Overview
Chaos Labs supports listing wsuperOETHb on Seamless. Our analysis and risk parameter recommendations for the initial listing are below.
Technical Overview
Super OETH is a “supercharged” liquid staking token that combines Ethereum staking rewards with compounded Layer 2 incentives to offer higher APY. It derives Beacon Chain yield from bridged Wrapped OETH and additional rewards from Aerodrome through a protocol-owned concentrated liquidity position on the Base network.
The AMO (Algorithmic Market Operations) is integral to Super OETH’s operations and is responsible for peg stability, capital efficiency, and yield maximization. It manages liquidity in Aerodrome pools, deploying funds to maintain balance and earn AERO incentives. These AERO tokens are harvested, converted into WETH, and distributed to Super OETH holders, automatically increasing their balances. This process, combined with staking rewards from the Beacon Chain, ensures that Super OETH remains backed and that the yield is compelling for holders.
Most of the superOETHb supply is protocol-owned and pooled as liquidity on Aerodrome.
superOETHb is a rebasing asset; thus, the proposal concerns its wrapped version, wsuperOETHb. However, given wsuperOETHb’s short history, lack of useful metrics, and the atomic wrapping and unwrapping mechanism, the analysis will focus on superOETHb instead of its wrapped version.
Base Liquidity
The supply of superOETHb on-chain is 163,000, with 4,400 holders and 22,500 transfers. Roughly 80% of the supply is protocol-owned. The majority of its DEX liquidity is composed of two Aerodrome pools. The biggest is against WETH, and the smaller is against the governance token OGN. The superOETHb/WETH pool boasts $402M of TVL and $73M of buy-side liquidity.
It is important to note that only 1Inch, out of the major DEX aggregators, has implemented wsuperOETHb to superOETHb routing. While only one available routing is not ideal, it is sufficient to allow for a listing.
superOETHb Volatility
Relative to ETH, superOETHb experienced high volatility, but this has improved significantly in the past month following an increase in liquidity. Chaos Labs measured a 60-day annualized volatility of 10.99%, which reflects the period before Aerodrome liquidity was added. Since then, the asset’s volatility has decreased to 2.64%, as the 30-day daily annualized volatility shows.
LTV, Liquidation Threshold, and Liquidation Bonus
Given the asset’s deep liquidity and recent volatility improvement, but a somewhat new minting mechanism and short history, we recommend setting the Liquidity Threshold and Liquidation Bonus in line with wstETH.
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 wsuperOETHb is a yield-bearing asset, we expect limited borrow demand. Thus, we recommend setting the UOptimal at 45%. To prevent excessive looping over wsuperOETHb to farm SEAM rewards, we recommend setting a Reserve Factor of 45%.
Supply and Borrow Cap
Given the deep liquidity available in a tight range, setting the supply cap at 2x the liquidity available under the Liquidation Bonus would result in a higher recommendation than is prudent for a relatively new asset (42K superOETHb, about $100M, greater than the amount of ETH, cbETH, and wstETH deposited on Base at this time combined). Instead, we recommend setting the initial supply cap equivalent to wstETH’s max supply over the past year: 400, with a borrow cap of 200.
To provide additional context, a supply cap of 400 would be sufficient to push ETH utilization above the 80% kink, and if fully utilized, it would drive WETH borrow rates to 22%. To avoid stressing the WETH market more than necessary, we prefer listing with a limited supply cap and gradually increasing it while more WETH supply gets onboarded.
We expect these caps may be filled quickly, given the significant leverage opportunity offered by the high APY of wsuperOETHb. However, this will also benefit the WETH pool by driving additional deposits, and Chaos Labs will continue monitoring the market to provide additional recommendations when needed.
Pricing superOETHb
Given the absence of a Chainlink price feed for wsuperOETHb and the reliance on an AMO-managed liquidity pool, which the Origin multisig could withdraw during an emergency, the market faces potential price volatility due to illiquidity risks. Therefore, Chaos Labs recommends utilizing wsuperOETHb’s internal exchange rate in conjunction with an ETH price oracle to mitigate these risks.
E-mode
As the asset has little history to demonstrate its peg stability, we do not recommend including it in E-mode at the current time. Including wsuperOETHb in E-mode would significantly enhance the asset’s utilization, so we will continue to monitor the market and its stability. If the asset maintains consistent low volatility and steady growth, we plan to introduce it into E-mode in the future.
Recommendation
| Parameter | Value |
|---|---|
| Isolation Mode | No |
| Borrowable | Yes |
| Collateral Enabled | Yes |
| Supply Cap | 400 |
| Borrow Cap | 200 |
| Debt Ceiling | - |
| LTV | 65.00% |
| LT | 72.00% |
| Liquidation Bonus | 7.50% |
| Liquidation Protocol Fee | 10.00% |
| Reserve Factor | 45.00% |
| Variable Base | 0.00% |
| Variable Slope1 | 7.00% |
| Variable Slope2 | 300.00% |
| UOptimal | 45.00% |
| E-Mode Category | N/A |