wsuperOETHb as a collateral asset on Venus Protocol BASE Core Pool

pete · November 25, 2024, 12:17am

wsuperOETHb as a collateral asset on Venus Protocol BASE Core Pool

Summary:

Origin contributors would like to propose the addition of a Wrapped Super OETH (wsuperOETHb) market to Venus Protocol as a core market on the upcoming Base launch

Motivation:

Origin is a leading LST and yield generating platform. Integrating wsuperOETHb on Venus as a launch partner for the Base deployment will provide a high yielding collateral and new defi use cases to Venus users on Base, while aligning interests and creating a strong relationship between the two protocols.

Benefits

Venus users will be able to take advantage of wsuperOETHb as a collateral asset, which currently offers 9-11% APY in ETH.
This partnership will enable Venus to capitalize on our growth and allow both Origin and Venus users to capitalize on advanced defi strategies such as looping & leverage for the benefit of both protocols.

About Origin

Origin Protocol is a decentralized platform offering various yield generating products such as wsuperOETHb, OUSD, OETH & ARM. Origin has been building in the web3 space since 2017:

Website: https://www.originprotocol.com/
Twitter: https://x.com/OriginProtocol
Discord: Origin Protocol
Telegram: Telegram: Contact @originprotocol

About Super OETH

Super OETH (superOETHb) is the next iteration of OETH, a superior LST with an extremely tight peg and high yields thanks to a combination of the OETH AMO and DVT direct staking through SSV/P2p. superOETHb yields are able to reach double digit levels, making it an exceptionally perfect token for lending as collateral. superOETHb was built reusing 90% of the code from OETH, for which the codebase has already been audited 12+ times.

Super OETH is the first token in a new category of liquid staking: Supercharged LSTs. Supercharged LSTs will have materially higher yield while being designed for L2s, with a similar risk profile to mainnet LSTs. Ethereum liquid staking is amplified with chain-specific, auto-compounded incentives. Deep concentrated liquidity pools guarantee exits with minimal costs - users will never lose ability to convert back to ETH.

Using Super OETH on Venus will produce higher yield than the other top LSTs and have a near perfect ETH peg. Utilizing a concentrated Aerodrome liquidity pool with the tightest tick possible helps make Super OETH the most pegged L2 LST currently available, while being able to reach double digit yields. Our vision for Super OETH is for it to become the most trusted LST for those seeking to use an LST for leveraged staking.

Obtaining Super OETH is seamless, users can convert from ETH or wETH via any of the following methods:

Minting on the Super OETH dapp
Swapping on WETH/superOETHb
Swapping on OGN/superOETHb

wsuperOETHb is a ERC-4626 tokenized vault designed to accrue yield in price rather than in quantity. When you wrap superOETHb, you get back a fixed number of wsuperOETHb tokens. This number will not go up - you will have the same number of wsuperOETHb tokens tomorrow as you have today. However, the number of superOETHb tokens that you can unwrap to will go up over time, as wsuperOETHb earns yield at the same rate as standard superOETHb. The wsuperOETHb to superOETHb exchange rate can be read from the contract (function number 16), or via the OETH dapp.

Current exchange rate as of 11/22/24: 1 wsuperOETHb = 1.02905839 superOETHb

Performance

Super OETH has seen incredible growth since launch. Proof of Yield tracks the distribution of each Super OETH rebase event and displays the compounded yield on an annualized basis each day. The current Super OETH TVL sits at $546.8m (166k ETH) with a native yield of 10.78% APY. Super OETH has reached the number one spot by TVL on Defillama for yield projects on Base and accounts for a large amount of the Aerodrome Slipstream TVL:

Risk Mitigation

superOETHb and wsuperOETHb were built reusing 90% of the OETH code, which was built reusing 95% of the OUSD code, of which many audits have been done since 2020. Not that long ago, OUSD reached a market cap of $300m without breaking, and without diminishing the APY it was capable of generating. All OETH audits can be found in the audits section of the OETH docs. We have recently retained yAudit to look at our PRs as we code, and OpenZeppelin is also held on retainer to review 100% of the OETH and OUSD smart contract changes. Origin maintains an active bug bounty with rewards ranging in size from $100 OUSD for minor issues to $1,000,000 OUSD for major critical vulnerabilities. The bug bounty program is currently administered by Immunefi, where Origin maintains a median resolution time of 6 hours.

