Title: New Collateral: Add cbETH/wstETH as Collateral to ETH Market
Author: @TokenLogic
Date: 2023.05.20
Summary
This publication presents the Sturdy Finance community the opportunity to onboard the Balancer cbETH/wstETH BPT as collateral to the ETH Market.
Abstract
Balancer’s cbETH/wstETH pool is the fourth largest LST/wETH pool with over $25.9M in deposits. Aura Finance has $25.4M in user deposits earning a project 7.84% in yield.
Sturdy would benefit from the first mover advantage whilst enabling users to deploy yield maximising strategies. Due to Sturdy’s yield-sharing mechanics, this is expected to lead to a boost in wETH deposit rates.
The Balancer pool is the highest pool by TVL but only attracts a portion of the overall swap volume with Uniswap v3 generating a lot more fees for Liquidity Providers.
Motivation
This will be the first pool where both constituents are LSTs. Although cbETH fees are higher than most, this represents a BPT with some of the best passive yield. Currently, most of the swap fee revenue is generated on Uniswap. With the Sturdy integration, this may change and create an every higher APY for Liquidity Providers and Sturdy users.
cbETH/wstETH also offers diversification wstETH/wETH and rETH/wETH.
Use Case
cbETH/wstETH serves as a great collateral due to its intrinsic and extrinsic productive yield features. This would be the first asset listing where all the constituents in the pool are Liquid Staking Tokens.
Intrinsic Yield Sources
- cbETH yield
- wstETH yield
- Swap Fees
Users can deposit the BPT into Sturdy Finance deposit contract, borrow wETH interest free and overtime the appreciation of the BPT will enable the repayment of the loan.
Extrinsic Yield Sources
- BAL Rewards
- AURA Rewards
Furthermore, the BAL and AURA rewards can be used to accelerate the repayment and reduce the payback duration.
Risk Considerations
The following details the key roles on the cbETH contract:
1. oracle - updates the conversion rate for the token. Coinbase controls the oracle's address and updates the ‘exchangeRate’ every 24 hours at 4pm UTC. This update cadence may be changed in the future.
2. master Minter - can assign minters and their limits
3. minter - can mint and burn tokens
4. pauser - can pause all transfers, mints, and burns for the contract
5. blacklister - can blacklist an address from transferring, minting, and burning
6. owner - can assign all roles except the admin’s
7. admin - can upgrade the contract, and re-assign itself
The counter-party risk is low with Coinbase as the issuing entity, cbETH is less than 12 months old (launched on 09/22/2022) and is a centralized token.
Market Volatility
cbETH the token, has experienced cbETH/ETH ratio as low as 90% around two weeks after the launch. The chart below shows the price history relative to ETH from Coinbase since launch.
Ref: TradingView Chart — TradingView
wstETH is already on Sturdy Finance on both the stable coin and ETH market and therefore has been the focus of this risk analysis.
Specification
This section defines the initial parameter configuration to support listing cbETH/wstETH colateral on the Ethereum market.
Contract Address
BPT: 0x9c6d47ff73e0f5e51be5fd53236e3f595c5793f2
Gauge: 0x01A9502C11f411b494c62746D37e89d6f7078657
Aura Finance: 0xe35ae62Ff773D518172d4B0b1af293704790B670
Oracle
Via the pool.getRate() function on the cbETH/wstETH BPT contract.
The pool.getRate() function returns the exchange rate of a BPT to the underlying base asset of the pool accounting for rate providers.
Please note the assets within the BPT each have a Chainlink Oracle:
- cbETH/ETH oracle:
0xF017fcB346A1885194689bA23Eff2fE6fA5C483b - stETH/ETH oracle:
0x86392dC19c0b719886221c78AB11eb8Cf5c52812 - cbETH Rate Provider:
0x7311E4BB8a72e7B300c5B8BDE4de6CdaA822a5b1 - wstETH Rate Provider:
0x72D07D7DcA67b8A406aD1Ec34ce969c90bFEE768
Risk Parameter Configuration
Sturdy can unique configure the leverage strategies to match the initial composition of the BPT. This publication presents Sturdy with the opportunity to integrate the BPT via Aura Finance with the following parameters.
LTV: 90%
LT: 93%
LF: 2%
Supply Cap: 3,500 units which is approximately 25% of the BPT supply
Copyright
Copyright and related rights waived via CC0.