This proposal aims to add stETH as a collateral option on FiRM, setting collateral factor to 70% and an initial daily borrow limit of $100k. This proposal also intends to increase the collateral factor for the existing wETH market from 70% to 75%.
Background:
On December 16th, 2022, Proposal #74 titled: “Launch FiRM - The Fixed Rate Money Market Protocol” passed through Inverse governance. Since launch, FiRM has been operating flawlessly in “guarded mode” with a single market of wrapped Ether and a limited amount of DOLA available to borrow. WETH was chosen for the debut market as it’s considered as pristine as a collateral can get on the Ethereum blockchain. A DOLA lending supply cap is continuously monitored by the RWG and any expansion or contraction will always be considered in relation to DOLA circulating supply and liquidity. At this time, we are comfortable with onboarding a small selection of new collateral options that have passed our due diligence process, starting with stETH.
Any decision regarding future expansions of the market will be actively managed by our Treasury and Risk Working groups. We are determined to stay true to our improved security posture and gradually add new markets to FiRM as usage grows and the DOLA ecosystem evolves. We have many exciting and innovative ideas to build on top of FiRM involving new markets, use cases for DBR, liquidation mechanisms, and more that will require extensive internal code review and external auditing.
Summary:
The Inverse team has been targeting adding staking derivatives like stETH as collateral options since FiRM inception since they are relatively easy implementations given wETH market and generally existing synergies between rebasing tokens and FiRM’s personal collateral escrow (PCE) feature. The RWG believes Ethereum’s Shanghai upgrade will lead to more LSD adoption, not less. Predictability around withdrawal times makes yield more predictable. This is appealing for whales and large funds, who will consequently be inclined to stake more. Furthermore, stETH has successfully passed the RWG’s due-diligence process (risk assessment documentation can be found here). Lido’s stETH is a powerhouse in the liquid staking category with over $7.4 Billion TVL and growing, and an obvious choice for our first LSD integration.
At launch, the stETH market will have a collateral factor set at 70%. At the same time, we will increase wETH collateral factor to 75%. This will ease the migration of WETH to stETH markets for users who choose to do so. As we move out of the “beta” phase of FiRM production collateral factors will be increased appropriately.
On-Chain Actions:
DBR:
- Call addMarket with the stETH market address
Market:
- Call setBorrowController with the deployed borrowController
- Set collateralFactorBps of stETH market to 7000 (70%)
- Set collateralFactorBps of wETH market to 7500 (75%)
FiRM FED
- Set marketCeiling to 500,000 DOLA for stETH market
Oracle:
- Call setFeed with stETH address, the stETH Chainlink feed, and the correct amount of decimals.