Better ETH: Intro to mev-ETH and an Ecosystem overview (pt1)

[sambacha]

Better ETH

Better ETH is the cumulative plan for enabling the best liquid staking service for Ethereum validators and provide the most performant infrastructure for DeFi Protocols and MEV Searchers. I will break down the individual ‘subsystems’ to provide an overview of what they do and how its relevant to both ETH and FOLD Staking.

This is Part 1 of a multi-part series of updates. In this update I will detail changes of FOLD and the new Isolated Lending Protocol. The next update will include details about the new Blockspace Futures/Options Exchange, and the update after that will have details about the LSD Protocol. A final update will summarize all of the previous posts.

Ecosystem Subsystems Mapview

Map Color Legend

Purple: Liabilities

• These are external deposits held within the system or are a liability of the system

Green: Revenue

• These are sources that generate positive cash flow

Red: System Debt

• These are risks underwritten by positions in the system, mainly FOLD staking

Orange: Effects Revenue

• These can positively or negatively effect sources of revenue.

Blue: Validator Subsystems

• These are directly effected by the validator business. Deposits for securing validator stake is required to operate these activities in some capacity.

FOLD v2

New Vault for single asset staking is ‘FOLD v2’

With the Liquid Staking Service going live, we will begin using FOLD for paid RPC access and Priority Block Submission access for SecureRPC. *Access can be paid for on a leased, bribe, or per-consumption basis

This means FOLD can be used as an additional bribe for block builder submissions, for getting lower latency access to the MEV Relay or for accessing our RPC endpoint.

FOLD will underwrite the risk to slashing for validators. This means all slashing risk is born on FOLD staked deposits, which in turn earn a fixed fee from the LSD protocol.

FOLD will earn fees from the ‘Protocol owned Validator Set’. These validator deposits are earned from the excess MEV surplus generated from the Smoothing Pool PID Contract. This contract calculates an avg. fee to distribute to the validators. The excess of this avg. fee is returned to the protocol for purposes of being used to acquire more validator positions. These validator positions are owned by ‘the Protocol’. The Ethereum protocol fees earned directly from these specific validators accrues to the FOLD staking vault and the Manifold Finance Multisig.

Summary for FOLD v2

• FOLD underwrites risk for Slashing
• FOLD now used in accessing RPC services
• FOLD now used in ‘bribing’ or paying for Priority Access for the Relay

Isolated Lending Protocol

The Lending Protocol is written in Vyper

This is the main lending pool which powers the isolated lending market. It is a relatively simple isolated lending pool which works to balance its interest rate to encourage utilization of the pool between a Minimum and Maximum utilization range. Asset shares are also implemented as an ERC20 for compatibility and composability. The contracts are implemented with emergency measures of both a 2 week timelock, and a pool deposit freeze mechanism.

Moreover, pools utilize interest rate epochs, directing fees earned to Protocol-Owned liquidity for 3 days after majors spikes in interest rates, this is done to discourage attacks which suddenly spike interest rates to liquidated borrowers at the gain of lenders. This mechanism is referred to as the ‘Surge Circuit Breaker’.

Note: The Smoothing Pool PID has a similar design construct in that it directs fees in surplus of the calculated feeReceiver reward back into the LSD protocol for purposes of buying protocol owned validators. These mechanisms are built to mitigate attacks.

Additional Features

• The ability to deposit is pausable through an EOA wallet with admin privileges, but upgradability is not possible.
• If there are no outstanding borrows, there is no need to accrue interest, and interest rate should be moved the minimum to encourage borrowing
• Fees should be considered in total assets
• If the daily change in interest rate is greater than the Surge threshold, trigger surge breaker

