Swell Network joined unshETH with UWP-01 ~2-3 weeks ago: Snapshot. As written in UWP-01, our risk framework is “no more than 10% target weight for new additions” and “no more than 10% of LST TVL can be in unshETH”.
Since the time of the posting, swETH TVL has “swelled” to $44m: https://defillama.com/protocol/swell. Given that, 10% of swETH TVL would be equal to $4.4m, which is ~14% of unshETH tvl today. swETH deposits in unshETH sit at >1000 ETH and swETH is already above it’s target weight of 5%.
Per the already approved UWP-01, from a risk management standpoint swETH target weight is eligible for increase to 10% target weight (and correspondingly, 14% maximum weight). This configuration change does not require a full governance vote - however; in the interest of transparency, posting this RFC topic to solicit feedback and questions from the community prior to enacting the change.
Swell has used it’s vlAURA influence by voting for the USH/WETH pools which have helped deepen liquidity for the core protocol asset and has otherwise been working closely with the unshETH team to support the protocol’s growth in other ways. The Swell Voyage is off to a great start with a good number of unshETH community members participating in staking on Swell, all of whom will be able to direct their swETH towards unshETH deposits. Swell also intends to continue directing our vlAURA towards gauges which are part of the unshETH ecosystem, for the remainder of the proposed 3 months, in order to get most efficient outcome for the the community in terms of yields / rewards which will carry downstream benefits to Swell Network.
At this time, Swell does not have withdrawals live. Given the deep on-chain liquidity swETH relative to its TVL and overall strength of its backing and community - this isn’t necessarily a blocker to increase its target weight up to the maximum for newly whitelisted LSTs (10%). Prior to pursuing further target weight increases, swETH should have withdrawals live.
At this time, swETH is trading below its ETH backing in the swETH-ETH dex pools (i.e. it is slightly depegged), whereas unshETH will be accepting swETH deposits at its mint price, creating a small arbitrage opportunity where ETH can be swapped into swETH at a discount, swapped out for another LSD in unshETH, and converted by to ETH at a profit. This isn’t necessarily a bad outcome, as it will help rebalance the unshETH index into a more diversified mix, while at the same time improving the health / liquidity of swETH in the ecosystem (i.e. unshETH will be making swETH more liquid, which is a core value proposition). Additionally, Swell is actively adjusting their bonus voyage program to discourage users from “looping” swETH deposits which directly drives the de-peg: https://twitter.com/swellnetworkio/status/1669711233728249856?s=20.
- Are there any additional considerations or questions?