[Re7 WETH] Re7 WETH Vault Updates Thread

MetaMorpho RE7
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Re7 WETH Vault Update

TLDR: We review the first weeks of the Re7 WETH Vault and present further plans for asset onboarding. We will use this thread for ongoing updates on the vault and cap changes.

The Re7 WETH Vault was launched at the start of February, with initial assets of Ether.fi’s weETH and Stakewise’s osETH.

Since then the vault has grown to over $12m TVL in supply deposits, supporting Morpho Blue markets with a combined TVL of over $15m. Currently the Re7 WETH vault is the third largest MetaMorpho vault and the second largest ETH-denominated vault.

Some highlights since the vault deployment:

  • The vault added over 1,000 ETH supply within 30 days of deployment and has continued to grow with sizable deposits.
  • The vault supply has enabled attractive leverage opportunities for LST and LRT holders. Borrow utilization on the underlying markets has remained elevated and sits now at over 90%.
  • Shortly after launch the vault onboarded and seeded a new market for ezETH/WETH which now has over $7m borrowed.
  • Base supply yields in the vault have remained well above ETH staking rate with LRT collateral supporting high borrow rates.
  • Incentives provided to all markets have added to depositor yield, with supply earning a combination of USDC, SWISE, Ether.fi points, Renzo points and Morpho tokens.

We’re excited to continue growing the vault and enabling additional WETH markets against high yielding ETH-denominated assets.

Adding apxETH Supply Cap

Re7 Labs will submit a cap of 750 WETH to Re7WETH for the apxETH (86%) market to continue to expand the vault allocation to Liquid Staking Tokens.

Redacted’s Dinero protocol combines a tested split-token mechanism with the deep voting power of Redacted protocol to deliver apxETH, which has outperformed yield of other LSTs on the market.

Adding apxETH to the Re7 WETH vault will allow for more diversified LST exposure and continue to maintain high yield with borrow demand from the high-yielding apxETH LST. Redacted has also pledged $75k BTRFLY of incentives to bootstrap supply liquidity.

Market Parameters

Loan token: WETH - 0xC02aaA39b223FE8D0A0e5C4F27eAD9083C756Cc2

Collateral token: apxETH 0x9Ba021B0a9b958B5E75cE9f6dff97C7eE52cb3E6

Oracle: Morpho Chainlink - 0x037D67A5E6F19d0Fb26A6603d2D4fE9d70eC3258

IRM: Adaptive Curve IRM - 0x870aC11D48B15DB9a138Cf899d20F13F79Ba00BC

LLTV: 86%

Listing Parameters

SupplyCap: 750 WETH

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Gm Re7 gigabrains, just a few questions from an honest farmer)

  1. I don’t understand how the native ≈3.82% yield can be so small given that ≈78% of the vault is in the LRTs that generate well above 4% thanks to points. Can you provide a back of the envelope calculation for the native yield please.

  2. Why do you hold pure WETH in the vault and not swap it into stETH to get some yield? ≈20% of the vault is generating 0 revenue, am I wrong?

  3. What is the framework for choosing certain LRTs in the vault: e.g. not including Puffer, but including Dinero?

  4. AFAIK you leverage up assets in this vault. Can you please describe your approach to leverage: do you maximize Loan-to-Value or try to keep a big cushion in case of market volatility? What protocol(s) do you use to lever up the LRTs?

  5. What security measures do you have in place:
    – do you have a multisig for managing the vault? Is the address of the multisig publicly available?
    – are there any monitoring tools and automatically executed smart-contracts that can prevent the positions from liquidations if the LRTs price goes to $0 in a matter of a dozen ETH blocks?
    – any other security measures that you can disclose?

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Hi @Mike, thanks for your questions.

1 - The yield is a function of individual yields on the underlying markets and the allocation that the vault has to each of these markets. For example, if there are two LRT markets each with a 30% allocation in the vault and earning 5% supply yield each market contributes 1.5% yield to the vault. So if you add up the individual allocations multiplied by the yield for each market, you will get to the total vault yield.

2 - There is no concept of swapping in MetaMorpho vaults. MetaMorpho vaults can only deposit in Morpho Blue markets, not trade between assets. There is currently an allocation to the Idle WETH market in order to facilitate increased withdraws we saw after ezETH liquidations and to increase the target rate on markets with lower utilization. We do have plans to add this week some additional markets including the wstETH / ETH markets with high liquidity, which can then serve as a market to allocate extra capital to that still gets some yield.

