Proposal:
Help expand rETH to Polygon zkEVM with $RPL co-incentives.
Summary:
Polygon Labs is forever committed to scaling Ethereum and and huge advocates of further decentralization of ETH staking. As a result, we would like to encourage increased adoption and use cases of rETH on Polygon zkEVM.
ETH and its liquid staked tokens (LSTs) play a very important role in DeFi and below is phase 01 a proposal to integrate rETH on zkEVM. A diagrammatic step-by-step breakdown of phase 01 is provided below:
Diagram 01:
Detailed description of phase 01:
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In order to create a Balancer v2 linear pool also known as boosted pool, Polygon zkEVM would require a rate provider. A community developer has already assisted with launching the rETH rate provider as a gesture of faith and commitment toward working with the Rocketpool community.
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Polygon Labs seeks to help drive liquidity growth through an initial commitment of $50k USDC, to be used as incentives to grow primary liquidity sinks for rETH on Polygon zkEVM.
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Within the Polygon zkEVM ecosystem, there are a number of liquidity sinks established that RocketPool can elect to use to build ecosystem liquidity. Balancer already has an rETH/wETH pool live, with some initial (non-RocketPool) rewards already seeded. Longer term, this could also transition into ECLP pools using Gyroscope on Balancer, for even better liquidity depth. Additionally, rETH/USDC pools on QuickSwap v3, and another large DEX launching on Polygon zkEVM this month, would be among the options for further liquidity sinks.
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A further consideration for the DAO is that rETH paired with stablecoins is important to increase the supply caps of money markets like Aave. Since the primary liquidity sink will likely be the rETH/WETH E-CLP pool on Balancer, and a lot of users provide single sided liquidity, there will always be mispricing between that pool and the stable pools. Hence, for every swap or new liquidity addition, there will be a countertrade happening to arbitrage the price difference. The volume created as a result can help reach the target of daily trading volume levels to create reliable oracles.
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Once an oracle is in place, rETH can be potentially used as collateral on lending markets like 0vix, Aave v3 and QiDao, which will provide additional composability and use cases for rETH in phase. Deployment of rETH/USDC pools will also aid in helping smoother liquidations for these money markets.
Apart from the above proposal, the Polygon DeFi team will aid Rocketpool in ensuring further composability and Business Development use cases within Polygon zkEVM. We look forward to working with Rocketpool and helping towards further decentralization of ETH staking.