Proposed New PowerBasket: $LSTETH

New Product Ideas
1

PowerPool should launch and manage $LSTETH, a diversified PowerBasket containing ~10 LSTs to spread LSP contract/multi-sig risk broadly w/auto harvesting of peg arbitrage gains & farming of extrinsic yields, including cross-staking yields. Opportunistic floating weights with max caps (~25%) to protect decentralisation of Ethereum validators. The PowerBasket NAV would include a liquid ETH Safety Fund to smooth investor mints & redemption queues in conjunction with on-going LST basket peg arbitrage operations. In Phase 2, Safety Fund will also re-insure any uncovered incidents of LST slashing. Fee stream (0.5%?) to be divided between PowerAgent job fees (gas+Keeper fees) estimated at (~0.2%), and the PowerPool Treasury (~0.3%) increasing with TVL. PowerPool DAO will manage white/gray/black lists periodically classifying 25+ candidate existing or planned ETH LSTs, and manage basket max caps and Safety Fund size allocation parameters.

Post Shanghai, ETH staking & LST TVL will grow explosively…a $LSTETH PowerBasket like this is potentially easily a $200+ million TVL product. $LSTETH can be launched across several chains where there is a lot of yield starved ETH, such as BNB Chain and Arbitrum L2.

Together with PowerAgent v2, in addition to $LSTETH on some chains, PowerPool should also eventually deploy many similar diversified $LSTxxx baskets with automated peg arbitrage, opportunistic rebalancing and harvesting of extrinsic/re-staking yield on each new EVM POS chain. In order to maximise extrinsic yield, it may be possible to also launch a sub-basket, $LRTETH, which would hold a diversified set of whitelisted LRTs, and accept direct investment of LSTs as well as manage a pool of LSTs for the $LSTETH basket. These PowerBaskets will demonstrate a wide range of PowerAgent capabilities, such as DCA with ZAP to save gas on mainnet. Launching a series of PowerBaskets will also ensurea steady ‘base load’ of jobs/fees to nurture more, smaller Keeper nodes on each chain. Someday, PowerPool could also launch a ‘blended’ pool-of-pool ‘flagship’ basket token like $PWRPOOL representing an actively-managed, diversified mix of L1 & L2 EVM POS $LSTxxx baskets, a ‘basket of baskets’ regularly re-balanced by TVL…providing a very broadly diversified, multi POS chain PowerBasket real yield token that will be attractive to a wide range of institutions and small retail savers.

Marketing Claims: Better balance of Risk, Return, Liquidity and Composability (vs investing in a single LST)

Higher Yield:
+More block reward exposure
+Arbitrage gains in NAV (Safety Fund)
+lower LSP average fee compression-(<10%?)
+extrinsic yield farming
(-) lower socialised gas costs
+(cross staking - Eigenlayer LRTs subbasket $LRTETH)

Lower Risk:
Spreads LSP smart contract risk
(Re-)insured, reduced slashing risk (DVT)

Improved Liquidity: Near-instant ETH match/withdrawal up to maximum daily limit. Both the underlying Ethereum and the LSP protocols have staking entry/exit queues which can be ‘buffered’ by the $LSTETH basket. Peg arbitrage will keep positions for the basket in many queues, and mints/redemptions can be met from the best available match for/source of ETH, because flexible weights allow the composition of the basket to vary opportunistically, subject to max caps on leading LSTs.

More Composability: The proliferation of LSTs will fragment LST liquidity, which will impede individual LSTs from achieving broad composability. The superior risk/yield profile and ETH mint/redemption buffering should make the $LSTETH PowerBasket token ‘pristine’ collateral in ETH terms, and a popular composability option, likely accepted as collateral for minting over-collaterized stablecoins like $LUSD and other Liquity-fork stablecoins.

Competitive Positioning

Passively-managed LST ‘indexes’ can spread smart contract risk on underlying tokens, but w/o offsetting their wrapper risk/fees. However, actively-managed, automated, 10+ LST PowerBaskets like $LSTETH add continuous peg arbitrage yield and optimised, automated, gas-efficient farming of underlying LSTs w/cross staking of underlying and near-instant (ZAP-optimised) ETH mints/redemptions. → Higher yield, lower risk, faster liquidity and more composability on ETH passive income compared with picking just 1 (out of ~25) LSTs and trying to farming it yourself.

