[RFC] Onboard Origin Protocol’s OETH and OUSD as new ARKs within the Mainnet ETH and Mainnet USDT vaults on Lazy Summer Protocol

General Discussion Ideas
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[RFC] Onboard Origin Protocol’s OETH and OUSD as new ARKs within the Mainnet ETH and Mainnet USDT vaults on Lazy Summer Protocol

Overview

This proposal seeks to integrate OETH, Origin’s liquid yielding token, into the Mainnet ETH vault, and OUSD, Origin’s yield aggregator, into the Mainnet USDT vault to improve APY, diversify sources of yield, and attract new users to the Lazy Supper protocol.

Origin’s OETH is an LST that is already integrated across DeFi and is one of the highest yielding LSTs today. Origin’s OUSD is the first ever stablecoin that earns a yield while sitting in your wallet, which paved the way for the yield bearing stablecoins of today. Both OETH and OUSD do not require KYC, and their redemption mechanisms offer multiple paths for users to exit or access liquidity. This ARK gives Summer.fi users access to the highest yields in Defi, with minimal additional integration complexity.

Motivation

As Summer.fi approaches $100M in TVL, it’s essential to grow yield options and attract new capital. Integrating both OETH and OUSD align with this goal by:

  • Increasing vault APYs, which is a core driver of user deposits and growth
  • Diversifying ARK risk among heavily audited yield sources
  • Expanding Summer.fi’s reach into the ecosystems of new projects
  • Providing users with access to proven, non-KYC high-yield USDT and ETH instruments

Specifications

New ARK 1 of 2

Origin Ether (OETH) was launched in May 2023 and is an ETH-pegged ERC20 that generates yield while sitting in your wallet. 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 is a full-fledged LST with an extremely tight peg (1:1 redemptions to ETH thru Origin’s ARM) and high yields thanks to DVT direct staking. OETH earns its yield from 3 core components:

  1. Beacon chain staking through SSV/P2p
  2. The Curve AMO
  3. Those opted-out from receiving the yield - any users LPing in a dex pool are giving up their OETH yield (in exchange for trading fees & emissions) to those opted-in, leading to a boost in yield

Current and historical OETH yields can be seen via the OETH analytics page at all times.

New ARK 2 of 2

Origin Dollar (OUSD) was launched in 2020 as the first ever yield bearing stablecoin. It is also an ERC20 that generates yield while sitting in your wallet, with yield paid out daily and automatically (sometimes multiple times per day) though a positive rebase in the form of additional OUSD, proportional to the amount of OUSD held.

OUSD yield comes from a combination of:

  1. Lending collateral to Aave, Compound, Morpho, SSR, Curve, and Convex
  2. Reward tokens (AAVE, COMP, MORPHO, CRV, and CVX) are automatically claimed and converted to stablecoin
  3. Those opted-out from receiving the yield - any users LPing in a dex pool are giving up their OUSD yield (in exchange for trading fees & emissions) to those opted-in, leading to a boost in yield

Current and historical OUSD yields can be seen via the OUSD analytics page at all times.

Non-rebasing OETH & OUSD

Both OETH and OUSD have corresponding wrapped versions of each token that are non-rebasing, but continue to earn the yield. wOETH and wOUSD are ERC-4626 tokenized vaults designed to accrue yield in price rather than in quantity, relative to the unwrapped versions of OETH and OUSD. The wOETH to OETH exchange rate and wOUSD to OUSD exchange rate can be read from the wOETH and wOUSD contracts, or via the Origin Protocol dapp.

Risks / Monitoring

Adding another protocol for yield adds additional counterparty risk and smart contract risk. However, OETH was built reusing 95% of the OUSD code, for 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. All OETH & OUSD audits can be found in the audits section of the Origin Protocol docs. We have recently retained yAudit to look at our PRs as we code, and OpenZeppelin is also held on retainer to review 100% of the OETH and OUSD smart contract changes. Origin also maintains an active bug bounty with rewards ranging in size from $100 OUSD for minor issues to $1,000,000 OUSD for major critical vulnerabilities. The bug bounty program is currently administered by Immunefi, where Origin maintains a median resolution time of 7 hours. Risk reports have also been completed by Auxo, PrismaRisk, LlamaRisk, and Chaoslabs.

Voting

This post serves as the RFC. A formal SIP with finalized specs and parameter settings will be submitted for vote following feedback from the community and Block Analytica.

