[MIP-4] Deploy a new market with Ether.fi weETH on Mendi

Authors: Mendi Core Team

Title: Deploy a new market with Ether.fi eETH on Mendi

Type: Mendi Improvement Proposal


Abstract

Eigenlayer restaking has been the dominant narrative this year in DeFi. EigenLayer has grew from $250 million in TVL to $12.255 billion at the time of writing. Ether.fi has been a key player in this growth and the protocol abstracts away all complexity from the end-user and enables easy collaboration between them and EigenLayer node operators. Ether.fi has been also active to decentralize and secure liquid staking experience within the ecosystem and they focus on making it as close to non-custodial as possible. With the launch of weETH on Linea, Mendi Finance should deploy a new market in the lending protocol for weETH to provide lending and borrowing opportunities with this new and dynamically growing market.

Link to snapshot vote:
https://snapshot.org/#/mendifinance.eth/proposal/0x73cf36dc24bc8da3e6259b1c500d7e6aebb81b5258364d8f367ac0f69edeefa3

Proposal Summary

Deploying the weETH market will further leverage Mendi’s top position within the Linea ecosystem and capture trading activities around the weETH token. It will also enable the Mendi community to gain exposure through weETH to EigenLayer restaking rewards and Ethereum execution, consensus layer staking rewards and ether.fi loyalty points.

The Mendi core team will be responsible for deploying the contracts, using the standardized deployment process. The market will be deployed using wrapped eETH due to the fact that eETH such as stETH is a rebasing token. weETH will ensure users accrue their staking rewards while participating in DeFi protocols such as Mendi Finance.

Motivation

The Mendi community will gain considerable benefit from the deployment of the weETH market:

  • Mendi will capture the weETH market on Linea generating further protocol revenue to be distributed to stakers.
  • Lending protocol users will gain exposure to Ethereum execution and consensus layer staking rewards + ether.fi loyalty points + EigenLayer restaking rewards

Technical considerations

Outline the technical aspects of the upgrade and what are the required development works to implement the proposal if the voting passes.

Expected Timeline

  • Governance Vote: From 04/26 to 04/29
  • Deployment Target: Immediately if on-chain liquidity reaches sufficient levels

Deployment Considerations

The core team will be responsible for deploying the new market.

Chainlink price feeds will be used to secure the market and the lending protocol.

https://docs.chain.link/data-feeds/price-feeds/addresses?network=linea&page=2

The methodology behind the price feed will be the same as it was on the ezETH market, using an exchange rate feed. This methodology aligns with the methodology used by Aave on their weETH deployments.

Collateral Factor: 70% target

Due to the fact that weETH is a full market deployment, withdrawals are enabled and has a large global liquidity behind it, the core team proposes to set the collateral ratio at 70%.

Reserve Factor: 20%

Conflict of Interest

There are no conflict of interests regarding this proposal.

Next Steps

Deployment of the market once the vote passes and sufficient liquidity is deployed on Linea DEXs for liquidators to operate.

References and Links

https://etherfi.gitbook.io/etherfi
https://etherfi.gitbook.io/etherfi/security/audits
https://twitter.com/LayerZero_Labs/status/1779706246054265159

1 Like

Given the proven reliability of the ezETH feed provided by API3, why does this proposal not seek to use the API3 weETH feed? This can be made available for Mendi to use instead of the Chainlink feed, with multiple reliable providers being live for it likely around the time the proposal passes.