Risk Market Details

Low

MINIMUM_TARGET_UTILIZATION = 400000000000000000 # 40%
MAXIMUM_INTEREST_PER_SECOND = 15854896000  # Aprox 50% APR

Medium

MINIMUM_TARGET_UTILIZATION = 600000000000000000 # 60%
MAXIMUM_TARGET_UTILIZATION = 800000000000000000 # 80%

STARTING_INTEREST_PER_SECOND = 317097920  # 1% APR
MINIMUM_INTEREST_PER_SECOND = 79274480  # Aprox 0.25% APR
MAXIMUM_INTEREST_PER_SECOND = 31709792000  # Aprox 100% APR

High

STARTING_INTEREST_PER_SECOND = 1585489600  # 5% APR
MINIMUM_INTEREST_PER_SECOND = 634195840  # Aprox 2% APR
MAXIMUM_INTEREST_PER_SECOND = 317097920000  # Aprox 1000% APR 

Stable

Risk configuration for stablecoin to stablecoin pairs, or ETH to staked ETH pairs, and other likewise pairs

STARTING_INTEREST_PER_SECOND = 158548960  # 0.5% APR
MINIMUM_INTEREST_PER_SECOND = 79274480  # Aprox 0.25% APR
MAXIMUM_INTEREST_PER_SECOND = 7927448000  # Aprox 25% APR

Summary

Ask your questions below, we will post additional parts of this update series later tonight and tomorrow. Thanks!

[Yakitori]

Thanks for the intro!

• Could you list clearly the revenue streams for ETH stakers and FOLD owners?

• “Cream” is honestly one of the worst brands in the crypto space, alongside FTX and Terra. Associating with them means that many potential stackers will be turned off whatsoever. What is their role here, do we really need them?

• You mentioned the $MEV token here, I don’t see it anymore. Did it get discarded?

[vhfan]

Thanks for all of this, although hard to understand.

1. Please make a summary that is easy to understand for a broad public that can also be spread to this broad public.

2. Do you have any indication or estimation how much revenue all of this will generate at the start and how much will go to fold stakers? Or will it be a big surprise for you as well?

3. What’s the payout plan gonna be for fold and eth stakers? Monthly, weekly, daily?

[sambacha]

I can empathize with this sentiment, but to be fair any project that does not meet success can be used to create negativity against the team. Let me make the additional point that CREAM had Compound’s support for engineering and technical resources. CREAM’s management changed before the hack (Machi Big Brother (Jeff Huang)), and after the hack Jeff returned to help sort out the community.

I have personally met Jeff and the rest of the CREAM engineering team in Taipei. We will be working with them going forward beyond just the staking acquisition. The CREAM hack was unfortunate, I remember it as it was during my more active involvement in Yearn. The CREAM team brings more than just a staking service, they bring exposure to the Eastern (‘Asian’) Market and Community, something we have zero exposure to.

Note: Manifold Finance already has a pretty distinct and dogmatic approach as it relates to community curation. You can read our “Community Dogma” at the Knowledge Base: https://kb.manifoldfinance.com/docs/Community/intro

We have an opportunity to get in on the ground floor for this new area of finance and computing, and yet somehow we are suppose to keep existing frames of organizational processes and business culture of the last century with us. A surprising number of people that I have encountered in this industry have yet to grok the modern vision of blockchains: a new computing paradigm with the potential to enable the next incarnation of the Internet and the Web, along with an entirely new generation of applications. The CREAM team sees that vision, it seems only right to be working with them if we are wanting to truly be impactful and high-consequence.

We have bigger fish to fry.

[sambacha]

1. ACK
2. I will post some numbers shortly after launch.
3. I think we need some semantic clarification as to what it means to get a ‘payout’. Distribution, Payout, Accrued Earnings, maybe something specific to vault pro rata balances. I will ask the team what these should be. More importantly we have a reporting API endpoint on the backlog for implementation so I will make sure that the answer is in that context. Meaning sending a request to the endpoint will send a response with that info.

[vhfan]

Thanks for answering. About the last point; with payout I mean fold staking rewards payout. And with that I thought of another question. How do we stake our fold? Will it be the same as the current situation since it remains single side staking, or will there be a new way to stake?