Index Coop Diversified Staked ETH Index

Tuesday, January 24, 2023

Quick Take

  • Index Coop introduces a diversified staked ETH index.
  • Compound activates its V3 WETH market.
  • Circle releases its Cross-Chain Transfer Protocol docs.
  • RAI explores multi-collateral RAI without governance.

Index Coop Diversified Staked ETH Index

Index Coop introduced $dsETH, an index token for diversified exposure to staked ETH. The index token includes rETH by Rocket Pool, stETH by Lido, and sETH2 by Stakewise. Index Coop plans to add additional liquid staking derivatives to the index that meet its inclusion criteria, which favors decentralized protocols.

The inclusion criteria include liquidity, client diversity, transparency, yield, and security requirements. Notably, Coinbase’s $cbETH was not included in the index due to its hefty 25% commission fee and an undetermined safety rating by the community. The dsETH index only accepts value-accruing tokens, as opposed to rebasing tokens.

dsETH also charges a 25 basis point streaming fee on top of staking fees for tokens in the index. dsETH can be purchased on secondary markets or minted directly on Index Coop. Just under $250k worth of dsETH has been minted so far. Index Protocol is a community-owned fork of Set Protocol V2 that allows users to create crypto indices.

Compound V3 WETH Market Goes Live

Compound governance approved the deployment of a WETH market on Compound V3. Users can now supply ETH to earn interest and COMP incentives. Lending ETH currently yields about 1.5% APR. While ETH cannot be used as collateral, $wstETH and $cbETH are supported as collateral types for borrowing ETH.

A 90% collateral factor on both $wstETH and $cbETH allows users to access a leveraged position on their liquid staking tokens. DeFi Saver also added support for the Compound V3 WETH market, allowing users to use the platform’s boost feature for leverage. The WETH market currently holds over 13k ETH worth of supplied collateral.

Circle Releases Cross-Chain Protocol Docs

Circle Pay, the company behind the USDC stablecoin, released developer documentation for its Cross-Chain Transfer Protocol (CCTP). The protocol allows USDC to be natively burned on a source chain and natively minted on a destination chain. Currently, cross-chain bridges lock tokens in bridge contracts on the source chain.

Since Circle is both the issuer and the bridge operator for USDC, it can mint and burn its stablecoin without having to use lock-and-mint mechanisms. The Cross-Chain Transfer Protocol is now live on the Ethereum Goerli and Avalanche Fuji testnets with a mainnet release planned for Q1. Circle plans to support additional chains later this year.

GearBox Discusses GUSD Depeg Preparedness

Leverage protocol GearBox shared a post discussing possible actions it can take in the event of a GUSD depeg. The post comes as Genesis trading, a company that owes Gemini over $600 million, filed for bankruptcy. GUSD is a stablecoin issued by Gemini. GearBox allows users to open positions on strategies that involve GUSD.

The posts suggest three possible actions in the event of a GUSD depeg. The first suggestion is to do nothing. The second suggestion is to have a multisig that will take action based on certain metrics such as a large drop in liquidity. Lastly, the third suggestion is to have a multisig that also takes action based on significant news events.

Multi-Collateral RAI Without Governance

Martin Köppelmann posted a proposal for multi-collateral RAI without governance. The proposal seeks to allow any token to be used as collateral by creating a new fork of RAI for each new collateral type. Each collateral would have its own RAI token. Users would also be allowed to treat certain collateral types indifferently, such as rETH, wstETH, and cbETH.

RAI is a governance-minimized stablecoin that is not pegged to the dollar and is overcollateralized by ETH. Ameen Soleimani recently shared that Ethereum’s staking yield creates an opportunity cost for RAI borrowers. As a result, RAI’s redemption rate would need to remain negative to make up for the opportunity cost.