[stETH] - MIP6 Collateral Onboarding

1. Who is the interested party for this collateral application?

ParaFi Capital

2. Provide a brief high-level overview of the project, with a focus on the applying collateral token.

The Lido Protocol, built on Ethereum 2.0’s beacon chain, allows users to earn staking rewards on the beacon chain without locking Ether or maintaining staking infrastructure.

Lido allows users to deposit ETH and receive stETH. The deposited ETH is then pooled and staked with node operators selected by the Lido DAO. stETH represents the user’s staked ETH balance of the beacon chain along with staking rewards accrued or penalties inflicted on validators in the beacon chain. When transactions are enabled on the beacon chain, stETH can be redeemed for unstaked ETH and accumulated rewards.

Unlike beacon chain ETH, stETH can be freely transferred and traded. Onboarding stETH to MakerDAO would allow users to borrow DAI against stETH, similar to ETH 1.0.

stETH supply stands at 5,572 - worth $3.4MM using current ETH prices.

3. Provide a brief history of the project.

Lido was announced in November 2020. The testnet was released in late November.

Lido staking went live on December 18th after the withdrawal key ceremony ended. Chorus One, Staking Facilities, Certus One, Argent, Banteg (yearn.finance), Alex Svanevik (Nansen), Anton Bukov (1inch), Michael Egorov (Curve/Nucypher), Rune Christensen (MakerDAO), Will Harborne (DeversiFi) and Mustafa Al-Bassam (LazyLedger) came together over a four-day event to generate threshold signatures for Lido’s withdrawal keys in a secure environment on air-gapped machines. Lido will move over to a fully non-custodial solution in the near future.

The Lido DAO manages the liquid staking protocol by deciding on key parameters (e.g. setting fees, assigning node operators and oracles) through the voting power of governance token (DPG) holders.

4. Link the whitepaper, documentation portals, and source code for the system(s) that interact with the proposed collateral, and all relevant Ethereum addresses. If the system is complex, schematic(s) are especially appreciated.

5. Link any available audits of the project. Both procedural and smart contract focused audits.

6. Link to any active communities relating to your project.

7. How is the applying collateral type currently used?

stETH tokens represent a tokenized staking deposit. stETH tokens can be held, traded, or sold. The balance of stETH is based on the total amount of staked ETH plus total staking rewards minus slashing applied on validators.

8. Does one organization bear legal responsibility for the collateral? What jurisdiction does that organization reside in?

N/A

9. Where does exchange for the asset occur?

stETH is currently traded on the stETH-ETH pool on Uniswap which currently has $160k in liquidity. A stETH-ETH pool has also been proposed for Curve Finance.

10 Likes

Update: Curve pool is live at https://www.curve.fi/steth with about $12m of liquidity. Also stETH supply is now ~18000 Eth, or ~$18m.

6 Likes

I agree to add stETH as collateral!

The Curve pool already holds about $15m of liquidity, and that is even before $CRV rewards are enabled.

Today, Argent also enabled staking via Lido from within their app, as did 1inch.exchange a few days ago. It seems safe to say that stETH is not going to go away any time soon.

2 Likes

Yes, I believe there is much more liquidity coming in 2021 for stETH so we should get behind it as a collateral to onboard.