Add $KING as a Collateral Asset on Swell chain

Euler DAO Markets
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RFC for $KING

Title: RFC to onboard $KING to Euler Prime on Swell chain

Author: Joe Bjornsen (Founder)

Date: 2025-04-01

  1. Simple Summary

The King Protocol is proposing the listing of its $KING token as collateral on Euler Finance. This would allow users to borrow against their $KING holdings on the Swell chain, increasing the token’s utility and potential adoption. If approved, it would benefit both platforms by providing new opportunities for users to leverage assets and manage risk, and would be a significant milestone for Euler and King Protocol.

King Protocol, (formerly LRT²) is a unified restaking rewards protocol acting as a vault that holds the rewards tokens as underlying assets. Through King Protocol, LRT projects can pool restaking network protocol rewards into a single vault and issue vault share tokens to their stakers (or distributor contract). This system cuts transaction costs and streamlines the rewards process, great for those with smaller stakes who might find it easier to manage and trade their shares collectively. Larger stakeholders can redeem and possibly arbitrage, which will drive the market price of King token.

  1. Motivation/Background

A. The addition of $KING to Euler markets would provide several benefits, including:

i. Increased liquidity for $KING holders
ii. Diversification of assets available on Euler
iii. Growing demand for lending and borrowing against $KING

B. By listing $KING on Euler, we can attract new users and increase liquidity in the market, ultimately benefiting both Euler and King Protocol ecosystems. The potential impact of this listing includes:

i. Increased trading volume and liquidity for $KING
ii. Greater visibility and credibility for the King Protocol ecosystem
iii. Expanded access to lending and borrowing options for users

C. Chains to be listed:

i. Swell chain

D. Relevant Links:

i. Website: https://kingprotocol.org/
ii. Docs: https://docs.kingprotocol.org/
iii. Whitepaper: Whitepaper | King Protocol
iv. Swell blockchain explorer contract address for King: https://explorer.swellnetwork.io/token/0xc2606AADe4bdd978a4fa5a6edb3b66657acEe6F8

E. Next Steps: If approved, the next steps would involve:

i. Conducting thorough security audits and risk assessments.
ii. Configuring liquidity pools and price oracles.
iii. Integrating $KING into Euler’s lending protocol.

  1. Basic Risk Analysis

A. The main risks associated with listing $KING include regulatory uncertainty, smart contract vulnerabilities, and market volatility.

B. Security audits:

i. king-protocol-sc/audits/NM_0314_EtherFi_LRT_2.pdf at master · King-Protocol/king-protocol-sc · GitHub
ii. Bridge to swell audit: PublicAuditReports/NM0452-FINAL_KING_CROSS_CHAIN.pdf at main · NethermindEth/PublicAuditReports · GitHub

C. Liquidity:

i. Liquidity Pools on Swell chain: Velodrome Ambient

D. Price Oracles:

i. DIA Oracle service: We’re integrating DIA as our on-chain oracle provider. It uses the AggregatorV3Interface, ensuring compatibility with standard tooling. The Swell deployment is expected to go live by the end of week (EOW). Once live, the oracle will update prices on-chain when a 0.5% deviation threshold is met. We’ll share the exact contract address as soon as it’s available.

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Thank you @SSJ2_Spartan for submitting this proposal.

After careful consideration, Objective Labs has decided not to recommend onboarding KING to the Euler Swell market. The reasons for this decision are detailed below:

The King Protocol is an LRT utility protocol that collects restaking rewards in a single vault. The KING token respresents a proportional claim on these reward tokens. The KING vault on Ethereum holds $2.7M in EIGEN and $2M in ETHFI for an FDV of ~$4.7M. Thanks to arbitrage mechanisms, the price of KING is expected to track the value of this underlying. The price of KING has fallen by 87% since its ATH in December, corresponding to similar drops in EIGEN and ETHFI.

The Euler Swell market presently contains only ETH-correlated assets. Listing KING would introduce a highly volatile asset, decoupled by design from ETH, which could result in stressful liquidations. While the KING token has atomic redemptions on Ethereum, this mechanism cannot be utilized on Swellchain; instead, liquidations must go through ~$700k in total DEX liquidity on Swellchain.

Based on the fundamental composition of KING, its low market cap and poor liquidity profile, we believe that the opportunity of listing KING on Euler Swell is far too small to outweigh the risks.

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Gauntlet agrees with Objective Labs’ assessment and does not recommend listing KING on Euler Swellchain at this time.

While KING exists on Swellchain an in the LRT ecosystem, its current liquidity profile poses significant risks. On Swellchain, available DEX liquidity has fallen to ~$673K, with only ~$8K in weekly trading volume indicating limited market depth and low user demand. In a liquidation scenario, limited liquidity could result in outsized slippage and heightened insolvency risk. We recommend revisiting once onchain liquidity and market activity improve.

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