Grant request - Notional Finance leveraged rETH/WETH vault

Summary

The Notional Finance team proposes to develop and launch a leveraged vault for the rETH/WETH Balancer pool. The vault would allow anyone to borrow ETH from Notional at a fixed rate, deposit it in the rETH/WETH Balancer pool with up to 10X leverage, and stake the BPTs on Aura to generate additional yield.

The development of this vault would lead to more capital being deposited into the rETH/WETH pool thereby increasing rETH liquidity without requiring the Rocket Pool DAO to add additional incentives to the pool.

This bounty from the Rocket Pool DAO would fund part of the development and deployment costs related to launching the vault.

Why is this important for RP?

The rETH/WETH leveraged vault would directly lead to higher rETH liquidity on Balancer as users will be able to borrow a significant amount of ETH on Notional to LP directly in the pool. As a result of deploying this vault Notional will effectively take rETH/WETH BPTs as collateral against ETH borrows.

The expected outcome for RP is higher rETH liquidity and therefore lower slippage for users when trading rETH for WETH. This proposal would also create an opportunity for rETH/WETH LPs to get leveraged exposure to fees and pool rewards.

Estimated cost

We ask the Rocket Pool DAO for a one-time bounty of 3,000 RPL ($50K). This bounty will cover part of the costs related to the development and deployment of the rETH/WETH Aura leveraged vault.

Additionally, to launch the rETH/WETH leveraged vault, we will need to deploy an rETH Chainlink oracle. This oracle will benefit the RP community and facilitate further integrations with other DeFi protocols. We ask the Rocket Pool DAO to help us in requesting that Chainlink deploy this rETH oracle.

The vault will be implemented by the Notional core development team over the upcoming weeks.

Links

Leveraged vaults contracts: GitHub - notional-finance/leveraged-vaults

Notional leveraged vaults UI: Notional Finance

Audits:

Strategy’s historical performance: Balancer rETH/WETH Pool strategy

What is the $50k for? It seems you already have audited contracts with this functionality. What exactly needs work? I understand deployment costs exist, but that seems like it wouldn’t be remotely in this ballpark.

I should also note, the vaults charge borrow fees - isn’t that where the payoff for Notional is? I’m not grokking why RP’s dao should fund the launch of your for-profit contract.


The Chainlink oracle is something we’re working on, and have been for a long time. It’s a prerequisite for this project, not a benefit or expense of this project.


As context, the Grants and Bounties income was 3177 RPL last period (a period is 28 days).

2 Likes

Hey @Valdorff thanks for the questions.

The grant would cover some of the costs Notional will have to pay to deploy and maintain the vault. More specifically:

  • Implement and deploy the vault;
  • Monitor the vault (ex: execute quarterly settlements, maintain a liquidation bot, and maintain a reward reinvestment bot);
  • Test the strategy and its implementation;
  • Monitor risks and adjust governance parameters over time;
  • Integrate the vault and the strategy’s historical return on the UI.

Although implementing and operating a vault is expensive and time consuming we think building the leveraged rETH/WETH vault is worth it. We think the vault is very promising and would be beneficial to both the Notional and RP ecosystems. With this grant request, we want to see if the RP community is willing to support us with this initiative and if so to what extent.

We think this project would be mutually beneficial for both protocols and we would definitely appreciate any support from the RP community.

Hi @Pierre-Yves I think most readers will appreciate proposals meant to increase the yield farming options for rETH. But I want to point out some things if you don’t mind:

  • I have some doubts about Notional Finance asking for 50k. If it works out like your proposal states, it would make more sense for you to invest in this yourself?

  • Your proposal also seems A LOT like another one I have read: Proposal for rETH-cETH Zero-Liquidation Loans

  • I also want to add that the above mentioned proposal makes more sense because of the following:

  1. MYSO Finance does not require 50k
  2. They do not require a chainlink integration
  3. It’s trust-minimised, so no trusted third party or admin involved
  4. Last but not least, it’s a proposal for ‘zero-liquidation loans’, which takes away a HUGE risk-factor. You can also get 10x leverage, without the risk of being liquidated.

I think it might be more beneficial to run with the MYSO finance proposal. Nothing personal, just my two cents.