Proposal: Add stETH as collateral asset

Summary

List Lido’s stETH as a collateral asset for supplying and borrowing on Cream Finance.

For

Add stETH as collateral asset.

Against

Do not add stETH as collateral asset.

Motivation

Cream will be the first lending protocol that successfully integrates stETH, attracting a large target audience that would like to borrow stETH or lend out their stETH on the Cream platform. In addition, idle stETH on the Cream platform will also be earning yield while kept in the reserves.

Background

Lido is the leading liquid staking protocol on Ethereum.

Lido, built on Ethereum 2.0’s beacon chain, allows users to earn staking rewards on the beacon chain without locking Ether or maintaining staking infrastructure.

Lido lets users deposit ETH and receive stETH in return. stETH represents the user’s staked ETH balance on the beacon chain along with staking rewards accrued or penalties inflicted on Lido validators. Rewards are reflected through a daily stETH balance rebase. When transactions are enabled on the beacon chain, stETH can be redeemed for the newly unstaked ETH along with the accumulated rewards earned through the balance rebases.

stETH tokens represent a tokenized staking deposit. stETH tokens can be held, traded, or sold. The total supply of stETH is based on the total amount of staked ETH plus total staking rewards earned minus a 10% commission fee as well as any slashing penalties applied to validators if they were to occur.

  • Market Cap: 183,000 ETH / $283,000,000
  • Max Supply: -

History and growth of stETH issuance can be tracked here: duneanalytics.com/vsh/lido-finance-extended

stETH is currently traded on the following platforms:

  • Curve Finance
    • Liquidity: $360,934,350.66
    • Volume: $851,429.73
  • Uniswap
    • Liquidity: $13,736,429
    • Volume: $264,503
  • SushiSwap
    • Liquidity: $25,932,216
    • Volume: $855,234

*Numbers up to date as of March 2nd 2021.

Specifications

a. Risks

  1. Slashing

Lido has been working for 2.5 months without bugs or a single slashing event. Still, slashing remains a risk. There is a slashing cover by Unslashed Finance.

  1. Oracle

stETH is not traded on CEXes and thus the oracle has to use Curve pool price + ETH price feed to determine current price, which might be difficult to do safely.

b. Audits

Lido contracts have been audited by Sigma Prime and Quantstamp.

Conclusion

Currently, users that would like to earn yield on their stETH but would rather not take any risks of supplying it to a liquidity pool (eg. impermanent loss) can lend out their stETH to the platform to earn Eth2 rate simultaneously with lending rates. The addition of stETH into Cream Finance will attract a larger audience to the platform, as well as to allow for more composable and efficient DeFi use cases. Aggregators (eg. Yearn Finance) can use stETH in their yield farming strategies, and borrowers and lenders can utilize stETH to their benefit.

6 Likes

For sure, I think adding stETH to CREAM would be a great fit!

3 Likes

stETH / ETH peg has been pretty consistent on Curve over the last 2.5 years (peg between 1 and 1.03), and there’s $350m of liquidity on that pool.

When can we get stETH on Cream?

I plan on holding stETH until the release of ETH 2.0 to support the network upgrade. It would be great to be able to use my stETH as collateral to still allow me to participate in other parts of DeFi.