Integrate inwstETHs on Euler Prime Markets

Euler DAO Markets
1

Authors

InceptionLRT Core Team

Summary

This proposal seeks to integrate inwstETHs (InceptionLRT’s liquid restaking token for wstETH) on Euler Prime Markets, enabling users to borrow wETH and wstETH against their inwstETHs holdings. inwstETHs represents wstETH restaked through Symbiotic via Mellow Protocol and Symbiotic’s curated vaults, with governance-driven restaking strategies. By aligning with Euler Prime’s ETH-correlated collateral framework, this integration combines the security of Lido’s wstETH with Symbiotic’s restaking infrastructure while maintaining Prime’s conservative risk parameters.

Motivation and Opportunity

inwstETHs represents a novel asset class in DeFi, combining the security of Lido’s wstETH with Symbiotic’s modular restaking infrastructure. Listing inwstETHs on Euler Finance aligns with Euler’s mission to support innovative, yield-bearing assets while maintaining robust risk management. Key opportunities include:

1. Restaking Integration: Leverage Symbiotic’s permissionless vaults to secure multiple networks (e.g., oracles, rollups) while earning rewards.
2. Liquidity Growth: Attract users from InceptionLRT’s $50M wstETH vault, expanding Euler’s TVL.
3. Additional Yield Possibility: Enable Euler users to collateralize inwstETHs and borrow against it, unlocking capital efficiency.

Key Benefits

1. Enhanced Security: inwstETHs’ multi-curated architecture (curated by MEV Capital, Re7 Labs, P2P, InfStones and Chorus One) ensures decentralized, battle-tested restaking strategies.
2. DeFi Composability: Seamlessly integrate inwstETHs into Euler’s lending/borrowing markets, enabling cross-protocol strategies (e.g., collateralizing inwstETHs to farm Symbiotic points and Networks rewards).
3. Ecosystem Synergy: Strengthen Euler’s position in the restaking economy by aligning with InceptionLRT, Symbiotic and Mellow Protocol.

Risks

1. Smart Contract Risk: inwstETHs relies on Symbiotic and Mellow’s audited contracts.
2. Oracle Risk: Price feed accuracy critical for liquidation mechanisms.
3. Liquidity Risk: Ensure sufficient liquidity for inwstETHs via partnerships with DEXs (e.g., Uniswap, Balancer).

Risk Parameters

Initial Risk Parameters for inwstETHs

Parameter Value
Liquidation Penalty 10%
Supply Cap $3.0M
LTV 88%
LLTV 90%

These parameters are subject to feedback from Risk Service Providers and will be updated as needed.

We encourage the Euler DAO and community members to provide feedback, share suggestions, and voice their opinions on this initiative.

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Thank you for the post!

What oracles are available currently for this asset? Which one do you think is most suitable for this usecase?

Mellow mainnet launched a week ago. Could you elaborate more on why you’ve selected Prime as the right market for this asset? Prime is a “market tailored to borrowing stable assets against blue chip crypto assets” meaning inwstETHs is conceptually suitable but possibly too immature to be considered a bluechip at this stage.

Is another market more suitable at this time? The LTV / LLTV delta is tight considering the maturity of this asset though a 10% LP should help to avoid issues with profitable liquidation.

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Thank you for the quick reply!

We currently have our own deployed Rate Provider since our vault is ERC4626 (contract link).

We chose Euler as we saw the opportunity to increase the demand for wstETH and ETH borrowing through inwstETHs.
We’ll also be deploying an additional liquidity pool on Balancer v3 soon to increase our secondary market liquidity.

Regarding our LTV/LLTV delta, it’s aligned with the current market benchmark, but we’re open to your suggestions.

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I love this proposal and believe it would bring value to all parties viz; InceptionLRT, euler and the users for sure. One of my major concerns is always smart contract risk exposure.
InwstETHs relies on mellow/symbiotic contract audits. But on the InceptionLRT side, what are some of the steps taken to maintain real-time monitoring of the contract to ensure if any issue were to arise, you can spot it ahead of time?
Finally, how many Dexs is inwstETHs tradable
And you talked about plans to deploy more liquidity on others soon any indication on the timeline and which ones would receive this liquidity?

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All of our contracts have been and will be audited in case of new deployments or updates (you can check them here). We also have a bug bounty program running right now.

inwstETHs is currently tradable on Curve (inwstETHs/wstETH) with $1.5M, with a Balancer v3 pool to be deployed next week.

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Lovely, then I look forward to seeing inwstETHs on euler market soon

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Objective Labs: Recommendations for inwstETHs on Euler Prime

Thank you @mv_inceptive for submitting this proposal.

Objective Labs has decided not to support listing inwstETHs on the Euler Prime market. Euler Prime’s mandate is “[a] market tailored to borrowing stable assets against blue chip crypto assets.” We believe inwstETHs presently does not clear the bar for listing due to the following reasons:

Total Addressable Market

The total supply of inwstETHs on Ethereum is 14.6k tokens (~$33M). 5.1k tokens are locked in a bridge contract. 224 tokens are locked in an AMM contract. The remaining tokens in circulation have a combined value of ~$21M. There are 123 holders. 98% of supply is held by 6 addresses.

Based on this information, inwstETHs does not present a material business opportunity for Euler DAO to warrant inclusion in the flagship Euler Prime market. The highly skewed distribution indicates lack of organic retail demand for the asset. Moreover, the TVL of the asset is too low to be considered a blue chip asset, as mandated by the market.

Liquidity

There is a single liquidity pool on Curve with $1.08M in reserves. In the 3 months since its creation only 11 swaps have been made, indicating low user interest and low DeFi penetration. 98.5% of liquidity in this pool is supplied by a single Gnosis Safe. We speculate but cannot confirm that this multisig is affiliated with MEV Capital based on its other holdings.

Recommendations for InceptionLRT

The primary reason for not supporting this proposal is inwstETHs’s weak top-level metrics (TVL, holders, liquidity). Listing can be reconsidered at a later date once those metrics improve.

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Gauntlet has reviewed the initial proposal to list inwstETHs on Euler Prime.

At this time, we do not believe liquidity conditions on mainnet are sufficient to enable a meaningful initial listing of this asset in Prime. The only DEX liquidity for this asset resides in one Curve pool with ~$500k of inwstETHs available. Over 99% of supply is presently held by 10 wallets. Inception does provide a “flash unstake” mechanism for instant atomic redemptions, but the liquidity available is presently only ~52 wstETH, barely over $100k.

We are open to reassessment should liquidity improve and welcome community feedback.

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