References
Website: https://www.staderlabs.com/
Documentation: Litepaper | Notion | Docs-ETHx | Audits
Social: Twitter | Discord | Telegram
Contracts: Docs - Contracts
Governance: Stader Snapshot | Stader community forums
Markets: Curve ETHX-ETH | Curve ETHX-wstETH | Uniswap
Dashboards: ETHx Metrics | Node Operator Dashboard
Summary:
This proposal is to onboard an ETHx vault for minting mkUSD. The suggested vault parameters are conservative and commensurate with ETHx’s risk profile.
Abstract:
Original PrismaRisk ETHx Report | 12/12/23
PrismaRisk ETHx Addendum 1 | 5/1/24
PrismaRisk has previously reviewed ETHx for onboarding to Prisma with a report published on December 12, 2023. At the time, the risk team recommended holding off until ETHx had time to mature. Since the original report, ETHx has secured an ETHx/ETH Chainlink price feed, prompting a renewed look at the protocol developments and market behaviours. The Prisma Risk team has recently published an addendum to the original report with updated adoption and performance metrics, current as of May 1, 2024. Both reports are linked above.
Prisma Risk now considers ETHx suitable for onboarding to Prisma, while bearing in mind it is a relatively fresh protocol compared to previously onboarded collateral types, and merits a cautious onboarding approach.
Addendum Summary
In less than a year of operating, ETHx has grown its market share to 0.9% - 1% of the LSD market. During late 2023 and early 2024, it experienced significant user growth. Since the initial analysis, DeFi utility has been added, for example with adoption as a restaking asset, which could explain recent growth.
Liquidity remains a pain point, with concentration primarily in Curve pools. The addition of an ETH/ETHx Chainlink price feed is positive, although it is currently not as optimal as Chainlink price feeds on previously onboarded vaults, due to the early stage of the protocol and unknown market resilience. A notable factor is the influence of EigenLayer in ETHx growth trends, which is associated with recent exuberant speculation and may expose ETHx to the risk of sudden and dramatic drawdowns. Such scenarios may expose ETHx to market pressures that test its capacity to process withdrawal demand. Additional data on the asset’s behaviour in various market conditions and the maturity of its market overall will help create more confidence in its resilience.
Concerns mentioned previously related to low TVL and short market history should be considered less significant, given that ETHx has made positive strides in establishing itself in the market while remaining relatively stable in its yield and peg. A conservative onboarding approach should still be taken due to liquidity and price feed oracle concerns, with less exposure afforded than current LSDs.
Motivation:
Prisma has not onboarded an additional collateral type since the protocol’s inception. According to the Risk Team, this was a wise move given that the majority of liquid staking utility was concentrated in a few, relatively battle-tested LSDs. We have been vigilant in reviewing up-and-coming market competitors that may make a suitable addition to the current basket backing mkUSD, and ETHx is the first contender that meets our onboarding criteria. It is ultimately a DAO decision whether another collateral type is desirable from a strategic perspective. We leave these considerations to community review.
Specification:
Suggested Parameters
Mint Cap: 10m mkUSD
MCR: 120%
Mint Fee: 0%
Borrow Interest Rate: 10%