GM Rocket Pool Community,
Nerite is a fork of Liquity V2 deployed on Arbitrum, providing access to the stablecoin USND, a redeemable, streamable, and sustainable stablecoin that complements the Rocket Pool ecosystem creating more utility for rETH holders and enabling leveraged exposure.
Protocol Overview
Nerite is a Collateralized Debt Position (CDP) protocol that allows users to mint USND, an overcollateralized stablecoin fully backed by crypto assets such as rETH, at up to 90.91% loan-to-value (LTV) ratios. Its core functionality revolves around the loan position being represented as a NFT. The NFT can always be sold at a discount to have others close out the loan.
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Key Differentiators: Unlike traditional lending protocols with variable rates with kinks, Nerite allows rETH holders to set custom interest rates. It emphasizes governance minimization for enhanced security and directs 100% of protocol revenue to users, 75% to the Stability Pool and 25% to community voted initiatives like liquidity provision.
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Value Proposition: USND maintains a $1 peg through onchain redemptions, accrues yield from real economic activity (borrower fees and liquidations).
This setup positions Nerite as a more efficient CDP than some of the alternatives available, while also focusing on Arbitrum native assets and minimal governance overhead.
How Nerite Works
Nerite is Liquity V2 and operates as such, with slight changes optimized for the Arbitrum ecosystem:
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CDP Creation and Borrowing: rETH holders deposit rETH into Nerite (receive an NFT) and specify a custom interest rate. They mint USND up to 90.91% LTV. Interest accrues continuously and is paid to the Stability Pool.
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Redemptions: Anyone can redeem USND at par ($1 worth of collateral), ensuring peg stability without reliance on external markets. A 0.5% premium is charged when redemptions occur, which effectively establishes a floor price for USND at $0.9945.
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Liquidations: If a rETH holder’s collateral ratio falls below 110%, it is liquidated at a 5% penalty. The Stability Pool absorbs the debt, selling collateral at a discount to cover losses and generate gains for depositors.
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Streaming: Arbitrum is a L2 that can offer low cost of transaction unlike ETH Mainnet. This allows for Nerite users to stream USND. This is beneficial for anyone paying subscriptions, grants, or payroll.
How Does This Benefit rETH Holders…And What Are the Risks?
Nerite has supported rETH as collateral since inception, enabling rETH holders to leverage their holdings for USND at a lower cost of capital than a lending market.
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Don’t Sell rETH: rETH holders can borrow yield bearing USND against their tokens, layering leverage on ETH positions.
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Governance Opportunities: With NERI staking for fee allocation (25% of revenue), Rocket Pool DAO could explore cross protocol votes or incentives for rETH/USND liquidity pools, amplifying liquidity for rETH on Arbitrum the largest L2 by TVL.
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Immutability Context: As a “governance minimized” protocol, Nerite’s core rules (including collateral support) are designed to remain unchanged post launch, providing predictable security for rETH holders. Implications include reduced exploit vectors from upgrades but limited adaptability to new risks.
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Risks: Smart contract vulnerabilities in Nerite could impact rETH positions. As a minimized-governance protocol, it avoids rug-pull risks but relies on audits (Sherlock, 0xSimao, Octane Security) for safety.
This integration turns rETH into a productive asset for stablecoin exposure, creating less sell pressure for rETH.
How Can You Use Nerite Today?
Today, rETH holders can bridge to Arbitrum, and use their rETH as collateral to mint USND:
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Nerite has borrow caps set at $25MM USND.
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Borrow LTV is 90.91%, avg borrow rate for rETH holders is currently at 1.6% APR
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The Liquity v2 model features user-set borrow rates, which are more competitive than what is currently offered to rETH holders.
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Socialized OEV / Yield in Stability Pool through partnerships with Yearn & API3 (currently 5.75% 7d APR).
To summarize, rETH collateral has room to breathe and grow on Arbitrum.
A Simple Strategy:
rETH holders can bridge to Arbitrum, and take advantage of this strategy today:
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Set interest rates to the above avg rate (lower than most lending markets).
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Deposit borrowed USND the yUSND Stability Vault, and start earning compounded yield.
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Earn SHELL points, SuperFluid $SUP tokens and claim NERI when the token goes live.
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(OPTIONAL) Provide yUSND Liquidity to the Spectra Market
Notes on Redemptions | Tranches:
- If users choose to borrow against rETH at .5% APR, they are at risk for redemption. Users may consider maintaining interest rates at or above avg rate, and taking advantage of the stability pool to achieve a net positive APR.
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Interest Rates on Liquity v2 are established in Tranches, which means if users would like to pay .5% on their loan, they can do that.
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In case of a USND depeg, the lowest interest rate Tranches, on the highest risk collateral types will be processed for redemption.
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COMP & ARB are the two highest risk assets listed on Nerite, as the rest are ETH, tBTC and LSTs.
TLDR: If users go too cheap on the rates, their rETH collateral may be sold for USND.
An easy solution to this, is to delegate interest rate management to Summerstone, which automates these concerns.
Resources
Nerite Links
Homepage: https://www.nerite.org/
Docs: https://docs.nerite.org/docs/category/user-docs
GitHub: https://github.com/NeriteOrg/nerite
X: https://x.com/neriteorg
Founder: https://x.com/CupOJoseph
Liquity V2 Information
Website: https://www.liquity.org/
Docs: https://docs.liquity.org/
GitHub: https://github.com/liquity/bold/
X: https://x.com/LiquityProtocol
Additional Resources
Video on Redemptions provided by Liquity team: https://www.youtube.com/watch?v=CQVmjFx987A
Looking forward to hearing any feedback or questions about Nerite from the community.