Integrate tETH on Euler Prime Market

Euler DAO
1

Summary

Treehouse Proposal propose the addition of tETH as a supported collateral and debt asset. By integrating tETH , Euler will enhance its collateral diversity and attract new users, leveraging Treehouse’s liquid staking token (LST) framework to boost lending and borrowing activity on the platform. Moreover, we will continue to offer a Treehouse Nuts Rewards as an incentive for users who pledge tETH as collateral on Euler.

To enhance investor confidence in Treehouse Protocol, we will introduce atomic withdrawals, enabling users to instantly swap their tETH for wstETH at a 2% fee, supported by a liquidity reserve earmarked at a percentage of our TVL (currently around $5M). Our atomic withdrawals will provide our users with quick access to liquidity and also ensures that liquidators’ needs can be met.

Motivation and opportunity

Listing tETH as collateral and debt assets on Euler expands Euler’s collateral options, which will increase Euler utilization and contribute to long-term activity on the platform.

By integrating tETH into the Prime market, Euler will unlock new utility for tETH holders, allowing them to collateralize their assets while continuing to earn leveraged staking rewards.

Benefits of adding Assets to Euler markets

  • Increased Activity in the Prime market
    Integrating with Euler will encourage stakers to utilize their tETH for leverage, driving higher lending and borrowing volumes within the Pool.
  • TVL Growth
    This partnership will expand tETH’s community and increase TVL on Euler while enhancing its utility. Euler users can take advantage of tETH’s staking features for added benefits.
  • Improved Capital Efficiency
    tETH holders can generate additional yield on their collateralized assets, promoting greater adoption and expanding the utility of the pool.

Chains to be listed - as continuation of step a., specify which chains will be best to list the asset and why.

At present, the Ethereum mainnet is our focus. In the future, as we expand tETH to Base and other Layer 2 networks, we welcome proposals for listings on these chains to enhance cross-chain interoperability.

Useful Links

Next Steps - clear and concise description of the next steps if the proposal is approved.

Marketing Push: Launch a targeted awareness push to promote tETH’s integration on Euler, highlighting the ability to borrow against tETH to increase exposure to Nuts.

Basic Risk Analysis

Below, a non-exhaustive list of risks relevant to tETH are outlined, along with the protocol’s risk management strategies.

General analysis

The primary idiosyncratic risk associated with tETH is the potential for de-pegging events, where the price of the underlying wstETH significantly deviates from ETH.

To mitigate this risk, Treehouse Protocol has developed a contingency plan that activates if an LST de-peg exceeds 2% for over 24 hours. The protocol continuously monitors the ETH/LST price ratio, and upon triggering the contingency, it automatically unwinds positions by:

  • Swapping LST for ETH via liquidity pools.
  • Repaying loans and withdrawing collateral.

Once these steps are taken, users will have the option to withdraw their deposits in LST, ensuring they maintain control over their assets.

For a full list of Risks & Risk mitigations, head to Treehouse Docs.

Security audits

Liquidity and volatility

Currently, tETH has over $18M in liquidity, paired with weETH and wstETH across Ethereum and Arbitrum. You can explore the full list of liquidity pools available on this page.

Price Oracles

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Gauntlet - Parameter Recommendations for tETH on Euler Prime (2025-03-05)

Gauntlet recommends the following risk recommendations to the protocol:

Cap Recommendations

  • Set tETH supply cap to 8,000
  • Set tETH borrow cap to 2,000

Present circulating supply of tETH is on mainnet is ~70,000. The supply cap recommendation covers ~11.5% of the total supply. We aim to maximize usefulness to users with this approach while not taking on oversized exposure to tETH supply in the worst case. We note that Treehouse currently offers instant redemptions of tETH at a 2% fee, which provides an additional avenue of liquidity for liquidators outside of DEXes.

Low borrow demand is expected for this vault, in line with existing market offerings for LSTs. We recommend a borrow cap that is 25% of the supply cap. Presently swapping this full borrow cap of tETH begins to incur price impact of ~2%.

The cap recommendations are pursuant to the implementation of a composed tETH / WETH exchange rate, WETH / USD market rate oracle for the new vault, or an oracle with similar risk profile. This is to minimize sporadic undercollateralization risk in the tETH collateral markets.

We remain cognizant of slashing risk and will set LLTVs accordingly below. We also recognize market risk wherein a depeg in tETH / WETH market price could lead to increasing deposits of tETH to borrow assets at discounted prices. Historically the risk of any such lasting effect is low, and we also see recent tETH / WETH price volatility is low and decreasing.

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Interest Rate Curve Recommendations

Borrow demand for tETH is expected to be minimal. As such we will recommend the same parameters as are currently set for the rsETH Prime vault’s interest rate curve:

  • kink utilization of 25%
  • kink borrow APY of 4.6%

LLTV Recommendations

Here we aim to maximize risk-adjusted capital efficiency for users. We note the primary opportunity is likely tETH / WETH and tETH / wstETH looping.

Collateral Debt LLTV Borrow LTV
tETH cbBTC 72% 70%
tETH cbETH 90% 88%
tETH eBTC 72% 70%
tETH ETHx 90% 88%
tETH ezETH 90% 88%
tETH LBTC 72% 70%
tETH mETH 90% 88%
tETH rETH 90% 88%
tETH rsETH 90% 88%
tETH SolvBTC 72% 70%
tETH tBTC 67% 65%
tETH USDC 77% 75%
tETH USDS 77% 75%
tETH USDT 77% 75%
tETH WBTC 67% 65%
tETH weETH 90% 88%
tETH WETH 93% 91%
tETH wM 77% 75%
tETH wstETH 93% 91%
tETH wUSDM 77% 75%
cbBTC tETH 70% 68%
cbETH tETH 93% 91%
eBTC tETH 67% 65%
ETHx tETH 87% 85%
ezETH tETH 90% 88%
LBTC tETH 70% 68%
mETH tETH 90% 88%
rETH tETH 90% 88%
tBTC tETH 70% 68%
USDC tETH 80% 78%
USDS tETH 70% 68%
USDT tETH 80% 78%
WBTC tETH 65% 63%
weETH tETH 93% 91%
WETH tETH 93% 91%
wM tETH 70% 68%
wstETH tETH 93% 91%
wUSDM tETH 70% 68%

Next Steps

  • We welcome community feedback
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Objective Labs: Recommendations for tETH on Euler Prime.

Objective Labs agrees with Gauntlet’s parameter recommendations for caps, IRM, and LLTV.

Oracle

We would like to recommend a different oracle setup which we believe is more suitable for leveraged ETH staking:

  • ChainlinkOracle with the Chainlink tETH / wstETH Exchange Rate price feed
  • LidoFundamentalOracle (wstETH / ETH)
  • ChainlinkOracle with the Chainlink ETH / USD price feed
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