Author(s): Seraphim Czecker
Submission Date: 31.10.2022
RFC: Promote cbETH to collateral tier
Simple Summary
This is an RFC to temperature check the idea of Coinbase ETH (cbETH) as collateral asset. A potential eIP would also include increasing borrow factors and decreasing reserve factors.
The proposed parameters are: collateral factor (CF) of 0.50, borrow factor (BF) of 0.80 and reserve factor (RF) of 0.05.
Edit: Also to change pricing from Univ3 to Chainlink.
Motivation
While the liquidity of cbETH is much lower than on stETH, cbETH could present a huge commercial opportunity for Euler as it did for wstETH (130mil TVL on Euler). Lots of funds expressed interest in trading cbETH/stETH and cbETH/WETH which is so far not possible in DeFi.
Lending cbETH on Euler would also be potentially extremely popular as Euler allows 2-way trading. This way, lenders will receive additional APY as they do on wstETH.
While a non-zero collateral factor is increasing systemic risk, this is mitigated by the presence of a Chainlink Oracle: https://data.chain.link/ethereum/mainnet/crypto-usd/cbeth-usd
With a CF of 0.5, it would take at least a 100% increase in the oracle price to meaningfully drain the protocol. Given the Chainlink oracle includes Coinbase-derived pricing, it’s very unlikely funds won’t sell if cbETH/ETH trades above 2.
The bigger risk is bad debt due to lack of liquidity onchain to sell the collateral. Should the market grow much bigger than onchain liquidity, it could be problematic. However, given Euler’s architecture, it is possible for a fund to liquidate users without selling the collateral. This presents an easy trade to buy cbETH from users at discount.
Specification
- What is the link between the RFC author and the asset?
None. The proposer is the head of risk at Euler Labs and has no link to cbETH.
- Provide a brief description of the asset
Coinbase is supporting liquid staking for its ETH stakers with Coinbase Wrapped Staked ETH (cbETH), where the staked asset is Ether (ETH), and the staking provider and token issuer is Coinbase. With cbETH, Coinbase aims to contribute to the broader crypto ecosystem by supporting high-utility wrapped tokens and open sourcing smart contracts.
cbETH follows the cToken model, which allows it to be ERC-20 compliant and easier to integrate with DeFi more broadly. cbETH can be unwrapped for staked ETH plus accrued rewards net of Coinbase staking fees and any network-imposed penalties. Rewards and penalties affecting Coinbase staked ETH change the conversion rate between cbETH and underlying staked ETH.
- How is the asset primarily used?
cbETH allows users who have staked with Coinbase to sell or transfer the ownership of their staked ETH. cbETH is currently traded on Uniswap, Curve, and the Coinbase trading platform.
- What are the volumes and market capitalisation?
- Market capitalization: $1.23B (Total existing supply * price)
- Average daily volume on the 30 last days: $6,346,540
- cbETH is currently listed on Coinbase platform, Uniswap v3, and Curve. Source: Coinbase Wrapped Staked ETH Price in USD: CBETH Live Price Chart & News | CoinGecko
References
Project - https://www.coinbase.com/price/coinbase-wrapped-staked-eth 3
Whitepaper - https://www.coinbase.com/cbeth/whitepaper 2
Documentation - cbETH Intro | Using cbETH | Sourcing cbETH on Coinbase 1
Github / source code - Source code | Github 3
Ethereum contracts - Coinbase Wrapped Staked ETH | Etherscan 1
Chainlink oracle - cbETH / USD Chainlink Price Feed 4
Audit - Coinbase Liquid Staking Token Audit - OpenZeppelin blog 2
Twitter - https://twitter.com/coinbase 1
Blog - https://blog.coinbase.com/
Support - https://help.coinbase.com/