👻Aave: Add stETH to Aave V2

Voting Recommendation by (Discord: Raho#0007)

Summary:

If passed, this proposal will allow Aave users to deposit their (Lido) stETH in Aave and borrow against it.

About stETH:

stETH represents Ethereum that is staked in Lido’s Ethereum 2.0 staking protocol. When a user deposits their Ethereum into Lido, they receive stETH in return which essentially is a tradable token (pegged to ETH) representing their staked tokens.

About this proposal:

To date, the usability of stETH has been rather limited (Curve: stETH/ETH, Balancer: wstETH/wETH, and Sushiswap:wstETH/DAI being the primary options for users). This proposal aims to change that, and if passed; will allow for users to borrow assets against their staked Ethereum holdings by depositing stETH into Aave. It is important to note that there is currently no plan to allow Aave users to borrow stETH.

Currently, users can sell their stETH, but there are no options that allow users to borrow against their stETH. This proposal aims to provide users with that option! If passed, this proposal will benefit both Lido users, and Aave users!

If passed, this proposal would require some changes to the ‘aToken’ contract.

stETH represents the user’s staked ETH balance of the beacon chain along with staking rewards accrued or penalties inflicted on validators in the beacon chain.This is implemented via rebasing mechanism. Due to the rebasing nature of stETH, the proposed listing implementation involves few changes to AAVE's generic aToken. The proposed aToken uses underlying stETH shares to store balances and implement the rebase ability. Thus, it has 2 private balances and 1 public balance. The internal (fixed-supply) balance and total supply are used for book-keeping. The deposited balance is stored in stETH shares and converted into the amount of the tokens with functions from stETH. Users’ balances are book-kept with the underlying ERC20 token. The internal (elastic-supply) balance and total supply correspond to the deposited balance without accrued interest. Rebasing of aSTETH according to stETH happens in this layer. The external (elastic-supply) balance and total supply correspond to the deposited balance with interest. Externally, the aSTETH behaves similar to every other aToken. It always maintains a 1:1 peg with the underlying stETH. The current implementation doesn't support borrowing, neither with variable nor with stable interest rates. The stableDebtSTETH and variableDebtSTETH contracts extend default stableDebtToken and variableDebtToken contracts accordingly to make it impossible to use borrowing with aSTETH because default debt tokens are not compatible with the AStETH contract.

Proposal:

https://app.aave.com/#/governance/62-QmVKuMiNYg8NpLii5EiqTnqixqQanhvjgpDy9e46NX2P3T

Recommendation:

I recommend that the Rabbithole metagovernance pod vote ‘Yes’ on this proposal. Lido and Rabbithole have a positive relationship, and I believe it is our duty as stewards of the Lido and Aave protocol’s to support positive sum proposals! I believe Rabbithole users that have recently completed the Lido Quest on rabbithole.gg would also benefit from having Aave as an option for their stETH tokens as well!

Open Questions:

Feedback:

Execution status: Not executed

Vote: Yes (Missed vote)

Community Vote

• 18Y

• 0N

Pod Vote

• Y

• N