This proposal will outline the new collateral tokens that are intended to be added to the protocol and touch on new specialized trading pairs that are planned to be commissioned. The rollout of each feature will not be at the same time due to different times to develop and each component is independent of the other. The snapshot vote will occur before any part is added and an on-chain vote will be used to add certain changes to Ethereum L1 deployment.
Deployment of itoken collateral upgrade on each chain.
The proposed changes are to add five new collateral tokens and one new specialized trading pair onto Ethereum L1 deployment. The five new collateral tokens are wstETH, yVault DAI, yVault USDC, yVault USDT, and yVault stETH/ETH. wstETH will be valued directly from the chainlink price feed and all the yVaults will be valued based on pricePerShare from yearn * the underlying token’s value. For the yVault stETH/ETH, the underlying token is curve stETH/ETH and the valuation of this is subject to potential manipulation. To mitigate this manipulation, the calculation for the value of the underlying token, which is curve stETH/ETH, is done by multiplying the virtual price of the pool by the lowest valued token in the pairing which is almost always stETH. This prices curve stETH/ETH at a sort of floor price but mitigates manipulation risk. The specialized trading pair shall be wstETH/ETH long-only. This trading pair will allow for an easier access into the commonly held position of borrowing ETH to long stETH and collect staking rewards.
The proposed changes intend to add two new collateral tokens and two new specialized trading pairs to the Polygon deployment. The two new collateral tokens are stMATIC and a vault to farm bStable-stMATIC/MATIC. stMATIC will be valued based on the feed setup by Lido as stMATIC has enabled redemptions and minting. The feed by Lido is updated every time someone mints or redeem stMATIC through Lido so it is essentially an index value. There are minor fluctuations around the index value on the secondary market but there has not been a strong deviation from it due to there being redemptions. The second collateral being added is a customized vault built by the developers to farm BAL rewards by staking bStable-stMATIC/MATIC. This vault is ERC-4626 compliant and carries a 10% performance fee that is given back to the protocol. The vault is valued by multiplying the number of assets each vault token controls by the price of the underlying asset, which is bStable-stMATIC/MATIC. To value bStable-stMATIC/MATIC, the protocol will be using a 60-minute TWAP with a 5-minute offset of the bptPrice and multiplying it by the MATIC/USDC conversion rate as the bptPrice for this specific BPT is denominated in MATIC, assuming the pool is trading at parity. This assumption adds tail risk with a potential deviation, however, since stMATIC is able to be redeemed it is likely to stay at its index value. The two new specialized trading pairs are long-only pairs with stMATIC/MATIC and the vault/MATIC. A new general purpose swap implementation will be added to support Balancer V2 and it is not determined whether the UI will add support for the general purpose implementation similar to what is seen for Uniswap V3 and sushiswap.
Note: The methodology and parameters specified to determine the valuation of certain collaterals may be changed if/when it is pushed for a final vote.