One of the key 2022 objectives for Lido is making stETH the DeFi’s unit of account. From this point of view, listing stETH on the major money markets is of paramount importance. So far, wstETH has been successfully listed on Maker, and stETH on AAVE is right around the corner, but Lido is also looking to list wstETH on Compound.
In February 2022, the new Compound price oracles are expected to be released, and those are going to use Univ3 as an anchor. This means Compound listing will require wstETH liquidity on Univ3 to be deep enough to provide good price data and to resist price manipulations. There are two ways of achieving it.
Put incentives on wstETH<>WETH liquidity pair on Univ3. This is a natural and efficient way to gain enough liquidity but it isn’t trivial in terms of development. We would want to have liquidity concentrated within a specific price range, and due to the growing nature of wstETH price, the incentivized price ranges should be tuned now and then. With development and audits, a proper solution cannot be delivered before mid-March or even later.
While waiting for proper Univ3 wstETH<>WETH pair strategy to be developed, the Lido DAO can allocate enough liquidity for this pair from the protocol treasury directly to Univ3. This would allow Lido’s wstETH to get listed on Compound significantly earlier – probably, by a couple of months.
This post aims to initiate a discussion about if the Lido DAO would like to allocate treasury assets worth up to 600 ETH at current prices to obtain a reliable price data source on Univ3 in order to list wstETH on Compound as soon as possible.
Please feel free to ask questions and leave comments. If this proposal gets positive feedback, there will be a snapshot voting in a few days to measure the community sentiment.
This makes total sense and puts little risk to treasury assets. It it assumed the DAO will actively manage the position due to the price drift of wstETH vs WETH? I realize this is a slow creeping problem but wanted to ask it publicly.
wstETH/WETH price ratio is moving really really slow, in fact, it has only shifted by roughly 5% over the past year. It will probably start moving faster after the Merge, but we expect to have a proper strategy on top of the Univ3 liquidity before any tweaks will be required; as soon as we will have adequate incentives on top of the pair, the DAO will be able to withdraw its assets and let the market handle the pair from that moment on.
A quick update on this matter.
The snapshot voting to allocate treasury assets was a success, but the timeline for Compound Univ3 oracles (required for listing) has shifted a bit. They are expected to go live at the end of March, so the allocation will be postponed as well.
The liquidity will be seeded via a custom smart contract, and it will be triggered via omnibus vote sometime later this month.
As stated in the post, the main goal of seeding Univ3 liquidity is to enable Compound price oracles for wstETH. However, the said oracles haven’t been released just yet. We still plan to execute the proposed action, but it will likely happen later this April, we don’t want to allocate treasury assets beforehand.
Jakov here, Lido on Polygon lead
We decided not to go with Uniswap initially because Balancer offered their metastable pool which is perfect for stMATIC/wMATIC and other similar correlated pairs.
Uniswap v3 seems like a logical choice due to efficiency and popularity, but it would require some operational complexity to adjust the LP ranges, so it is not a complete set&forget solution.
However, there is an interesting forum post that seems like a good solution for stMATIC too:
unfortunately, David’s incentvizable pool hasn’t been implemented. While reviewing his work, we found out it wasn’t exactly what we wanted – we wanted a Uni v3 pool where we can eventually shift the incentivized price ranges automatically considering the natural wstETH/ETH price drift. So we postponed it for a while, and we are still struggling to put it on the timeline for now. (That’s basically the reason why we proposed seeding liquidity directly.)