[BIP-586] Enable Gauge for sUSDe/USDC [Ethereum]

BAL Gauges
1

PR with Payload

Summary:

Ethena proposes a Balancer Gauge for a sUSDe/USDC on mainnet, with uncapped emissions. The sUSDe/USDC pool is 50% yield bearing and will be a core pool.

References/Useful links:

Protocol Description:

Ethena is a synthetic dollar protocol built on Ethereum that provides a crypto-native solution for money not reliant on traditional banking system infrastructure, alongside a globally accessible dollar denominated savings instrument - the ‘Internet Bond’.

Ethena’s synthetic dollar, USDe, provides a stable crypto-native solution for money achieved by delta-hedging staked Ethereum collateral. USDe is fully collateralized and free to compose throughout DeFi.

USDe peg stability is ensured through the use of delta hedging derivatives positions against protocol-held collateral.

sUSDe is the staked version of USDe which earns yield from the protocol.

USDe has already seen extensive use throughout DeFi, making this an interesting asset to onboard to Balancer.

For example, liquidity on Curve is already over >100m:

USDe is currently the 4th highest volume asset in the whole of Ethereum behind ETH, USDC, USDT: Uniswap Interface

Motivation:

Balancer is seeking to establish the sUSDe/USDC as a main liquidity source for users wishing to swap sUSDe to USDC and avoid the 7-day delay for unstaking. This move aims to enhance the trading experience across the Ethereum ecosystem, making it more accessible for users while generating additional value to the Ethena community.

Specifications:

USDe derives its peg stability from executing automated and programmatic delta-neutral hedges with respect to the underlying collateral assets.

Hedging the price change risk of the collateral asset in the same size ensures the change in value of the collateral asset is offset by the change in value of the hedging leg.

This ensures the synthetic USD value of the collateral remains relatively stable in all market conditions.

Considering the recent launch of sUSDe and current scaling plans, further proposals will suggest conservative LTVs and borrow caps in order to thoughtfully scale sUSDe as collateral.

Key Information

  • Users are able to acquire USDe in permissionless external liquidity pools.
  • Approved parties from permitted jurisdictions who pass KYC/KYB screening are able to mint & redeem USDe on-demand with Ethena Labs contracts directly which will include only market making entities.
  • There is no reliance upon traditional banking infrastructure as trustless collateral is held and stored within the crypto-system. USDe is fully backed by users’ deposits at all times.
  • Users are also able to complete Cross Market Arbitrage by minting & redeeming USDe with Ethena and trading USDe in external markets such as Binance or Curve pools to capture price dislocations.

Risks

The protocol is exposed to various risks including but not limited to:

  • Smart Contract Risk
  • External Platform Risk
  • Liquidity Risk
  • Custodial Operational Risk
  • Exchange Counterparty Risk
  • Market Risk

Governance:

Ethena currently operates with a multi-signature wallet, featuring doxxed founding contributors. The protocol is planning to decentralize strategy management to shards holders and transition to decentralized governance in the future.

Oracles:

The Ethena system is split between onchain and offchain components. It does not use any onchain oracles at the moment as all pricing is external to onchain price fees with centralized perpetual markets, but we do use extensive offchain data sources from multiple providers.

Ethena Labs relies on price feeds in order to price the mint and redeem USDe requests per the available derivatives market liquidity as well as manage the risk of our derivatives positions. Real-time data feeds indicate not only where it delegates collateral, but the various risk profiles between the exchanges.

With this in mind, it’s critically important that Ethena has access to & is constantly consuming real-time price feeds, especially from where it matters most; the exchanges where it holds derivatives positions due to their margin requirements.

Ethena consumes real-time pricing information from three primary sources:

  • CeFi Exchanges such as Binance, Bybit, Okx, Deribit, Bitmex and Bitget.
  • Pyth.
  • Redstone

This real-time data is used extensively throughout the system to apply business logic, but to also ensure the integrity of all actions.

Audits:

Ethena has undertaken a multi-phased audit program to ensure the highest level of security on the procotol.

  • Phase 1: conducted initial audit with Zellic on the v1 of the protocol where no critical or high level vulnerabilities were found.
  • Phase 2: architecture design review and economic risk factor analysis with Spearbit’s Kurt Barry former Lead Engineer at MakerDAO
  • Phase 3: phased audit with industry leading firms:
    • Quantstamp
    • Spearbit & Cantina
  • Phase 4: independent audit with Pashov with individual experience of over 50 audits
  • Phase 5: public audit with Code4rena
  • Phase 6: economic and financial risk audit by Chaos Labs
  • Phase 7: upcoming public bug bounty program with Immunefi

Copies of the audit reports can be found here.

Centralization vectors:

See here

Value: The sUSDe/USDC pool on Balancer is intended to serve as a primary liquidity source for users wishing to avoid the 7-day unstaking period and instead swap sUSDe direct for USDC.

sUSDe on mainnet: Ethena: sUSDe Token | Address 0x9d39a5de30e57443bff2a8307a4256c8797a3497 | Etherscan

USDC on mainnet: Circle: USDC Token | Address 0xa0b86991c6218b36c1d19d4a2e9eb0ce3606eb48 | Etherscan

sUSDe/USDC pool on Balancer: Balancer

Mainnet Gauge: 0x84f7F5cD2218f31B750E7009Bb6fD34e0b945DaC

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): 0x84f7F5cD2218f31B750E7009Bb6fD34e0b945DaC

gaugeType(string): Ethereum

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https://snapshot.org/#/balancer.eth/proposal/0x57e64f5d75cd61a26f844a5a98d64e5b5000f92dce70813fdda586502f2aed34

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