Summary:
Proposal to end existing gauge for the 80/20 USH/unshETH pool on Ethereum mainnet and to activate a new gauge with an updated specification.
unshETH’s governance token, USH, and liquid staking basket token, unshETH, have launched on both BNB and Ethereum mainnet. unshETH is implementing the Balancer 80/20 USH/unshETH pool as its primary liquidity hub on Ethereum and will be utilizing this pool in it’s ve-locking governance sytem.
The existing gauge, proposed here ([BIP-267] Enable USH/unshETH Gauge on Ethereum) is a standard gauge. In order to enable BAL rewards to flow to users who have deposited their BPT into the unshETH ve-locking system, a single recipient gauge is required which would distribute BAL rewards to a fee distributor contract deployed by unshETH.
References/Useful links:
Website - https://unshETH.xyz/
Documentation - https://docs.unshETH.xyz/
Github Page - https://github.com/unshETH
Communities - unshETH
Team Multisig - 0x1b0aedcd95ea7e93291c1f13365e4bd7660bba92
Other useful links?
Twitter - https://twitter.com/unshETH_xyz
Blog - unshETH
Protocol Description:
unshETH is a decentralized, on-chain movement for improving validator decentralization. The Matrix prevents monopolies from growing so large that they stifle innovation and endanger the cryptocurrency economy by morphing into a central point of failure via the creation and enforcement of anti-competitive policies and practices.
Within Ethereum’s DeFi ecosystem, user activities are governed not by laws, but by protocol design and incentives. unshETH’s mission is simple — decentralization through incentivization. Through incentive engineering, unshETH aims to distribute capital across the LSD ecosystem in a manner that prioritizes validator decentralization, and therefore the increased safety of the network.
unshETH aims to be a catalyst for LSDfi. LSDfi refers to a new class of DeFi primitives that are built on top of liquid staking derivatives (LSDs) in order to enable markets on staking yields, validator monopolies, slashing risks, and even validator censorship.
LSDfi enables use cases such as validator decentralization mining, validator dominance options, interest rate swaps, yield speculation, and efficient risk pricing. These mechanisms allow users to take advantage of the unique properties of liquid staking derivatives, and can similarly be used to improve healthy competition among validators and restrict capture of the consensus layer.
Motivation:
unshETH aims to be one of the first protocols to usher in LSDfi. Adding this gauge will allow for USH to have deep, robust liquidity on Balancer markets on any chain. This proposal represents the second step in strengthening the relationship between the two protocols. In addition, this pool’s BPT is intended to be unshETH’s ve-locking token for governance participation and a primary source of liquidity on Ethereum mainnet - with future considerations for other EVM and Layer 0 compatible chains.
Details:
Governance: unshETH’s governance structures for USH token holders will be launched by the end of April 2023
Oracles: No on-chain price feed oracles exist for the USH token at this time.
Omnichain: The USH and unshETH tokens are omnifungible (OFT-20) tokens.
Audits: Certik Audits of unshETH V1 and V2: https://skynet.certik.com/projects/unsheth
Centralization vectors:
The unshETH protocol is in the process of rapidly and iteratively decentralizing the protocol, in keeping with the project’s dedication to the ideology and practice of maximally decentralized finance.
With the launch of unshETH protocol V2, on April 1st, 2023, ownership by the team multisig was fully renounced and any changes affecting user-deposited funds are governed by a 72-hour timelock. Prior to this protocol upgrade there was a centralization risk of the team-controlled multi-sig being able to change oracles and approved minters.
The deployment of unshETH protocol V2 also launches configurable target weights and risk caps on the user-deposited LSD tokens underlying the unsETH token; currently target weights are set at a fair equal split across Liquid Staking ETH tokens issued by protocols chosen by the team based for their market-leadership. The unshETH team’s ability to set those target weights is a centralization risk that will be mitigated with the launch of the DAO governance structures, which the team is targeting to launch by the end of April 2023.
The launch of DAO governance and the transition to a ve-style token staking model (called vdUSH) that will empower the USH token holding community to govern protocol parameters such as the target weights.
Market History:
The USH and unshETH tokens were launched on 1/31/2023. Protocol development was not funded with any outside capital, including that of VC’s or angels. The launch was accomplished via an airdrop, announced on the unshETH blog (unshETH Express: $USH and vd(3,3,3) — unshETH ) to:
- Early adopters of the old guard of liquid staking
- Liquid staking pioneers who’ve been using LSDfi for leverage
- The savviest yield-seekers this side of L1 (LSD-ETH LP farmers)
- Team and early contributors
The airdrop was followed by an initial staking and liquidity mining campaign.
Value:
$USH trading metrics can be seen (Sushiswap: https://app.sushi.com/analytics/pools/0xaaf448d30f01b429fb6e7f9af6a8ff66e694f312?chainId=1 ):
Specifications:
Gauge Weight Cap
unshETH proposes to cap the gauge emissions to 2%. The current intention of this pool is to allow collected fees to be paid back into the gauge via Core Pool Bribes.
unshETH may return to governance at a later date to request an increase as the need arises and the pool has more history to be used to evaluate it against BIP-57.
Gauge Type
A single recipient gauge used as part of the ve80/20 program. As a result BAL incentives will be paid out to a single smart contract that redirects these tokens to lockers.
Core Pools Designation:
While this pool contains no boosted tokens, a 0.5% fee has been set on the pool with an intention to participate in the BIP-19 boosted pool program. As with RBN/USDC gauge, It is therefore requested that 100% of the fees earned by this pool and not paid to the DAO are used to pay bribes on the pool. It is further requested that these fees are used bribe the USH/ETH pool directly, instead of participating in the distribution of bribes by TVL as following the protocol for mainnet instead of for side-chains specified in BIP-19. Handling of this pool should change in line with changes to BIP-19.
Details of Gauge to be killed
Gauge address 2% cap: 0xc85d90dec1E12eDee418C445b381E7168EB380Ab
Details of Gauge to be whitelisted
Gauge address 2% cap: 0x5b79494824bc256cd663648ee1aad251b32693a9
Pool address: 0xd689ABc77B82803F22c49dE5C8A0049Cc74D11fD
Specification
The DAO Multisig eth:0x10A19e7eE7d7F8a52822f6817de8ea18204F2e4f will interact with the Authorizer Adapter Entry Point 0xf5dECDB1f3d1ee384908Fbe16D2F0348AE43a9eA and call performAction with the following inputs:
target: 0xc85d90dec1E12eDee418C445b381E7168EB380Ab
This corresponds to the gauge to be killed.
data: 0xab8f0945
This corresponds to the function killGauge.
The DAO Multisig 0x10A19e7eE7d7F8a52822f6817de8ea18204F2e4f will interact with the AuthorizerAdaptorEntryPoint at 0xf5dECDB1f3d1ee384908Fbe16D2F0348AE43a9eA and call performAction with the GaugeController at 0xC128468b7Ce63eA702C1f104D55A2566b13D3ABD for the target(address) argument and using 0x3a04f900 followed by the gauge address 0x5b79494824Bc256cD663648Ee1Aad251B32693A9 and the corresponding gauge type for the data(bytes) argument.
data(bytes) :
0x3a04f9000000000000000000000000005b79494824bc256cd663648ee1aad251b32693a90000000000000000000000000000000000000000000000000000000000000002
Author
Harpe is an independent contributor to the unshETH protocol, pursuing growth of the unshETH protocol through collaboration with other DeFi teams and DAOs. Harpe is not a member of the protocol development team.