Summary:
Proposal to add weETH/swETH on Ethereum to Gauge Controller.
References/Useful links:
• Website - https://www.ether.fi/
• Documentation - ether.fi Whitepaper - ether.fi
• Github Page - etherfi-protocol · GitHub
• Discord - ether.fi
• Twitter - https://twitter.com/ether_fi
Protocol Description:
ether.fi is a decentralized, non-custodial liquid restaking protocol built on Ethereum, allowing users to stake their ETH and participate in the DeFi ecosystem while maintaining composability. The protocols eETH is a liquid restaking token (weETH is the non-rebasing equivalent), serving as a representation of ETH staked on the Beacon Chain, which rebases daily to reflect the associated staking rewards. Users can deposit ETH into the liquidity pool to mint eETH, hold eETH to accrue rewards, wrap eETH to weETH to use within DeFi, or swap it back to ETH at any time via the liquidity pool. The protocol currently employs a permissioned validator set, however this will transition to permisionless based on the protocol roadmap.
ETH staked through the ether.fi protocol liquidity pool accrues normal Ethereum staking rewards, and is also natively restaked with EigenLayer. Currently when users wish to restake their LST’s they lock their tokens, which breaks composability in DeFi. Staking with eETH on ether.fi automatically natively restakes that ETH to EigenLayer and accrues normal staking rewards while allowing users to keep composability of their eETH in other DeFi protocols. No other liquid staking protocol has this capability.
The eETH contract has been live since June 2023, with eETH going live to all users on November 15th, and has approx. 48,000 ETH held within it. Being a liquid representation of staked Ethereum, the price of the token is aligned to the price of ETH.
Through these mechanisms, eETH acts as a conduit for individuals to engage in Ethereum’s staking & restaking process with the added liquidity, making it easier for them to enter and exit staking positions while also benefiting from boosted rewards.
Motivation:
ether.fi is looking to seed a weETH/swETH stableswap-ng pool on Curve to serve as a primary source of liquidity for weETH. Incentivising this Curve pool will continue to significantly boost the liquidity of the LRT. Higher liquidity ensures that traders and investors can easily enter or exit positions, which is essential for the overall usability and attractiveness of the LRT token within the DeFi ecosystem. To ensure success, ether.fi is committed to growing pool liquidity through bribes and incentives.
Specifications:
- Governance: - Currently, the protocol utilises a multi signature wallet, with the signatories being doxxed ether.fi executives. This will change with the evolution of the protocol, moving to decentralized governance with a DAO and a governance token in approx. 3-6 months.
- Oracles: - The Protocol relies on an oracle for withdrawals and beacon state, however, the reliance on an oracle for beacon state is set to go away in an upcoming Ethereum upgrade. The Oracle is based on the hash consensus mechanism and run by the committee members. Initially, the ether.fi team will be the only ones to operate the Oracle nodes, however the protocol grows, it will add more external parties to join the committee.
- Audits: - Audit reports for the ether.fi protocol are found on the GitBook page - https://etherfi.gitbook.io/etherfi/security/audits. The audits have been carried out by reputable firms such as Certik, Zellic, Nethermind, Omniscia and Solidified to ensure the security of the protocol. An audit competition was also completed through Hats Finance.
- Centralization vectors: - The centralization vectors primarily relate to the Oracle until it becomes decentralized, in line with the protocol roadmap. The price (staking rewards for rebasing) and the validator management (spinning up new validators and exiting them for liquidation) are also currently centralized for the early stages of the protocol to ensure mobility. As mentioned above, the signatories currently consist of the doxxed executive team at ether.fi, however this will be upgraded with the implementation of the ether.fi DAO and governance.
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Market History: eETH is a new Liquid restaking token, having only been live for 1.5 months and growing to ~48k ETH in TVL.
weETH/swETH pool on Curve: 0x5005e71f10d006B087F5dEb48f24480824D3A80B
Gauge: 0x827B8F142A54cC901A626911f4934a75a292f687