3 - As mentioned we are in the process of adding new markets for both LRTs and LSTs. This includes conversations with most every live LRT protocol including Puffer, Swell, and Kelp DAO. These markets will likely be added in the next week or two subject to further coordination with each team. We expect most LRTs to have enabled markets and allocation in this vault provided an asset meets certain listing criteria like sufficient liquidity and reliable oracle. If there are other tokens depositors or borrowers would like to have added, please reach out here or on Discord.

4 - MetaMorpho vaults take no inherent leverage with deposits. As mentioned, the only actions MetaMorpho vaults can take is immediately depositing into Morpho Blue markets with accepted caps. So the MetaMorpho vault itself is not using leverage at all. That said, users of Morpho Blue can come and borrow supplied assets (in this case ETH) using collateral on each individual market. So this lets borrowers take leverage. Users can use alternative front-ends like Summer or Contango to enter leveraged positions using Morpho Blue. At the MetaMorpho vault level, curators can set caps on each market. For this reason the Re7WETH vault has a 2,500 ETH cap on each LRT and also the 86% LTV was chosen to limit available leverage.

5 - MetaMorpho vaults have strict security measures in place and actions of a vault curator are extremely limited in scope. MetaMorpho vaults are non-custodial so users can withdraw at any time as long as there is available liquidity. Curators can only submit new market caps, adjust caps, and reallocate liquidity between accepted markets. Each MetaMorpho vault also has a timelock. You can see the various curator roles and associated addresses on the Morpho UI. Currently the Re7WETH vault has an owner multisig and a 1-day timelock. We expect to upgrade this very shortly to add additional signers and extend the timelock to 3 days. We are also evaluating solutions to add a Guardian that would be able to veto any proposed changes to the vault.

Liquidations on Morpho Blue are permissionless much like other liquidations in DeFi. Monitoring tools for borrowers are out of scope for MetaMorpho vaults, but there are some available tools including ones being developed by the Morpho community. However, we actively monitor both health factors of borrowers on allocated markets as well as global leverage and liquidity on relevant assets.

We have outlined some of our infrastructure at a high level in the introductory Re7WETH thread. In addition to many years experience in DeFi, we have an extensive suite of internal monitoring tools and liquidity tracking that we use to monitor the MetaMorpho vaults. We can do a longer write up of the methodology and relevant tools if there is interest from the community.

Thanks again for your questions. We encourage the community to post any other questions, suggestions or clarifications and expect that they will be useful for all other honest farmers to review.

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In order to continue unlocking new markets and keep a baseline of servicing yield as new markets are added, we have submitted caps for the following markets.

wstETH 94.5% LTV with Chainlink Oracle

loanToken: 0xC02aaA39b223FE8D0A0e5C4F27eAD9083C756Cc2
collateralToken: 0x7f39C581F595B53c5cb19bD0b3f8dA6c935E2Ca0
oracle: 0x2a01EB9496094dA03c4E364Def50f5aD1280AD72
irm: 0x870aC11D48B15DB9a138Cf899d20F13F79Ba00BC
lltv: 945000000000000000

Supply Cap: 5,000 ETH

The main liquidity source on Morpho Blue for ETH lending will allow semi-idle ETH in the vault to earn a base yield while remaining liquid as a withdraw buffer.

ETH+ 86% LTV

loanToken: 0xC02aaA39b223FE8D0A0e5C4F27eAD9083C756Cc2
collateralToken: 0xE72B141DF173b999AE7c1aDcbF60Cc9833Ce56a8
oracle: 0x3308Fed4625E5C5b176E4B7458F20B54C26C38ED
irm: 0x870aC11D48B15DB9a138Cf899d20F13F79Ba00BC
lltv: 860000000000000000

Supply Cap: 350 ETH

ETH+ is an asset basket that offers a composite yield on LSTs. Reserve will be adding incentives to this market soon, and additional MORPHO rewards are also expected.

Adding Public Reallocator as Allocator Role

The Morpho Blue Public Allocator allows vault owners to set up flow caps between markets with a supply cap in a MetaMorpho vault. This allows borrowers to tap into liquidity available across vault markets, not just liquidity currently available in a single market. This addition is expected to allow borrowers to increase borrowing sizes without needing to wait for curators to reallocate liquidity to a market. As a result, borrowing utilization (and therefore yield) should improve. We will set conservative flow caps to start, and monitor initial usage of the public allocator.

