Dear TAI Community,
I am Peter, a member of the core Origin Protocol team. This is a proposal for another new form of collateral to mint TAI, Origin Ether (OETH), to be added alongside the existing collateral options from Lido, Rocketpool, and Coinbase.
Background on Origin Protocol
Origin was founded by Web3 veterans Josh Fraser and Matthew Liu in 2017 and is one of the most venerable projects in the space. Josh and Matthew are joined by the fully doxxed Origin team and community, which includes hundreds of thousands of members and open-source contributors. Origin has raised $38.1M from top investors including Pantera, Spartan Group, Foundation Capital, BlockTower Capital, Steve Chen, Garry Tan, and Alexis Ohanian, and currently maintains a multimillion dollar treasury. As a technology partner, Origin Story has helped launch some of the largest NFT projects to-date:
- Paris Hilton Launches ‘Past Lives, New Beginnings’
- 3LAU Launches Record-Setting $11.7M Auction
- Charlie Bit My Finger NFT Sale Makes Headlines and Sets New Record
- Macallan Cask NFT Sells For $2.3 Million
- First Real Estate Sale via NFT Marketplace
Origin Story was followed up with Origin Dollar, a yield-generating stablecoin that reached a TVL of $300m in 2022. Origin Ether is Origin’s 3rd and latest launch.
Origin Ether was launched in May 2023 and is an ERC20 LST aggregator that generates yield while sitting in your wallet by tapping into blue-chip protocols. OETH is backed 1:1 by ETH, WETH, stETH, rETH, and frxETH at all times; holders can go in and out of OETH as they please. Similar to stETH, OETH yield is paid out daily and automatically (sometimes multiple times per day) through a positive rebase in the form of additional OETH, proportional to the amount of OETH held.
OETH yield comes from a combination of:
- Deploying collateral across Curve, Convex, Morpho, Balancer, and Aura
- LST validator rewards
- A 50bip exit fee is charged to those who choose to exit OETH via the dapp (completely avoidable if using a DEX), this fee goes back to OETH holders
- OETH sitting in non-upgradable contracts does not rebase, instead the interest generated from those tokens is provided to those that can rebase
These 4 yield generating functions combined enable OETH to generate higher yields than holding or farming any single LST manually. The current collateral allocation and yield strategies can be seen via the OETH analytics page. Future OETH collateral and yield strategies are governed by OGV stakers .
- Volume Weighted Average Price with Interquartile Range (VWAPIR) is used to calculate price
- 2% deviation threshold for updates trigger will be applied
- 120s trades aggregation window size will be applied
- The feed will be updated every 24h period if there are no deviation based updates
Discussions are currently taking place for building additional price feed oracles with Redstone and Pyth.
Performance & Growth
The OETH TVL, now over $66m (41,523.20 ETH), has been trending upwards and has been crushing it in comparison to direct competitors with the yield OETH is generating. OETH yield is currently at 7.17% APY, whereas competitors icETH and Cian are down to 3.50% APY and 4.02% despite taking leverage.
Motivation & Benefits to TAI
At the time of writing, there is no other platform to use OETH as collateral - OETH holders have been asking for leverage opportunities since the launch of OETH. Adding an OETH market for TAI collateral will be mutually beneficial for both TAI and Origin Protocol, as it will increase the utility for OETH, while also increasing the TVL for TAI and the TAI protocol. Any TVL created from OETH lending to TAI creates additional revenue for the TAI Protocol and DAO from active loans and liquidations.
OETH yield is paid out daily and automatically through a positive rebase in the form of additional OETH, proportional to the amount of OETH held. In the event that it would not be possible or not make sense to add OETH as a TAI collateral option due to needing to opt-into OETH yield generation within smart contracts, an alternate solution would be using Wrapped OETH (wOETH). Similar to Lido’s wstETH, wOETH is a ERC-4626 vault designed to accrue yield in price rather than in quantity. When you wrap OETH, you get back a fixed number of wOETH tokens. This number will not go up - you will have the same number of wOETH tokens tomorrow as you have today. However, the number of OETH tokens that you can unwrap will go up over time, as wOETH earns yield at the same rate as standard OETH. The wOETH to OETH exchange rate can be read from the contract, or via the OETH dapp. More information on wOETH and the wrapping/unwrapping process can be found within the OETH docs.
