Has anyone attempted to quantify/model the potential loss exposure to EarnETH in connection with the rsETH incident?
My understanding is that 9.1% of the EarnETH pool is looped (leveraged) rsETH on AAVE.
Any insight into the effective leverage ratio on this exposure? And am I correct to assume the EarnETH rsETH exposure is held on mainnet (AAVE made a statement suggesting all dilution/loss will be imposed on l2 rsETH holders, but this seems to be an unsettled questions)?
If rsETH losses are shared across all rsETH, that would seem to imply an ~18% loss per turn of leverage. So, for example, if Lido has created 3X leverage via looping, that would seem to imply a potential 54% (3 * 18%) loss exposure on the 9.1% looped rsETH position, amounting to a ~5% loss (~$12M potential loss by my calculations).
I’m not sure what the effective leverage ratio is, and possible I’m making a faulty assumption, but this analysis implies a real likelihood that losses would exceed the EarnETH $3M first loss buffer.
As a first matter, I’d grateful for any insights from others who may be better informed about the rsETH looping strategy specifics and the scope of the EarnETH loss exposure. As a second matter, I’d be curious whether the Lido team has gamed out what course of action it would advise the DAO to persue should there be losses exceeding the first loss buffer.