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🟣 Ethena and Eigenlayer and Euler, oh my!
USDe expands restaking, and Euler V2 arrives
Macauley Peterson & Donovan Choy
September 04, 2024
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Welcome back to 0xResearch. Here's what we’ve got for you today:
Ethena x Eigenlayer
Chart: It’s POL time
Degen: Euler relaunch
CT: Penpie exploit
Ethena, EigenLayer and Ether.fi partnership
Ethena Labs announced yesterday a major partnership with EigenLayer and Ether.fi, the top restaking and liquid restaking protocols by TVL.
Ethena’s USDe stablecoin, or to be exact — a synthetic dollar, is being listed next week on Ether.fi for a new liquid restaking token (LRT) eUSD. EigenLayer is also agreeing to accept USDe for restaking collateral to validate AVSs.
The Ether.fi USDe vault will also allow users with USDC or USDT to exchange for the eUSD LRT.
The staked version of USDe (sUSDe) that is earning about a 4.3% APY right now “may also be added as a restaking asset” in the future, the official blog post says.
And of course, eUSD holders will earn the seemingly never-ending emission of points across all three protocols.
When restaking as a sector gained prominence in DeFi last year, the use of ETH as collateral was a straightforward and reasonable decision. ETH carried the market narrative of “pristine” money, given its solid reputation as the driver of Ethereum mainnet validating.
Accepting dollar-denominated assets as restaking collateral was a unique value proposition that Karak leveraged on to differentiate itself, accompanied by a nifty marketing talking point of putting to work “billions of dollars worth of idle assets.” Symbiotic then upped the ante by allowing the use of any ERC-20 collateral, albeit segregated within permissionless third-party Mellow vaults.
That race to the bottom of “restake anything” is only accelerating. EigenLayer is closely watching the competition and slowly chipping away at the competitive edge of newer restaking entrants. We’re all building the same thing, after all.
From a security standpoint, that’s still very much a black box to be concerned about. Millions or billions of cryptoassets sit on AVSs by restaking protocols. Sure, ETH is volatile, but it’s immeasurably a far superior market-tested asset to centralized stablecoins like USDT, USDC, or USDe.
On a somewhat related note, Ethena announced the conclusion of its Season 2 airdrop on the same day of this major partnership. 5% of the ENA supply ($161.2 million) will be distributed across all Season 2 farmers, with the largest 2000 wallets subject to a 50% vesting period with linear unlocks over 6 months.
— Donovan Choy (X: @donovanchoy | Farcaster: @donovan)
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The MATIC staking plateau:
Source: Lido / Dune Analytics
MATIC staking experienced steady growth until February 2023, when the percentage of total staked plateaued at around 4% of the total supply. Since then, MATIC staking rewards have decreased from approximately 6–7% to around 4–5% APY as of mid-2024. Now as the circulating supply nears its 10 billion cap, the staking APR stands at closer to 3%.
The transition to the POL token, which kicked off today, under the rubric of “Polygon 2.0” will over new staking incentives. POL will introduce a 2% annual inflation, half of which is allocated to reward validators keeping the network secure.
— Macauley Peterson
The Aptos ecosystem is accelerating, with both the network and core projects gaining notable volume, transactional activity and deposits. Aptos’ TVL has grown significantly, rising 263% year-to-date from $116 million at the start of the year to over $425M today. Ondo Finance’s tokenized US Treasurys product, USDY, has surpassed $15 million, bringing RWAs to Aptos and highlighting the realities of new innovative financial products that bridge tradfi and decentralized platforms.
Euler v2: A “credit layer” with a security focus
In the comeback story of the year, Euler v2 just went live, bringing a new modular twist on DeFi borrowing and lending. Unlike its predecessor, Euler v2 is a “meta-lending” protocol — infrastructure for creating and managing multiple types of lending products rather than being limited to a specific use case.
For instance, new Euler vaults support virtually any asset as collateral, from ERC-20s and RWAs to synths and NFTs.
The Euler Vault Kit (EVK) and Ethereum Vault Connector (EVC) work together to eliminate the inefficiencies of isolated lending markets by enabling “more capital-efficient cross-collateralized clusters of vaults,” Euler said in a blog post.
Beyond creating something new, security was naturally a top priority in Euler v2's development. After a catastrophic exploit in its earlier iteration, Euler v2 underwent an intense security process with $4 million allocated for audits, making it one of the most thoroughly vetted protocols in DeFi.
A total of 31 audits by 13 different firms were conducted, alongside the largest-ever code audit competition with $1.25 million in prizes. That has to be some kind of record.
This month's PPGC mainly focused on two subjects. First is a discussion about the Ahmedabad Hard Fork and the PIPs included with it (PIP-30, PIP-36 and PIP-45). The second subject revolves around the MATIC-POL transition and the stakeholders it primarily impacts.
Recent discussions within the Ethereum community have highlighted a broader trend in crypto: L1s are converging on leaderless consensus designs to deliver higher performances and hardened censorship-resistance. Magicdhz illustrates the L1 convergence, discusses the two prevailing leaderless consensus designs (multiple concurrent proposers and directed acyclic graph based protocols), and argues that refreshing one's perspective on the L1 landscape is an advantageous position for evaluating adoption and the potential investment value of L1s and their applications.
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To put it quite frankly, folks are struggling to see a catalyst on the horizon.
POL’s new tokenomics will see an annual inflation rate of 2%.
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The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm’s Financial Disclosures.