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# System prepended metadata

title: rETH/ETH LPs on Curve

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# rETH/ETH LPs on Curve


## Proposal

On Ethereum, adapt the [ankrETH Curve Pool](https://github.com/curvefi/curve-contract/tree/master/contracts/pools/aeth) to rETH and [deploy](https://etherscan.io/address/0xA96A65c051bF88B4095Ee1f2451C2A9d43F53Ae2#code) 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](https://dune.xyz/queries/36557/72603) (see also [stETH Deposits](https://dune.xyz/queries/96263/192763)) 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](https://votium.app) as well as liquidity bonding via [Olympus Pro](https://twitter.com/OlympusDAO/status/1456697161782071304?s=20).



## 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.


