Summary
The objective of this proposal is to list axlWETH on the Red Bank’s Neutron Outpost.
Motivation
The main motivation for listing axlWETH is to allow users to perform delta neutral leveraged staking with wstETH, which we’re also proposing to list on the Red Bank. As mentioned on the wstETH listing proposal, leveraged ETH staking has been a significant growth driver for protocols on Ethereum, as evidenced by the fact that 51% of Aave V3’s TVL today is wstETH. As such, we believe listing this asset (along with wstETH) has the potential to catalyze activity within the Red Bank.
Additionally, it’s worth noting that axlWETH is currently the second most bridged Axelar asset from Ethereum to Cosmos and has consistently been one of the most liquid assets in the Cosmos ecosystem. This further strengthens our conviction in the popularity of this asset and its ability to generate valuable organic usage of the Red Bank.
Risks
In the sections below we’ll explore the risks associated with listing axlWETH and the proposed risk parameters for the listing.
Technical Risk
In terms of technical risk, the asset meets the minimum requirements suggested by the Mars risk framework:
| Metric | Requirements | Axelar Network |
|---|---|---|
| Time Since Launch | Ideal | The Axelar Network has been live since February 2022. axlWETH has been live on Cosmos at least since May 2022. |
| Custom Public Audit | Ideal | The Axelar Network has had 27 public audits available here. |
| Recent Audit | Ideal | Several audits have been conducted within the last year. |
| Critical Vulnerabilities | Ideal | No critical vulnerabilities have been found. |
| Bug Bounty | Ideal | Axelar has a live ImmuneFi bug bounty program that covers up to $2.25m. |
Centralization Risk
The Axelar Gateway contracts pose an important centralization risk for the asset. If the Axelar multisig that controls these contracts were to be compromised, be it via regulatory pressures, a hack/exploit or just multisig member misbehavior, the asset could suffer significant consequences that could translate into drastic repricings that may lead to protocol insolvency. While control over these contracts is expected to be handed to the DAO over the coming weeks, as of now it’s still under the purview of the multisig.
The following table summarizes the complete list of requirements and their status:
| Metric | Requirements | Axelar Network |
|---|---|---|
| Owner Decentralization | Ideal | The Axelar Network itself is decentralized and governed by AXL holders. The AXL tokens are distributed over time to the core team, operators, investors, and community programs. |
| Admin Decentralization | Not met | The Gateway contracts custodying transferred assets are controlled by a multisig contract. Details of key holders are not published, however information about their team members can be found here. Since current affiliation of key holders is not known, this category is not met. In the future, the Gateway contracts are planned to be decentralized to the control of the Axelar Network. |
| Other Permissioned Addresses | Ideal | No other permissioned addresses. |
Oracle Risk
We propose to use the Pyth ETH/USD feed to price axlWETH.
Note that this implementation uses the price of the underlying asset (ETH), rather than that of the bridged asset (axlWETH). This is important given that, if anything were to happen to the bridge (such as a loss of assets), Mars would effectively be unaware of it and would still be pricing the bridged asset as the underlying, opening the protocol to potential losses. This is a known but important risk. As such, we think the current implementation should be considered an interim one, as a more robust implementation that incorporates bridge proof of reserves is adopted.
Risk Parameters Suggestion
Following the methodology suggested by the Mars Risk Framework, we propose the following parameters:
- Max. LTV: 78%
- Liquidation LTV: 80%
- Deposit Cap: 200 axlWETH
- Interest Rate Parameters:
- Optimal Utilization: 70%
- Base IR: 0%
- Slope 1: 5%
- Slope 2: 300%
- Liquidation Bonus: 10%
- Reserve Factor: 10%
- Usable as collateral? Yes
- Available to borrow? Yes
Implementation
This is a signaling proposal, not an executable proposal.
The Mars smart contracts on the Osmosis chain are currently controlled by the Builder Multisig address. If this proposal passes, the builders will utilize their multisig to make the necessary parameter changes.
Copyright
Copyright and related rights waived via CC0.
Disclaimers/Disclosures
This proposal is being made by Delphi Labs Ltd., a British Virgin Islands limited company. Delphi Labs engages in incubation, investment, research and development relevant to multiple ecosystems and protocols, including the Mars Protocol. Delphi Labs and certain of its service providers and equity holders own MARS tokens and have financial interests related to this proposal. Additionally, Delphi Labs is one of several entities associated with one another under the “Delphi Digital” brand. Delphi Digital’s associated entities and/or equityholders or service providers of such entities may hold MARS and may have financial interests related to this proposal. All such entities, service providers, equity holders and other related persons may also have financial interests in complementary or competing projects or ecosystems, entities or tokens, including Osmosis/OSMO. These statements are intended to disclose relevant facts and to help identify potential conflicts of interest, and should not be misconstrued as a complete description of all relevant interests or conflicts of interests; nor should they be construed as a recommendation to purchase or acquire any token or security.
This proposal is also subject to and qualified by the Mars Disclaimers/Disclosures. Delphi Labs may lack access to all relevant facts or may have failed to give appropriate weighting to available facts. Delphi Labs is not making any representation, warranty or guarantee regarding the accuracy or completeness of the statements herein, and Delphi Labs shall have no liability in the event of losses or damages ensuing from approval or rejection or other handling of the proposal. Each user and voter should undertake their own research and make their own independent interpretation and analysis of all relevant facts and issues to arrive at their own personal determinations of how to vote on the proposal.