wOETH contract address: 0xDcEe70654261AF21C44c093C300eD3Bb97b78192
Exchange rate as of 10/20/23: 1 wOETH = 1.061744 OETH
Potential Risks and Mitigation
The introduction of OETH provides an opportunity for diversification and broadening the collateral base while mitigating concentration risks. However, Origin does acknowledge the concerns around the potential risks associated with OETH too. There are six possible risks when using OETH, and Origin is making sure to reduce each risk as much as possible:
New token risk - Given OETH is a relatively new token, some may be worried that OETH is prone to new attack surfaces. While this may be true for other new tokens, OETH was built reusing 95% of the OUSD code, of which 10+ audits have been done since 2020. Not that long ago, OUSD reached a market cap of $300m without breaking, and without diminishing the APY it was capable of generating. Origin continues to work on OUSD, despite the lower market cap.
Counterparty risk - OETH is governed by OGV stakeholders around the world. Everything from yield generation to fee collection and distribution is managed by a set of smart contracts on the Ethereum blockchain. These contracts are upgradeable with a timelock and are controlled by hundreds of governance token holders. While the initial contracts and yield-earning strategies were developed by the Origin team, anyone can shape the future of OETH by creating or voting on proposals, submitting new strategies, or contributing code improvements. We intend for all important decisions to be made through community governance and limited powers to be delegated to trusted contributors who are more actively involved in the day-to-day management of the protocol.
Smart contract risk of the yield strategies - Origin is only using platforms for yield generation that have a proven track record, have been audited, have billions in TVL, maintain a bug bounty program, and provide over-collateralized loans. Over-collateralization in itself, combined with liquidations, provides a reasonable level of security for lenders.
Collateral risk - Origin has chosen 3 of the largest LSTs to ever exist to back OETH, and they have maintained their peg quite well since launch. They have also demonstrated significant growth in circulating supply, so the Origin team is confident that the 3 LSTs will maintain their peg and that OETH will remain stable to ETH. To ensure accurate pricing at all times, OETH is using Chainlink oracles for pricing data for rETH and stETH, and a dual oracle for frxETH that combines two sources: the Curve frxETH/ETH EMA oracle and the Uniswap frxETH/FRAX TWAP oracle. In situations where any OETH collateral falls below peg, OIP-4 disables minting of additional OETH tokens using the de-pegged asset.
Slashing risk - Since OETH is collateralized by multiple LSTs at the same time, OETH is protected from slashing from any individual collateral LST. If there is a small slash, the OETH yield will simply decrease, as income will likely exceed the size of the slash. During a major slashing event, both the slashed LST and OETH will experience a drop in value relative to ETH, but OETH should not fall as low and for as long as the slashed LST, as the remaining un-slashed OETH collateral LSTs will soften the blow. There will never be a negative OETH rebase.
Smart contract risk of OETH - Origin is taking every step possible to be proactive and lessen the chance of losing funds. Security reviews are prioritized over new feature development, with regular audits being done, and multiple engineers are required to review each code change with a detailed checklist. There are timelocks before protocol upgrades are launched, and deep dives into the exploits of other protocols are constantly being done to make sure the same exploits don’t exist on Origin contracts. Security is extremely important to the Origin team. OETH was built reusing 95% of the OUSD code, of which 10+ audits have been done since 2020. All audits can be seen on Audits - OUSD , and OpenZeppelin is now on retainer. On-chain insurance protocol InsurAce awarded OETH and OUSD the highest possible security rating of AAA, of which only 3 other projects on the InsurAce platform have received. Optional OETH cover is currently available for both OETH and OUSD on InsurAce. Origin Defi also maintains a $1m bug bounty through Immunefi, with a resolution time of 7 hours.
Peter is a core member of Origin Protocol and is joined by the fully doxxed Origin team and community, which includes hundreds of thousands of members and open-source contributors. Many members of the Origin team, including both founders, are holding a significant portion of their personal wealth in OETH. Origin Protocol’s corporate treasury is also holding millions of dollars in OETH. We have skin in the game and are willing to put our own money at risk with the code we have written.
There are no lockups with OETH, users can move in and out of OETH at all times. OETH remains completely liquid at all times, and can be spent in the same way as its backing collateral, if unexpected expenses were to arise.
External OETH analysis:
We would be happy to answer any questions on Origin Protocol, OETH, or the proposal itself. The Origin team can be reached at any time via the Origin Discord server.