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The Origin team is great. We have seen them become an integral part of Reserve Protocol, and they have been extremely supportive.

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Awesome proposal, I would be keen to here the thoughts of @chrisb @BlockAnalitica and @halaprix

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Hey! Welcome to the forum :slight_smile:

From the technical point of view, we’d need to find the best way to deposit - but mainly withdraw/exit. We could move that discussion to tg ?

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Yes, can move that to TG. I am @pgee13

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Appreciate the clear proposal and the optionality around rebasing vs. wrapped formats (especially with ERC-4626 support) making these ARKs particularly accessible for passive earners as well as power users building more complex stacks around LSDs and yield-bearing stables.

A few thoughts before moving forward to SIP stage:

  • It’d be helpful to clarify if the integration will use the rebasing or non-rebasing (ERC-4626) versions — the latter may be better aligned with Lazy architecture, @halaprix?

  • There’s some yield source overlap with other ARKs (Morpho, Aave, etc.) — worth noting from a diversification lens.

  • Could we see modeling around exit flows and historical liquidity — especially under stress. How has OETH/OUSD handled periods of volatility or heavy redemption in the past? This can be helpful for @BlockAnalitica and the community when determining weighting caps.

In general, this proposal aligns well with Lazy Summer’s roadmap. Let’s keep iterating and excited to see the SIP version of this.

– jensei

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We are discussing this via Telegram within the group we have with the Summer team.

Correct. There may be times when it would make sense to allocate to Morpho & Aave and not OUSD, or times when it makes sense to allocate to all 3, or times when it makes sense to allocate only to OUSD. Yield generation mechanism #3 in the proposal above makes it possible so that OUSD is often able to pay a higher yield than if you were to use the same underlying strategies. This is limited to the amount of USDC, USDT, and DAI backing OUSD at any given time.

The Origin analytics page is a great place to see historical liquidity. OUSD performed exceptionally well during the weekend of 3/10/23, when USDC (and thus, DAI) had a major depeg. Sharing a blurb here that I sent to a few others regarding OUSD on that weekend:

Dropping a quick note here on the OUSD performance during the weekend of 3/10/23:
Since OUSD is partially backed by USDC and DAI, the price of OUSD also fell below $1 for a period of time. During this time, arbitrageurs were able to buy OUSD at the cheaper price on AMMs, then redeem the OUSD via the dApp into a basket of stables (USDC, USDT and DAI), which they sold back to the market for a profit. With each dApp redemption, OUSD collected an exit fee which was returned to current holders as an additional yield source (0.25% on each redemption), and there were lots of redemptions during this weekend. When the price for USDC and DAI returned to peg, the entire cost was borne by those that sold their USDC and DAI for less than $1. If the price stayed down, LP’s will have traded more valuable OUSD for the less valuable USDC, and will have taken a loss.
In either case, OUSD holders have more stablecoins than they started with, with external parties bearing both the risk and the loss. OUSD holders made a total of $120K in yield during the market events. OUSD APY increased from ~4.6% to ~42% (7-day trailing) and was trading back at 0.99 within 17 hours of losing its peg. The 1/3 backing of OUSD by USDT helped prevent the OUSD peg from falling as low, and for as long, as USDC and DAI.
In situations where the price of DAI, USDC or USDT fall below $0.998, OIP-4 disables minting of additional OUSD tokens using the de-pegged asset. OUSD fully restored to $1 within 36 hours as opposed to USDC and DAI which remained severely depegged for almost 3 days.

There’s a fun thread on OUSD event this from one of the co-founders here.

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Thanks @pete — super helpful context.

Good to hear the discussion is ongoing.

The historical performance during the March '23 depeg is impressive. Having that kind of resilience — and yield capture via exit fees — is worth surfacing in the risk modeling. Also helpful to know about OIP-4 auto-disabling minting on depegs.

Great recap!

If you guys have potentially any internal stress tests, backtests, or simulated exit data you can share (even directional), it’d be great input for @BlockAnalitica as they scope out cap recommendations.

Looking forward to hearing thoughts from other delegates, community, and more detailed [SIP] to come!

— jensei

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The 2023 USDC de-peg was a real stress test, and OUSD shined. I am not sure if there is anything for OETH other than it’s the same codebase: origin-dollar/contracts at master · OriginProtocol/origin-dollar · GitHub

We do use an in-house solution based on Subsquid as our indexer and Grafana, and also add custom alerts on Tenderly for critical events - but these are not public facing dashboards.

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