Overview
Chaos Labs supports listing weETH on Seamless. Our analysis and risk parameter recommendations for the initial listing are below.
weETH
Wrapped eETH (weETH) is the yield-bearing wrapper of ether.fi Staked ETH (eETH). It rapidly grew to be the largest Ethereum LRT, reaching over 2M ETH restaked in the protocol.
It has previously been assessed for use as collateral on other top protocols and found to be appropriate, including in highly leveraged situations. For example, 61% of the weETH on Ethereum, valued at $3.75B, is deposited in Aave.
Base Liquidity
There is a total supply of 40,932 weETH on Base, with 73% of this supply deposited in Aave. Its DEX liquidity on the network has been relatively steady since mid-September, with a 500 weETH for USDC swap able to be completed for under 10% price slippage.
weETH Volatility
Relative to ETH, eETH has low and decreasing volatility, with 3.62% daily annualized over the last 30 days, compared to 4.4% over the last 90. This indicates the asset has a robust peg.
LTV, Liquidation Threshold, and Liquidation Bonus
Given the asset’s deep liquidity, usage in other protocols, and low volatility relative to ETH, we recommend listing it with a 7.5% Liquidation Bonus, 72.5% LTV, and 75% LT.
Interest Rate Curve, UOptimal, and Reserve Factor
Given a similar use case, we recommend aligning the IR curve with the other LSTs in the same market. As weETH is a yield-bearing asset, we expect limited borrow demand. Thus, we recommend setting the UOptimal at 45%. We recommend setting its Reserve Factor to 45% to prevent excessive looping.
Supply and Borrow Cap
We recommend utilizing our usual methodology, setting the supply cap equivalent to 2x the liquidity available below 7.5% (LB) price slippage. We recommend a supply cap of 900 weETH, with a borrow cap set to 50% of this value.
Pricing
Given the asset’s strong peg and demonstrated history of withdrawals, we recommend pricing the asset according to its exchange rate, allowing the protocol to avoid potential liquidation cascades. This allows us also to recommend listing the asset in the ETH Correlated E-Mode.
Recommendation
| Parameter | Value |
|---|---|
| Isolation Mode | No |
| Borrowable | Yes |
| Collateral Enabled | Yes |
| Supply Cap | 900 |
| Borrow Cap | 450 |
| Debt Ceiling | - |
| LTV | 72.5% |
| LT | 75% |
| Liquidation Bonus | 7.50% |
| Liquidation Protocol Fee | 10.00% |
| Reserve Factor | 45.00% |
| Variable Base | 0.00% |
| Variable Slope1 | 7.00% |
| Variable Slope2 | 75.00% |
| Uoptimal | 45.00% |
| E-Mode Category | ETH Correlated |