[BIP-542] Enable svETH/wstETH gauge [Ethereum]

PR with Payload

Proposal Summary

This is a proposal to enable an svETH/wstETH gauge on Balancer at:

Gauge address:

Incentivization Strategy

We will adopt a two-pronged incentivization strategy.

We will directly stream rewards to Aura, so that Balancer LPs can maximize yields. We will also bribe Hidden Hand for additional votes to reward our pools.

The bribes will be paid in wETH.

Rewards streamed to Aura will be paid in the form of either our reserve-based utility token, VEC, or in the form of psVEC. psVEC is the yield-boosted version of staked VEC (sVEC) that has been wrapped into a Pod on Peapods Finance to deliver increased rewards.

You can read more about VEC in our Protocol Description below.

Key Links

Website: https://www.vectorreserve.com/

Docs: https://vector-reserve.gitbook.io/

dApp: Vector Reserve | Home

Twitter: https://twitter.com/vectorreserve

Github: vectorreserve · GitHub

Protocol Description

vETH is DeFi’s first Liquidity Position Derivative (LPD), introduced by Vector Reserve.

svETH is the staked version of vETH, which users receive when they stake their tokens to earn additional rewards.

LPDs, or Liquidity Position Derivatives, are a never-before-seen asset class, capturing the yield from various LSTs and LRTs in a diversified fashion - while maximizing the ways to earn yield from each of them.

vETH can be minted using any approved asset on our dApp, and staked to earn yield from the following sources:

  1. Staking and Restaking gains from holding LSTs and LRTs

  2. LP fees from pairing these assets on various DEXs

  3. Upcoming Superfluid Staking: The process of restaking liquidity positions on EigenLayer to earn additional yield. When this feature of EigenLayer goes live, we aim to be the market leader with a large treasury of LST/LRT-based LP positions backing vETH.

This approach allows us to generate best-in-market yield, giving vETH holders an advantage over holding standard LSTs or LRTs.

Holders can then stake the vETH on the Vector Reserve dApp to receive svETH and earn additional rewards.

Our reserve-based utility token, VEC, has a symbiotic relationship with the vETH token. While vETH generates value for the Vector Reserve, being a great source of treasury revenue, VEC is emitted to generate liquidity for vETH pairs across multiple DEXs - ensuring the product remains competitive in all areas. Every VEC token is backed by assets within the Vector Reserve, which grow from a share of yield generated by vETH as well as LP positions acquired through bonding.

With over $30m TVL accumulated across vETH and sVEC since launch, Vector Reserve is pioneering the next stage of the liquid restaking revolution.

Motivation

The Balancer vETH/wstETH gauge will play an important early role in incentivising liquidity providers to help with the process of bootstrapping initial liquidity. It will then serve as an important source of liquidity for svETH on an ongoing basis, supporting its utility and viability for integration into a range of DeFi protocols.

Specifications

Governance: Here is a link to the multisig wallet for the owner safe:

Oracles: No external oracles.

Rate Provider Contract: The rate provider contract for svETH(svETHRateProvider | Address 0xad4bFaFAe75ECd3fED5cFad4E4E9847Cd47A1879 | Etherscan) can be seen here. It is currently under review(sveth review by mkflow27 · Pull Request #11 · balancer/code-review · GitHub) by the Balancer integrations team prior to snapshot voting.

Audits: First audit can be viewed here:

Second audit can be viewed here:

Centralization Vectors: We have a small engineering team, with one lead engineer, but plans and funds are in place to scale as needed. The treasury is currently controlled by the multisig wallet.

Market History: Vector Reserve and vETH minting launched along with svETH staking on Thursday 25th January 2024. Since then Vector TVL has rapidly accumulated over $40m in TVL. There have been no major volatility events attached to svETH since launch.

Value: We believe in migrating the majority yield pool to wherever the majority of user provided LP is. Therefore, if the Balancer pool proves very popular for our community, it is very likely that we will support it to become the primary source of liquidity.

Technical Specification:

Transaction: The Balancer Maxi LM Multisig eth:0xc38c5f97B34E175FFd35407fc91a937300E33860 will interact with the GaugeAdderv4 at 0x5DbAd78818D4c8958EfF2d5b95b28385A22113Cd and call the addGauge function with the following arguments:

gauge(address): 0xD98ed0426D18B115d6388923803e33ad8aaF11F8

gaugeType(string): Ethereum

https://snapshot.org/#/balancer.eth/proposal/0x2587e7e9818f3c7e96a96ddef4464d6fa4817ba97169974d5d2a0d67c0904715