Ethereum liquid restaking protocol Renzo announced that it has published its first liquid restaking token (LRT) Aave Lido proposal, which aims to onboard Renzo Protocol’s ezETH token and to increase the borrow caps for wstETH on the Aave V3 Lido Instance. Renzo is seeking community votes during a five-day period.
The decentralized finance (DeFi) lending platform Aave introduced its dedicated V3 deployment for Lido Finance’s stETH and wstETH tokens this summer. This strengthens Aave’s ties with Lido, the protocol responsible for the leading liquid staking token, stETH.
According to Renzo, LRTs have become popular collateral assets on the Aave platform. The ezETH token is a reward-bearing LRT, allowing users to deposit native ETH and liquid staked tokens (LSTs), currently including stETH, in exchange for ezETH.
Due to the strong correlation between LRTs and ETH, ezETH is frequently utilized as collateral for borrowing ETH and engaging in leveraged yield staking. Various communities have developed products that automate these strategies using Aave. The integration of ezETH into E-Mode is expected to maximize the yield potential of recursive staking strategies. This onboarding process is likely to increase demand for ezETH, leading to higher revenues for both Aave and the Renzo Protocol while also enhancing the liquidity and peg stability of ezETH.
With the introduction of ezETH and the new LRT wstETH E-Mode, it is anticipated that ezETH will primarily serve as collateral for borrowing wstETH to leverage its yield. Given that the borrow cap for wstETH has already been reached, the proposal aims to raise this limit.
The 1st LRT @aave Lido Proposal is LIVE!
— Renzo (@RenzoProtocol) October 22, 2024
2 liquid e-modes with 15,000 ezETH supply caps will allow you to:
– Provide ezETH as collateral with @LidoFinance and borrow wstETH
– Provide ezETH as collateral with @SkyEcosystem and borrow USDS
ezETH is the best risk-adjusted… pic.twitter.com/fxZ0cmdEMy
Comprehensive Risk Parameters Prove ezETH’s Viability
Risk parameters have been evaluated by the on-chain economic security system Chaos Labs, while a positive technical assessment of ezETH has been conducted by BGD Labs, a Web3 blockchain software developer. Additionally, qualitative analysis has been performed by the risk management services provider LlamaRisk.
Renzo protocol is designed to simplify and manage Actively Validated Service (AVS) strategies for LRTs. Its products, ezETH, pzETH, and ezSOL, function as interfaces to various ecosystems, including EigenLayer, Symbiotic, and Jito Network. Renzo’s primary objective is to democratize the restaking process, ensuring that users of all experience levels can easily participate.
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