# MIP10c3: Subproposal to Onboard Oracle

## Preamble

MIP10c3-SP#: 36
Author(s):
Contributors:
Type: Process Component
Oracle Team Name:
Status:
Date Proposed: <yyyy-mm-dd>
Date Ratified: <yyyy-mm-dd>

## Sentence Summary
MIP10c3-SP36 onboards the wstETH/USD Oracle.

## Specification

### Introduction

This Oracle would provide the wstETH/USD price as part of the collateral onboarding process for wstETH.

[wstETH](https://docs.lido.fi/contracts/wsteth) is a constant-balance wrapper ERC20 token that converts stETH balances which undergo periodical rebases to the underlying shares balances. As Lido oracles report ETH2 rewards, penalties, or slashings, wstETH token balances remain unchanged: instead, the amount of stETH corresponding to one wstETH (and thus wstETH price) changes. Anyone can convert stETH to wstETH and vice versa on-chain through [`wstETH.wrap`](https://docs.lido.fi/contracts/wsteth#wrap) and [`wstETH.unwrap`](https://docs.lido.fi/contracts/wsteth#unwrap) functions.

Since wstETH and stETH represent the same underlying asset (Ether staked with Lido plus the rewards accrued) and can be mutually converted at any given time, one can consider the combination of wstETH and stETH liquidity on all exchanges as contributing to a common liquidity pool. stETH price can be converted to wstETH price by multiplying the former by a coefficient obtained from either stETH or wstETH contract.

Right now the absolute most of the stETH liquidity resides in the [stETH/ETH Curve pool](https://etherscan.io/address/0xDC24316b9AE028F1497c275EB9192a3Ea0f67022). Lido plans to facilitate several new wstETH and stETH pools soon.

Since Curve doesn't have an off-chain API, there are two ways to get a flashloan-resistant stETH/ETH price: use Ethereum JSON-RPC or The Graph protocol to query the spot price calculated on the latest block's state.

We propose to use to JSON-RPC because:

1) There are no widely adopted Curve subgraphs that support querying spot prices.
2) Using JSON-RPC allows each feed operator to use their own endpoint whilst querying a subgraph makes The Graph API endpoint a single point of failure.

This will require configuration changes to the Feeds' environments: making sure there is a JSON-RPC endpoint accessible from the target environment and passing this endpoint to Setzer using an environment variable.

### Oracle Data Model

As mentioned in the [introductory section](#Introduction), in order for the Oracle Data Model to accurately reflect the realities of the market, exchange liquidity for both wstETH and stETH should be considered.

To include exchanges that trade stETH/ETH pair in the price calculation, the stETH/ETH price can be converted to wstETH/ETH price by multiplying the former by the amount of stETH one can currently get from unwrapping 1 wstETH. This coefficient can be obtained by calling `stEthPerToken` view method on the [wstETH contract](https://etherscan.io/token/0x7f39c581f595b53c5cb19bd0b3f8da6c935e2ca0):

wstethEthPrice = stethEthPrice * stethPerWsteth

| Source | Asset Pair | Quorum | Feed Model | Oracle Model |
| :-------------- | :------------ | :----: | :---------: | :----------: |
| Curve | stETH/ETH | 13 | N/A | N/A |

TODO: add new liquidity pools and CEX pairs as they go live (e.g. Uniswap v3 wstETH/ETH).

### Oracle Supporting Data Model(s)

**ETH/USD (canonical)**

| Source | Asset Pair | Feed Model |
| :-------------- | :------------ | :----------: |
| Binance | ETH/USD | Median |
| Bitstamp | ETH/USD | |
| Coinbase | ETH/USD | |
| FTX | ETH/USD | |
| Gemini | ETH/USD | |
| Kraken | ETH/USD | |
| Uniswap | ETH/USDC | |

### Oracle Address

- Medianizer: Mainnet TBD
- Oracle Security Module (OSM): Mainnet TBD

### Supported Tools

- Setzer: [wstETH/USD support](https://github.com/makerdao/setzer-mcd/pull/33)
- Omnia: update setzer version to new one which supports wstETH/USD
- wstETH/USD Medianizer: use standard medianizer like the one [ETHUSD uses](https://etherscan.io/address/0x64de91f5a373cd4c28de3600cb34c7c6ce410c85#code)

### Remaining Work

- Deploy and configure Medianizer and Oracle Security Module smart contracts to Mainnet
- Coordinate Feeds to upgrade to latest release candidate
- Push new relayer configuration with wstETH/USD mainnet Medianizer smart contract address

### Summary

Lido allows users to deposit ETH and receive stETH. The deposited ETH is then pooled and staked with node operators selected by the Lido DAO. stETH represents the user’s staked ETH balance of the beacon chain along with staking rewards accrued or penalties inflicted on validators in the beacon chain.

When withdrawals are enabled on the beacon chain, one will be able to redeem stETH for unstaked ETH and accumulated rewards. Unlike beacon chain ETH, stETH can be freely transferred and traded. Onboarding wstETH to MakerDAO would allow users to borrow DAI against stETH, similar to ETH.

Unlike ETH, the wstETH token is a productive asset which ETH value normally goes up along with staking rewards accrued in the beacon chain. Using such productive assets as collateral in the Maker protocol allows the debt to the collateral ratio to decrease over time.

Currenly the stETH/ETH pool is [the largest pool](https://curve.fi/steth) on Curve with over $1.9b in liquidity, which makes (w)stETH one of the most liquid assets in DeFi.