Author: Euler Labs
Date: 2025-06-06
Summary
Euler is the biggest lending protocol on Unichain with over $140M in TVL. To expand Euler’s offering on Unichain we are looking to establish an LST-focused market with the purpose of facilitating LST/LRT looping.
Specification
New Assets
- Borrowable Assets: WETH, wstETH, rsETH, ezETH
- Structure: Launch partners require the following structure: WETH should be borrowable only by wstETH with fundamental pricing and wstETH should be borrowable by rsETH and ezETH with market pricing.
Risk Management
The Euler LST market on Unichain will be governed by Euler DAO and risk-managed by Gauntlet and Objective Labs. Euler Labs invites Gauntlet and Objective Labs to provide initial recommendations for risk parameters.
Copyright
Copyright and related rights waived via CC0.
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Objective Labs: Initial Risk Recommendations for Euler LST market on Unichain
Liquidation Loan-to-value Ratios (LLTVs)
We recommend the following:
- an LTV structure in alignment with the mandate
- additional collateral relationships to facilitate EulerSwap
- 2% spread between borrow and liquidation LTVs
- LST market vaults to be accepted as collateral by the Euler Unichain market with the same LTVs as their respective vaults in Euler Unichain
| Asset |
WETH |
wstETH |
rsETH |
ezETH |
| WETH |
0.00 |
0.95 |
0.92 |
0.92 |
| wstETH |
0.95 |
0.00 |
0.92 |
0.92 |
| rsETH |
0.00 |
0.92 |
0.00 |
0.92 |
| ezETH |
0.00 |
0.92 |
0.92 |
0.00 |
Collateral on rows, debt on columns.
Caps
| Asset |
Supply cap |
Borrow cap |
| WETH |
50,000 |
45,000 |
| wstETH |
20,000 |
18,000 |
| rsETH |
10,000 |
9,000 |
| ezETH |
10,000 |
9,000 |
All amounts are in units of the underlying.
IRMs
We recommend using adaptive interest rate models
| Parameter |
Target utilization |
Initial rate at target |
Min rate at target |
Max rate at target |
Steepness |
Speed |
| WETH |
90% |
3% |
1% |
5% |
4 |
7 days |
| wstETH, rsETH, ezETH |
90% |
1% |
0.5% |
5% |
4 |
7 days |
All rates are borrow APY.
Oracles
In line with the market’s mandated structure we recommend:
- fundamental oracle for wstETH
- market oracles for ezETH and rsETH
- configuring WETH as the unit of account
- crossing all oracles by the same ETH/USD price feed if USD is chosen as the unit of account for compatibility reasons
| Asset |
Name |
Methodology |
| wstETH |
RedStone wstETH/ETH |
Fundamental |
| rsETH |
Chronicle rsETH/ETH |
Market |
| ezETH |
Chronicle ezETH/ETH |
Market |
Gauntlet supports the Liquidation Loan-to-Value ratios proposed by Objective Labs. Our analysis indicates that the associated risk profile is low and the LLTVs are competitive. We do want to highlight a difference in oracles between Euler Unichain and the proposed Euler LST Markets (see below):
| Asset |
Unichain Market Oracle |
LST Market Oracle |
| wstETH |
Market |
Fundamental |
| rsETH |
Fundamental |
Market |
| ezETH |
Fundamental |
Market |
Due to rsETH and ezETH both using Market rate Oracles in the proposed Euler LST Market, it’s advised to be conservative, or at least on par with the LLTVs on Euler Unichain.
| Asset |
WETH |
wstETH |
rsETH |
ezETH |
| WETH |
- |
0.95 |
0.92 |
0.92 |
| wstETH |
0.95 |
- |
0.92 |
0.92 |
| rsETH |
- |
0.92 |
- |
0.92→ 0.91 |
| ezETH |
- |
0.92 |
0.92 → 0.91 |
- |
Caps
According to the Uniswap governance proposal, Unichain liquidity incentives will be distributed for the first three months following launch. The incentive program began on April 15th, 2025 and is set to run through July 15th, 2025. It includes rsETH, ezETH, and wstETH as strategically incentivized assets. The continuation of this incentive program beyond July 15th remains uncertain.
Current State
Despite a recent upward trend, supply and borrow usage rates for rsETH, ezETH, and wstETH remain relatively low in the Euler Unichain Market with supply cap usage rates currently under 10% for all three assets. This indicates that while interest in these markets is emerging, they are still in early phases of adoption, and demand has not yet matured.
With the expected launch of a dedicated LST market, we anticipate a natural migration of LST-related activity away from the Euler Unichain markets.
Recommendation
Given the above factors(uncertainty around ongoing incentives, low utilization, and anticipated shifts in market structure), Gauntlet recommends the following cap reductions for the Euler Unichain market and agrees on the caps suggested by Objective Labs on Euler LST market:
| Asset |
Supply Cap |
Borrow Cap |
| WETH |
20,000 (no change) |
18,000 (no change) |
| wstETH |
3,000 → 1,500 |
750 → 375 |
| rsETH |
2,000 → 1,000 |
500 → 250 |
| ezETH |
2,000 → 1,000 |
500 → 250 |
IRMs
Gauntlet supports the Adaptive IRM models and believes it aligns with the strategy for LST markets on Unichain.
Next Steps
- We welcome community feedback.
After discussions with Euler and Objective Labs, we’ve aligned on maintaining the current Euler Unichain Vault caps as the LST markets go live. Given the strong user demand and rapid growth in these markets, we will continue monitoring wstETH, rsETH, and ezETH over the next month. We do note that Unichain incentives are expected to carry on until mid-July.
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