[SIPS-076] Upcoming Proposal to Update stETH Pricing Mechanism
The purpose of this forum post is to discuss the upcoming proposal to replace the existing stETH pricing mechanism with a new one.
The current approach to pricing stETH is just reading the Chainlink price. While this is a relatively simple and secure mechanism, it introduces share price volatility because of how infrequently Chainlink oracles are updated.
The proposed solution is to use a Uniswap V3 TWAP oracle for price that falls back on the Chainlink oracle price if there is significant deviation in the Uniswap V3 TWAP. This approach smooths pricing (by using a more frequently updated TWAP oracle) while also establishing safeguards against oracle manipulation (defaulting to the Chainlink price if the TWAP reports an unusual price).
The deployed pricing extension contract can be found here: StEthExtension | Address 0xe696Ee6cC174D1551fB5491cb6A8D83044Cf7462 | Etherscan
If the proposal is accepted, a Steward update will enable the strategist to call the cachePriceRouter function on RYETH which will update stETH pricing to point to the new pricing extension.