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rETH/ETH LPs on Curve

Proposal

On Ethereum, adapt the ankrETH Curve Pool to rETH and deploy it. Then start a proposal for the Curve DAO to add a gauge.

Research how to get a rETH price oracle on L2s to start these Curve pools on Arbitrum and potentially Optimism. I think one way would be to partially copy the protocol smart contracts so that oDAO members can be registered, submit balance updates and reach consensus on the rate.

Why focus on LPs now

  • Liquidity at the fair rate is fundamental to the value proposition of rETH. Based on the stETH Curve Pool (see also stETH Deposits) we should expect supply/demand to fluctuate more than the native Rocket Pool deposit pool can handle and that we will need liquidity on secondary markets.

  • The gas cost to mint rETH represents a barrier to entry for smaller and medium sized stakers. A effecient liquidity pool can enable cheaper swaps both on Layer 1 and Layer 2s.

  • Demand for rETH seems to be the bottleneck for now. There need to be ways to earn yield on top of the built-in staking reward for rETH to be competitive with other DeFi strategies. LPs are easy to implement and they would give us multiple levers to fine tune rETH demand.

  • Long term, lending protocols will want to see enough liquidity available at all times to handle liquidations during ETH crashes. I believe that liquidity is the first step towards many other DeFi integrations.

Why Curve

  • This implementation of a Curve pool targets the protocol exchange rate as the equilibrium rate and this rate is updated whenever the oDAO updates it on the protocol level. It avoids any impermanent loss for liquidity providers without the need for intervention. This is superior to a Uniswap v3 pool, which magnifies impermanent loss unless liquidity provides continuously rebalance their position.

  • Targeting the protocol rate should also be beneficial for peg stability. It creates natural incentives for people to arbitrage towards the desired peg. Uniswap pools don't support the concept of a target rate and could contribute to peg issues (see for example the sUSD/DAI pool on Optimism over the last few months).

  • Besides Ethereum L1, Curve is already deployed on Arbitrum and Polygon and has been whitelisted on Optimism.

  • Curve offers multiple options to incentivize liquidity if that is deemed necessary in the future. It supports liquidity incentives with a protocol token, Curve Bribes as well as liquidity bonding via Olympus Pro.

FAQs

Why not just deploy a Curve Factory pool?

From my understanding factory pools currently only support like kind assets, that should trade at a 1:1 rate. Since staking rewards are accrued by increasing the value of rETH, the rETH to ETH ratio is going to drift over time. That's why a custom solution is needed.

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RPIP-49 Thoughts

If there is a node operator queue, base validators SHALL be given priority over satellite validators

Apr 3, 2024
Fraud Proof Challenge Period

Fraud Proofs have been suggested as a potential alternative for multiple oDAO duties. This section explores the security of optimistic fraud proofs and how it relates to the challenge period and other variables. The challenge period aims to protect against censorship attacks. The first type of censorship to consider is on the block builder level: An attacker can attempt to get builders to exclude the fraud proof transaction from their blocks. If they succeed for every block in the challenge period the fraud goes unreported. One could imagine an attacker using MEV boost relays for something like this, but then a single validator building a block locally during the challenge window could thwart the attack. The second type of censorship requires collusion with a majority of all validators. These validators would not only exclude the fraud proof, but would also fork out blocks from other validators that include it. This attack would require a high level of coordination since forking requires direct intervention of participants, but would be resilient against individuals building locally. Besides the high level of difficulty of both attacks, Ethereum is inherently censorship resilient: censorship creates a DoS vector that could cost validators priority fees while it lasts. It is also possible to detect forking censorship and the challenge period could increase when it is likely. Nevertheless, I believe it is possible to make censorship attacks crypto-economically not viable. These are the variables to consider in this context: The cost to exclude a transaction scales with the reward a challenger would receive for a successful fraud proof, because it determines the priority fee a challenger can pay for inclusion. The payment for censorship needs to make up for that lost reward. The cost also scales with the length of the challenge period or the number of blocks. Under block level censorship, the attacker needs to pay the reward every block, under forking censorship only for 51% of blocks.

May 25, 2023
MEV Proofs

This section looks at the potential of proving MEV stealing with the help of the beacon block root proposed in EIP4788. A relatively straight-forward approach would be to use merkle proofs against the beacon root to objectively determine when a node operator has stolen MEV according to some rule set and apply a penalty accordingly. However there are some challenges around what data the beacon root gives us access to and some limitations for what rules can be verified. State Proofs The beacon block root would give access to: The proposer_index contained in the BeaconBlock itself validators in BeaconState linking indices to pubkey and withdrawal_credentials fee_recipient, transactions, and state_root contained in the ExecutionPayload in BeaconBlockBody So unfortunately, a pure state proof approach doesn't appear to be possible with the beacon root alone. For example it would be possible to prove that:

May 25, 2023
Fraud Proof Scrubs

Instead of the current challenge period that relies on trusted oracles to scrub, this design allows fraud proofs during a challenge period to prevent the withdrawal credential exploit described in [SCRUB CHECK -WITH CRED] in a trustless manner. Design The general flow is similar to what we have now: The node operator initiates a first deposit of 1 ETH to the beacon chain. During a scrub period, a fraud proof can be submitted. a) If no fraud proof is submitted, the remaining 31 ETH can be deposited. b) If a valid fraud proof is submitted, the minipool is scrubbed: ETH is returned to liquid stakers and RPL is slashed and awarded to the person providing the proof.

May 24, 2023
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