Proposal to Incentivize wstETH listing on Liqee for further integration

Proposals
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Proposal to Incentivize wstETH listing on Liqee for further integration

It’s quite frustrating that so far there is no lending protocol supporting stETH or wstETH, though I noted a few already in the progress. More importantly, Lido is subsidizing the liquidity pool by spending $250m of LDO per year, to support a turnover of 0.1% of liquidity on Curve. We don’t need that much liquidity in Curve pool, in line with our liquidity diversification strategy, Lido should definitely incentivize other lending protocol to support stETH/wstETH as collateral.

Here is what I propose as new lending venue specifically for liquid staking tokens.

Liqee is the world’s first lending protocol for liquid staking assets (PoS staking tokens, DeFi staking tokens, etc).

They are currently deployed on Ethereum and BSC and is looking to expand into Arbitrum.

Basically, this is the go-to-place for liquid staking tokens, now they mainly support rToken from StaFi, which have rETH (similar to stETH, but it’s cTokenmodel not rebase model) and also rATOM and rDOT. The platform already command $20m assets. The benefit of Liqee is that it basically allow people to take recursive leverage, i.e assuming wstETH are listed there, you are able to use wstETH and borrow ETH with 3.5-5x leverage, substantially enhanced your underlying yield, they are generating very decent yield for underlying tokens (this is on Binance Smart Chain) (picture on top). They are also running liquidity mining incentives with StaFi:(Picture on bottom)

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I think Liqee is great fit for wstETH

I propose the following integration plan:

Proposing to have Liqee to list wstETH as collateral on their market (Etheruem, and possibly launch on Arbitrum? To minimize gas cost), there is already a community post there to propose this and Lido could provide some a grant of $50,000 (in LDO tokens) a week from the Lido Ecosystem Grant Organization for lending mining rewards for bootstrapping wstETh’s liquidity there.

So, the recap, the value props are that

  1. we shall incentivize more protocol support, particularly lending protocol support;

  2. Liqee has intimal traction and good security practice and StaFi’s rToken are already proving success (95% rATOM, rDOT and growing rETH are supplied on Liqee for leveraged lending) .

  3. stETH need to find more adoption and use case, lending particularly leveraged staking lending is the must-go place; and general lending protocol (given their risk appetite is very low) won’t be able to help much that.

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this is the website？ https://www.liqee.io this is excellent idea. we definitely need lending protocols support, but are we proposing stETH?

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i think layer 2 is too difficult to use now, gas went through the roof.

Liqee is going to support Arbitrum or maybe Optimism that’s a better destination

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looks like a decent borrowing volume and yields are insane…, is it real

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The comments here are a bit suspicious…

When did you add stETH to your platform?

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i dont think they need our consent to add support for stETH, it’s permissonless anyway, the only issue is whether we should grant LDO rewards

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I asked when they did, do you know when?

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Not opposed to this in general, but in particular: $50k a week for a protocol of Liqee current seems excessive. How exactly does incentivization work there? I think the best way to make value for Lido would be to incentivize a stablecoin pool only - can we do that?

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i just checked their platform (mainly on BSC), they just added rETH(ETH staking token from StaFi) as collateral and StaFi provide their protocol token as incentive there, didn’t check how much StaFi rewards depositors. ah, i found the article, StaFi provides about $25k per week and Liqee also has their governance token distribution.

we shouldn’t incentivize stablecoin, the best is to incentivize wstETH deposit (similiar to our Curve liquidity incentives), StaFi provides about 10% APY for their rETH depositors, i guess the farming yield is reward APY.

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our incentive mechanism is very flexible, basicly Liqee is a lending market for liquid staking token, so users can deposit i.e ETH, DOT, ATOM, FIL or USX (usd-pegged stablecoin) and also can depoist liquid staking token (i.e wstETH), the great use cases is for users, i.e use wstETH as collateral to borrow ETH or stablecoin, call it leveraged staking and it’s pretty safe.

just like lending protocol, you can incentivize deposit as well as borrowing, the best use for LDO incentive, is to incentivize wstETH deposit, the rewards can be distributed on per block basis or ETH borrowing, so it incentivizes very directly on wstETH depositors or those who borrow ETH for leveraged staking.

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How are you getting price feeds for rETH? How do you plan to get price feeds for stETH or wstETH?

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good catch, price feeds for yield token are tricky, particularly for wstETh (unlike dot, atom etc, no unbonding route), we have some trade-off to cut here.

We use ETH price from Chainlink as the price feed for rETH, so effectively, it is a discount to its actual net value and it is immuned to flashloan attack on liquidity pool, and also we implement a cap on the rETH supply to minimize liquidity risk and also the LTV is lower, at 70%.

stETH is a bit tricky with its rebase function, so we suggest to go with wstETH, the same as rETH, a price feed for ETH from Chainlink will apply.

we also onboarded a number of pro market makers to participate in the liquidation, to ensure there are counterparties ready to engage in liquidating liquid yield tokens.

the risk parameters for all Liqee’s assets are here