Through its integration with Aerodrome, Super OETH is able to ensure a 1:1 peg with ETH at any scale. The Super OETH AMO holds a portion of the protocol’s underlying collateral in a concentrated liquidity pool with an extremely tight price range within a single tick above 1.0000 WETH. This allows anyone to sell superOETHb into the pool for at least 1 WETH (minus swap fees). The Aerodrome TWAP quoter, which works the same as the Uniswap TWAP oracle, can be used to derive the price of superOETHb on chain. SuperOETHb Tellor and Dia Data oracles are also available. superOETHb is derived from OETH, which has mainnet oracles from Chainlink, Tellor, and Dia Data.

It has actually been recommended that protocols treat superOETHb to be 1:1 with ETH rather than use an oracle, as Aave has done with stETH. Morpho, Ionic, Silo, and Zerolend have all done this with their wsuperOETHb markets, and have not encountered any issues.

By design, superOETHb is the most pegged L2 LST:

Specifications

Contract Addresses:

superOETHb: 0xDBFeFD2e8460a6Ee4955A68582F85708BAEA60A3
wsuperOETHb: 0x7FcD174E80f264448ebeE8c88a7C4476AAF58Ea6

Optional Oracle & Price Feeds:

Next Steps

We would be happy to answer any questions on Origin Protocol, Super OETH, or the proposal itself. The Origin team can be reached at any time via the Origin Discord server.

Oranges · November 25, 2024, 9:46am

Great proposal - adding superOETHb as a collateral asset yielding ~10% apy feels like a no brainer.

Should be a great opportunity for growth for Venus and to align with the Origin community.

Looking forward to this one.

NoOneVII · November 25, 2024, 10:08am

It would be great to partner with some platforms that offer looping strategies when Venus is deployed on Base. Origin is a good choice for this and the 10%+ Apy opportunity will also attract new users to Venus . I support this proposal

Debbie · November 25, 2024, 2:35pm

II completely support this proposal—it’s an excellent opportunity to expand our ecosystem and drive further growth.

pete · November 25, 2024, 2:39pm

The Origin team has a direct line to several of these platforms. We will be in touch with them once onboarded to Venus

mopgawka · November 25, 2024, 5:10pm

I like that suggestion. Let’s run a snapshot

Tomm · November 25, 2024, 11:34pm

origin protocol is a promising protocol on BASE. Venus is glad to have the opportunity to cooperate with origin.

ChristoWarriorCrypto · November 26, 2024, 5:54pm

I find this proposal interesting, especially given the impressive growth of SUPEROETHB. It’s particularly noteworthy that platforms like Origin provide such accessibility, allowing for various strategies within the DeFi ecosystem. I fully support this proposal, and I’m excited to see more projects joining Venus Protocol each day, especially as we are about to deploy on Base. Let’s go all in on this proposal!

pete · December 3, 2024, 4:50pm

The Snapshot vote for this proposal is now live: Snapshot

pete · December 9, 2024, 10:32pm

Snapshot passed with 100% of votes in support. We are now awaiting the recommendation from @chaoslabs

chaoslabs · December 17, 2024, 7:06pm

Overview

Chaos Labs supports listing wsuperOETHb on Venus Protocol’s Core and ETH-Correlated Isolated Pool on upcoming Base Chain deployment. Below are our analysis and recommendations for initial risk parameters.

Technical Overview

Origin is a DeFi platform offering a range of yield-generating products. Currently, Origin supports five established products: OETH (a LST), OUSD (a stablecoin), ARM (a zero-slippage swapping tool), OGN (a value accrual and governance token for all Origin products), and Super OETH.

OETH enhances decentralization and security using DVT via the SSV Network, which splits validator keys into multiple KeyShares distributed across nodes. This ensures continuous operation, as other nodes take over if one goes offline. Additionally, OETH redemptions are supported by Origin’s ARM, enabling lossless 1:1 WETH exchanges with no slippage or price impact. Currently, the ARM is deployed for small-scale redemptions and will scale up with added liquidity in the coming weeks.

superOETHb is Origin’s first token in a new class of yield products called Supercharged LSTs. Compared to traditional LSTs, Supercharged LSTs offer higher APY by combining liquid staking yields from Ethereum with compounded rewards on Layer 2. superOETHb generates Beacon Chain yield from bridged Wrapped OETH and additional rewards from Aerodrome through a protocol-owned, concentrated liquidity position on Base. Notably, superOETHb inherits the majority of its code from OETH, benefiting from its multi-year safety track record and audits.