Further Vault Plans

We are in active discussion with other LRT protocols to add market allocations to the Re7WETH vault. This includes plans to add caps for pufETH, rswETH and rsETH. Expect these markets to go live over the coming weeks, increasing overall vault utilization.

We are in talks with curators to allow Re7WETH markets to be added to other MetaMorpho vaults. This will allow depositors to access borrow liquidity with their Re7WETH. Already, Re7WETH has been added as accepted collateral on the Re7USDA vault.

These updates should unlock further utility and yield for Re7WETH holders.

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Thank you for the immediate response, detailed answers and promptly adding wstETH market which increased the vault’s yield! Just a few followup questions:

1/ In case of any LRT rapid price decline (e.g. osETH dollar value goes way below WETH dollar value), do I get it right that you aren’t able to withdraw WETH immediately because of the 24h timelock? I fear that liquidators may be reluctant to liquidate positions losing trust in a specific LRT at all. Or LRTs price may collapse very rapidly in a few ETH blocks which won’t enable all the positions to be liquidated. I’d rather grant a curator or a guardian a right to execute pre-defined set of actions (e.g. swap the whole ezETH into WETH in one block) without a timelock.

2/ I’ve been supplying WETH to Re7 WETH vault for more than a month: never received MORPHO, USDC or BTRFLY tokens. Are they converted to ETH automatically and redistributed to suppliers via WETH?

3/ Just curious, why do you need to coordinate with a LRT protocol to launch the market on the Morpho Blue? Because you want them to supply initial liquidity in the lending pool or it has smth to do with points accrual to the lenders of this market?

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Thanks for the feedback. More markets are deployed for LRTs and will be added soon.

To answer your questions.

1 - The timelock on MetaMorpho vaults is only for changes to the vault like adding markets or changing market supply caps. This allows depositors to take action if they want before changes are enacted. Moving available liquidity between listed markets can be done at any time though. So one way curators can reduce exposure to a market is by moving available liquidity out of a market into another one listed in the vault.

Liquidations are permissionless and mostly run by bots. If a position becomes unhealthy and open for liquidation, whether a liquidation happens successfully is usually a function of available liquidity and whether these bots can realize a profit. This is why supply caps and LTV selection on vaults is important.

2 - These accrue outside of the Re7WETH position and need to be claimed. There is a separate tab to claim rewards.

3 - We’ve already deployed markets for other LRTs, and are in the process of submitting caps to the Re7WETH vault for these. With the addition of the public reallocator, users will be able to borrow with these new collateral as soon as they are added to the vault.

However, it is still best to coordinate with teams for public announcements. This is so that users are aware, creating more borrow demand and better utilization. Also some teams want to provide additional incentives and backing. For example, giving incentives for lenders or additional points for borrowers.

Ultimately each Morpho Blue market’s success relies on the community, so it is best to work together. Expect to see the new LRT markets go live very soon.

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In order to continue expanding Re7WETH, we have added supply caps for additional Liquid Restaking Tokens (LRTs). LRTs have proven popular collateral on Morpho Blue and other lending markets, and have continually support Re7WETH yield.

As Re7WETH supply has increased, supply caps on the ezETH and weETH market have continually been maxed out. While we will continue to evaluate raising caps on these markets, adding new LRT assets will allow new users to borrow from the vault’s supply and keep overall vault utilization high using high-yield LRT markets.

The following caps are submitted:

pufETH

loanToken: 0xC02aaA39b223FE8D0A0e5C4F27eAD9083C756Cc2
collateralToken: 0xD9A442856C234a39a81a089C06451EBAa4306a72
oracle: 0x7A5628D0f541c697D7E9Bd7DC5a0598b306C13Fc
irm: 0x870aC11D48B15DB9a138Cf899d20F13F79Ba00BC
lltv: 860000000000000000

Supply cap: 2,500 ETH

rswETH

loanToken: 0xC02aaA39b223FE8D0A0e5C4F27eAD9083C756Cc2
collateralToken: 0xFAe103DC9cf190eD75350761e95403b7b8aFa6c0
oracle: 0x32aE7f50aAD360a0E991fA60E52d667A0241709A
irm: 0x870aC11D48B15DB9a138Cf899d20F13F79Ba00BC
lltv: 860000000000000000

Supply Cap: 2,500 ETH

rsETH

loanToken: 0xC02aaA39b223FE8D0A0e5C4F27eAD9083C756Cc2
collateralToken: 0xA1290d69c65A6Fe4DF752f95823fae25cB99e5A7
oracle: 0x423671566dE77E9Cb50E9bE4383BA78fFC808a4e
irm: 0x870aC11D48B15DB9a138Cf899d20F13F79Ba00BC
lltv: 860000000000000000

Supply Cap: 2,500 ETH

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A cap increase for weETH has been submitted for Re7WETH.

