[SIPS-086] Upcoming Turbo STETH Cellar Proposal

Governance
1

Goal

The goal of this forum post is to discuss the upcoming Cellar proposal asking Governance to accept the Turbo STETH strategy.

Context

Lido stands out as the leading liquid ETH staking ecosystem, boasting a substantial $20 billion in liquidity spread across Ethereum mainnet and the L2s. It’s also highly versatile, serving as collateral on numerous lending protocols like Aave, Morpho, and Compound and one of the most traded assets on DEXs like Uniswap. This versatility, coupled with its established Lindy effect and attractive yield potential, positions Lido as an enticing asset for strategists like Seven Seas and DeFine Logic Labs. Consequently, we believe there is a remarkable opportunity for collaboration between Lido and Sommelier.

The Turbo STETH vault will accept ETH as deposit asset.

The strategy generates returns through two primary techniques:

  1. Leveraged Staking: This process involves continuously exchanging ETH for wstETH, using the wstETH as collateral, borrowing additional ETH, and repeating the cycle. Sommelier’s innovative architecture allows for tight loops and close monitoring of on-chain conditions to reduce liquidation risk. Furthermore, the Cellar contract enforces a minimum 1.02 health factor during each rebalance as a safety precaution.
  2. Uniswap V3 LPing for ETH/wstETH Pairs: Mirroring the Real Yield ETH strategy, this method entails providing liquidity to ETH/wstETH trading pairs on Uniswap V3, a leading decentralized exchange. Liquidity providers deposit both ETH and an wstETH into a liquidity pool and earn fees from traders exchanging between the two tokens.

We believe Sommelier has the opportunity to play the role of DeFi infrastructure that provides support for specific ecosystems. In particular, this vault is being built to serve the needs of the Lido community. The vault will take exposure to the following assets:

  • WETH

  • stETH

  • wstETH

and the following protocols:

  • Uniswap V3

  • Aave v2

  • Aave v3

  • Morpho

Proposal for cellar authorization for strategy Turbo STETH

If approved, the chain will accept signed function calls submitted to the cellar contract from the strategy provider.

Name: Turbo STETH

Cellar share token: TurboSTETH

Strategy providers: Seven Seas Capital and DeFine Logic Labs

We will update this post with more details in the coming days, including contract deployments