Aave has published a proposal to list wsETH on its V3 implementation on Optimism. To be stETH Reserve on Aave V2 has been successful so far.

Leading cryptocurrency protocol Aave [AAVE] recently introduced a new proposal describing the addition of Lido’s packaged stETH, wstETH, to the V3 implementation on layer 2 network (L2) Optimism.

Lido Finance users receive stETH tokens as a reward for wagering their ETH on the liquid staking protocol. However, because stETH is a rebase token, a user’s stETH balance changes as they receive daily staking rewards.

Read Aave’s [AAVE] Price Forecast 2023-24

However, some protocols do not support token rebases, putting stETH holders at risk of missing out on daily staking rewards when offering stETH as liquidity on these platforms.

To address this issue, Lido allowed users to deposit their stETH into a wrapper to create a wstETH, a DeFi-compatible version of the stETH token, which had an underlying subsystem to always display staking rewards. to give.

Aave’s decision to add wsETH to the V3 implementation on Optimism was driven by the success of the stETH Reserve on Aave V2. With $1.09 billion in deposits and USDC and ETH holdings of more than $1.08 billion and $1.03 billion, respectively, the reserve is the largest reserve of any existing Aave deployment.

The large size of the reserve is,

“Partly because several communities have built products that deposit stETH and borrow ETH as part of a reward-maximizing strategy.”

Lido announced stETH as collateral on Aave in February. Both protocols have since benefited from this. Aave stated in her proposal,

“The demand for stETH has increased due to the listing of stETH on Aave V2. Lido DAO takes a small percentage of the rewards received by deploying ETH as income. Aave’s listing of stETH has enabled Aave to offer the best return on ETH, in ETH terms, across major credit markets, consistently outperforming Compound.

In addition, Aave confirmed that including wstETH in the Optimism Liquidity Pool would allow developers to build and deploy similar projects on the L2 network.

State of Aave

According to data from DefiLama, the TVL for Aave’s three implementations was $3.85 billion at the time of going to press. This was down 73% year-on-year.

In August Optimism launched the Liquidity Mining program on Aave, where five million OP tokens were distributed to Aave users on Optimism within a 90-day period. Aave’s TVL is down 41% since then.

Source: DefiLlama

It remains to be seen whether wstETH’s listing on the Optimism Liquidity Pool would lead to growth in the protocol’s TVL as the market prepares to close out Q4 2022.





This post Aave seeks community ‘go-ahead’ to place Lido’s wstETH in its liquidity pool

was published first on https://ambcrypto.com/aave-seeks-community-go-ahead-to-list-lidos-wsteth-on-its-liquidity-pool/

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