum within the Liquid Staked ETH isolated pool and not listing ezETH on BNB Chain until liquidity improves. We recommend the following parameter settings:

ezETH (Ethereum Mainnet)

Parameter	Value
Pool	Liquid Staked ETH
Collateral Factor	80.00%
Liquidation Threshold	85.00%
Supply Cap	14,000
Borrow Cap	1,400
Kink	45%
Base	0%
Multiplier	9%
Jump Multiplier	75%
Reserve Factor	20%