The 86% LLTV weETH market has been one of Morpho Blue’s most successful markets. Starting as an original inclusion in Re7WETH’s launch, the market grew to a peak of over 8,000 ETH supplied from a variety of curators and strategies.

With the addition of other venues for weETH collateral and the removal of supply from the EtherFi’s Liquid ETH strategy, the market has seen lower total supply and higher borrow rates causing borrowers to reduce or move their positions.

This cap increase will look to meet continued demand for borrowing with weETH collateral and allow for the vault to reallocate some supply towards higher yield LRT markets.

weETH

loanToken: 0xC02aaA39b223FE8D0A0e5C4F27eAD9083C756Cc2
collateralToken: 0xCd5fE23C85820F7B72D0926FC9b05b43E359b7ee
oracle: 0x3fa58b74e9a8eA8768eb33c8453e9C2Ed089A40a
irm: 0x870aC11D48B15DB9a138Cf899d20F13F79Ba00BC
lltv: 860000000000000000

Supply cap: 5,000 ETH

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To continue expanding vault markets for Liquid Staking Token collateral, the Re7WETH vault has added supply caps for the ETH+ and wOETH.

ETH+ from Reserve protocol is a LST-based asset, offering a basket of exposure to various LST tokens and backed by additional RSR staker capital.

wOETH from Origin protocol is a long-running LST that allocates ETH to various yield strategies.

Both assets offer some additional yield and benefits over traditional LSTs, and lack current lending markets, making them good additions to the Re7WETH vault.

ETH+

loanToken: 0xC02aaA39b223FE8D0A0e5C4F27eAD9083C756Cc2
collateralToken: 0xE72B141DF173b999AE7c1aDcbF60Cc9833Ce56a8
oracle: 0x3308Fed4625E5C5b176E4B7458F20B54C26C38ED
irm: 0x870aC11D48B15DB9a138Cf899d20F13F79Ba00BC
lltv: 860000000000000000

Supply cap: 350 ETH

wOETH

loanToken: 0xC02aaA39b223FE8D0A0e5C4F27eAD9083C756Cc2
collateralToken: 0xDcEe70654261AF21C44c093C300eD3Bb97b78192
oracle: 0xb7948b5bEEe825E609990484A99340D8767B420e
irm: 0x870aC11D48B15DB9a138Cf899d20F13F79Ba00BC
lltv: 860000000000000000

Supply cap: 2,500 ETH

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Two updates to supply caps are pushed to the Re7WETH vault.

wstETH 96.5% with exchange rate oracle

loanToken: 0xC02aaA39b223FE8D0A0e5C4F27eAD9083C756Cc2
collateralToken: 0x7f39C581F595B53c5cb19bD0b3f8dA6c935E2Ca0
oracle: 0xbD60A6770b27E084E8617335ddE769241B0e71D8
irm: 0x870aC11D48B15DB9a138Cf899d20F13F79Ba00BC
lltv: 965000000000000000

Supply cap: 10,000 ETH

The first is the addition of the wstETH / ETH 96.5% LLTV market. The addition of wstETH market to the vault improved yield while keeping a liquid buffer of ETH supply. With the addition of the exchange rate oracle markets, vault curators have started migrating liquidity away from the original wstETH market to these new ones. Over the long term, the 96.5% LLTV market should settle at a higher supply rate, and we expect further supply to move towards this market.

ezETH supply cap increase to 4,000 ETH

The second update is an increase in the ezETH supply cap to 4,000 ETH. The ezETH market has seen high demand with utilization regularly at or over the 90% target. The old 2,500 ETH supply cap was instrumental in keeping a reasonable limit on the size of the ezETH market and limiting vault exposure. But with Renzo enabling withdraws from ezETH in the coming weeks, an increased supply cap is warranted. We will continue to monitor liquidity and pricing as additional supply is slowly reallocated to this market.

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