LRT and wstETH Unification
LRT and wstETH Unification
Author
@TokenLogic
Creator
0x57ab7ee15cE5ECacB1aB84EE42D5A9d0d8112922
Simple Summary
This publication presents a comprehensive overview of proposed LRT and LST risk parameters updates across Ethereum, Prime, Base and Arbitrum instances of Aave v3.
Motivation
This publication incorporates the feedback and recent discussions into a single holistic publication. For ease of reference, those publications are referenced below:
- [ARFC] wstETH and weETH E-Modes and LT/LTV Adjustments on Ethereum, Arbitrum, Base - 03.12.25
- [ARFC] rsETH LTV & LT Update
- [ARFC] Core Instance - Add ezETH and update rsETH eMode Parameters
- [Risk Stewards]wstETH/wETH eMode Update - Ethereum, Arbitrum & Base Instances
Each of the following sub-sections presents insights into how each parameter is to be adjusted.
Prime Instance - wstETH and WETH eMode
The Prime instance, previously Lido instance, presents a tailored wstETH eMode configuration that offers enhanced capital efficiency relative to other instances of Aave v3. With a Liquidation Threshold (LT) of 96.50% for wstETH on Prime relative to 95.00% elsewhere, a position with a Health Factor of 1.01 can support a leverage ratio of 22.44 on Prime relative to 16.83 on other instances of Aave Protocol.
With all other variables held constant, a small difference in the wstETH deposit yield on Prime relative to the Core instance, has a meaningful impact on the overall return of the wstETH/WETH yield strategy. With a strong focus on sustaining a wstETH deposit yield derived from LRT/wstETH leverage, the wstETH/WETH yield strategy is expected to outperform on Prime relative to other venues supporting the same wstETH/WETH strategy.
rsETH LTV & LT Update
To promote a level playing field between LRTs, a proposal was submitted and approved by Risk Service Providers to align the LTV and LT parameters of rsETH with other LRTs, ezETH and weETH.
The following is proposed for rsETH Core, Prime and Base instances:
- Update rsETH/wstETH eMode: LTV 93%, LT 95% and Liquidation Penalty 1%.
EModes
The introduction of Liquid eModes in Aave v3.2 enables more granular and targeted risk configurations between correlated assets such as LSTs and LRTs. Creating isolated eModes for each pair enhances capital efficiency relative to the current ETH-correlated eModes on the Base instance.
Specification
The following adjustments are to be implemented on all instances within the same AIP.
Prime - Ethereum
Update the current wstETH/wETH eMode
Parameter | Value |
---|---|
Max LTV | 95.0 |
Liquidation Threshold | 96.5 |
Liquidation Penalty | 1.00% |
Collaterals | wstETH |
Borrowable | WETH |
Create new rsETH/Stablecoins eMode
Parameter | Value |
---|---|
Max LTV | 72.00% |
Liquidation Threshold | 75.00% |
Liquidation Penalty | 7.50% |
Collaterals | rsETH |
Borrowable | USDS, USDC, GHO |
Core - Ethereum
Update the current rsETH/wstETH
Parameter | Value |
---|---|
Max LTV | 93.00% |
Liquidation Threshold | 95.00% |
Liquidation Penalty | 1.00% |
Collaterals | rsETH |
Borrowable | wstETH, ETHx |
Arbitrum
Update the current rsETH/wstETH
Parameter | Value |
---|---|
Max LTV | 93.00% |
Liquidation Threshold | 95.00% |
Liquidation Penalty | 1.00% |
Collaterals | rsETH |
Borrowable | wstETH |
Create new rsETH/Stablecoins eMode
Parameter | Value |
---|---|
Max LTV | 72.00% |
Liquidation Threshold | 75.00% |
Liquidation Penalty | 7.50% |
Collaterals | rsETH |
Borrowable | USDC, USDT |
Base
Update the current rsETH/wstETH eMode
Parameter | Value |
---|---|
Max LTV | 93.00% |
Liquidation Threshold | 95.00% |
Liquidation Penalty | 1.00% |
Collaterals | rsETH |
Borrowable | wstETH |
Create new rsETH/USDC eMode
Parameter | Value |
---|---|
Max LTV | 72.00% |
Liquidation Threshold | 75.00% |
Liquidation Penalty | 7.50% |
Collaterals | rsETH |
Borrowable | USDC |
Create new weETH/wETH eMode
Parameter | Value |
---|---|
Max LTV | 93.00% |
Liquidation Threshold | 95.00% |
Liquidation Penalty | 1.25% |
Collaterals | weETH |
Borrowable | wETH |
Create new wstETH/wETH eMode
Parameter | Value |
---|---|
Max LTV | 93.00% |
Liquidation Threshold | 95.00% |
Liquidation Penalty | 1.00% |
Collaterals | wstETH |
Borrowable | wETH |
Create new cbETH/WETH eMode
Parameter | Value |
---|---|
Max LTV | 93.00% |
Liquidation Threshold | 95.00% |
Liquidation Penalty | 2.00% |
Collaterals | cbETH |
Borrowable | wETH |
References
- Implementation: AaveV3Ethereum, AaveV3EthereumLido, AaveV3Arbitrum, AaveV3Base
- Tests: AaveV3Ethereum, AaveV3EthereumLido, AaveV3Arbitrum, AaveV3Base
- Snapshot: Direct-to-AIP
- Discussion
Copyright
Copyright and related rights waived via CC0.