Super OETHb maintains its 1:1 peg with WETH through a deep concentrated liquidity pool on Aerodrome, managed by the protocol’s Automated Market Operations(AMO). The liquidity pool holds Super OETHb and WETH in a tightly focused price range, ensuring trades occur near 1 WETH per Super OETHb with minimal slippage. To simply explain the mechanism of AMO, it dynamically mints or burns Super OETHb to balance the pool during trades. While the protocol pre-mints some “unbacked” Super OETHb for liquidity, these tokens become fully collateralized when users exchange WETH for them. Similarly, the protocol removes excess Super OETHb from the pool when needed to maintain price stability. This ensures that all circulating Super OETHb is always backed 1:1 by ETH.

To further investigate the operation mechanism of the AMO, we analyzed the quantities of OETH and WETH in the pool over time, as well as the corresponding Pool Price, derived directly from the AerodromeAMOStrategy smart contract. The blue line represents the pool peg price between OETH and WETH over time, as indicated by the Y-axis on the left. It demonstrates that the price of OETH and WETH consistently maintains a strong peg around 1, stabilizing at approximately 0.9999, with only negligible differences in the fifth decimal place. The orange and green lines represent the amounts of OETH and WETH in the pool over time, as indicated by the Y-axis on the right. These lines demonstrate how the liquidity levels of OETH and WETH are dynamically adjusted to maintain a balanced distribution of the two assets within the pool.

To illustrate the overall reward distribution for superOETHb, we begin with the OETH reward distribution process: Rewards earned through Beacon Chain staking are swapped for ETH via the swapRouter when someone calls the harvest function. The ETH proceeds are sent to the Dripper, which gradually distributes rewards over a 7-day drip duration. This ETH is then used to maintain protocol liquidity, mint additional OETH for users, or support other yield-generating strategies.

In addition to OETH rewards, the Aerodrome AMO Strategy generates additional liquidity rewards through its integration with the Aerodrome Slipstream Pool to add the extra reward for superOETHb holders. The strategy interacts with the ICLGauge contract to claim AERO incentive tokens using the clGauge.getReward() function. These rewards are forwarded to the Vault, converted to WETH, and distributed as an additional reward component for superOETHb holders.

Market & Ecosystem

The current TVL of SuperOETHb is 168,321.87 ETH, equivalent to around $646 million based on the price of ETH at the time of writing.

The percentage of wrapped superOETHb has shown a steady growth trend since its launch, currently reaching a wrapping rate of 20.61%.

Liquidity

Since wsuperOETHb is simply the wrapped version of superOETHb and can be unwrapped atomically, this section will focus on analyzing superOETHb’s liquidity.

The largest liquidity source for superOETHb is Aerodrome Finance. Currently, its most active liquidity pool has a total TVL of $560 million, indicating robust liquidity.

Pricing/Oracle

We recommend using the internal convertToAssets rate between wsuperOETHb and superOETHb, as well as the underlying 1:1 assumption of superOETHb to WETH, to directly determine the price of wsuperOETHb.

Collateral Factor, Liquidation Threshold, and Liquidation Bonus

From the above analysis, we observe the steady growth of Super OETH on Base, along with its strong liquidity and stable peg with WETH, supported by its collaboration with Aerodrome.

Given these considerations and superOETHb’s liquidity staking nature, we recommend setting Super OETH’s initial parameters with reference to Liquid Staked ETH assets in the Isolated Pools. However, we suggest slightly lower liquidation threshold and collateral factor values given the highly increased operational flow. Therefore, we recommend setting the initial Collateral Factor at 85% and the Liquidation Threshold at 90% on the Isolated Pool Instance, and 73% and 78% on the Core Instance.

Interest Rate Curve

As we do not anticipate strong borrowing demand for the asset, we recommend a Kink at 45% and Multiplier and JumpMultiplier of 0.09 and 3.0, respectively.

Supply and Borrow Cap

Given the relative novelty of the asset and the associated concentrated relationship of the AMO liquidity relative to the price, we initially recommend a conservative supply cap of 5,000 wsuperOETHb in the ETH-Correlated Instance and 2,000 in the Core Instance. Furthermore, we suggest setting the asset as non-borrowable given the expected lack of borrowing demand due to its yield-bearing nature.

Specification

Asset	wsuperOETHb	wsuperOETHb
Chain	Base	Base
Pool	ETH-Correlated	Core
Collateral Factor	85%	73%
Liquidation Threshold	90%	78%
Liquidation Incentive	2%	10%
Supply Cap	5,000	2,000
Borrow Cap	0	0
Kink	45%	45%
Base	0.0	0.0
Multiplier	0.09	0.09
Jump Multiplier	3.0	3.0
Reserve Factor	20%	20%

Disclaimer

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

Copyright

Copyright and related rights waived via CC0