Shorter Twitter blurb:
Diversified LST basket to spread contract/multi-sig risk
Internal Safety Fund speeds mints/redeems and adds slashing coverage
Safety Fund automates LST peg arbitrage, increasing NAV/yield
Auto optimised farming of extrinsic/cross staking yield (& gas) on underlying LSTs
$LSTETH basket token=better collateral than single LST
#lsteth

Longer Twitter blurb:
$LSTETH diversified 10+ LST ‘basket’ w/auto-harvesting of intrinsic/peg arbitrage/extrinsic/cross staking yields. More blocks exposure=more rewards/MEV. More (DVT enabled) NOs->less slashing risk. Instant mint/redeem, leading LSTs max capped, rebalances skewed->small DVT networks->+decentralisation. Pledge/hedgeable=(composable). Active max ETH real yield. Just buy LST basket token and forget. Pristine collateral for borrowing & stables minting
#lsteth

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This is a very short synopsis of $LSTETH. For a much more detailed overview of the opportunity and go-to-market planning, and suggestions for how all DAO members can contribute, please see the Project Wiki:

4 Likes
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It’s an essential future PowerPool automated product

1 Like
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Great idea! I can’t wait to get this PowerBasket working!

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Sounds smart to me to be honest.

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What are the plans for $100+ million TVL product creation on marketing side for this product ?
It can be a good opportunity but need to think on the spreading imo.

Pros for this offer.

6

That’s quite impressive and ambitious. Exactly what I expect it to be

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Huge potential for sure, after LSTETH launch we should definitely have dozens of similar baskets

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Marketing planning detail is available in the product Wiki. Pre-launch, the idea is to pitch ETH-rich DAO Treasuries, some of which are already holding/investing in LSTs, to act as prime minters (‘book-building’), with some type of management fee rebate (max fee rebate is achievable via xCVP staking). All PowerPool members can participate in pitching $LSTETH to other DAO Treasuries in which they participate. Long term, if we execute/deliver well, this a a global ETH-based small savers proposition to be marketed with retail partners and an un-branded minting widget as set forth in detail on the project Wiki

3 Likes
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Hello again, thanks for the response.

Sounds legit. Let’s see.

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Any ideas to differentiate this product with other major top native coins ?

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This will be a yield-bearing version of staked ETH…better than HODLing ETH. There will be passive baskets like dsETH from Index Coop, but they lack the automation required for active management of the basket, i.e. peg arbitrage and auto-farming extrinsic yield. Potentially also in future phases with PowerAgent automation of tradeable smart contract insurance coverage. Basket token should become pristine collateral and the primary way most investors hold yield-bearing ETH in future. Individual LSTs will be too numerous (~25) and suffer from very fragmented liquidity, more concentrated contract risk, and less block coverage. The $LSTETH basket is a way of re-assembling LST liquidity with lower risk and higher return via a DAO-managed, standardised basket token tradable at scale with max caps to combat power law concentration in LSTs and act as a bulwark protecting Ethereum decentralisation.

2 Likes
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I’ve just read project wiki

Seems solid to me, but it needs to be seen after production phase of course.

Let’s see.

Only question is about if there more and more details about the Competitive Positioning part, should be cool.

2 Likes
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This is always changing, but yes, need to update and focus more on LSTs. The core comparison for competitive positioning is ‘active’ baskets versus ‘passive’ index management. There are several protocols offering multi-token baskets and complex vault strategies, but without PowerAgent style generalised automation. In the case of LSTs, these multi-token passive ‘indices’ can diversify contract risk and harvest intrinsic yield, BUT they cannot do more active management strategies like opportunistic flexible weights, peg arbitrage, optimised auto-harvesting of multiple extrinsic sources, and auto-balancing of smart contract insurance. PowerAgent enables ACTIVE basket/vault management, and if this is not enough to give PowerPool a sustainable advantage in yields achieved vs benchmarks, then we need to improve PowerAgent until it does.

2 Likes