[RFC] Proposal to onboard Kelp’s hgETH to the Mainnet Higher Risk ETH strategy

[gonemultichain]

1. Summary:

This RFC proposes integrating Kelp’s High Gain (hgETH) vault as an additional strategy for Summer Fi’s High-risk ETH (mainnet) vault. Adding hgETH would broaden yield sources for risk-tolerant ETH depositors, increase diversification, allow SummerFi to tap Kelp’s high-conviction yield opportunities and significantly boost the APR.

2. Context & Motivation:

Summer Fi’s Higher-Risk ETH vault currently captures lending spreads majorly through Morpho markets leaving room to lose out on restaking and DeFi yields that can be easily leveraged using Kelp’s hgETH vault and can enhance the overall yield for the vault.

What is the High Gain vault?

Curated with seasoned strategy managers including Edge Capital and UltraYield - High Gain vault is an automated multi strategy defi yield aggregation mechanism made with the sole purpose of generating top tier rewards and maximising user returns.

Why the High Gain Vault Makes Sense

Kelp is a multichain liquid restaking platform with over $1.5 B in Total Value Locked (TVL). The team is focused on building Liquid Restaking Solutions for public blockchain networks. From its suite of automated yield aggregating vaults, Kelp presents High Gain (hgETH) vault made for capturing the best APRs on ETH across strategies including Dex liquidity, Lending markets, Basis Trade Arbitrage and more. Why we think that hgETH is the perfect fit for SummerF’s high risk ETH vault

1. Diversification of yield across blue chip DeFi protocols

• The High Gain Vault deploys capital across trusted protocols including Aave, Compound, Morpho, etc through intelligent dynamic allocation, optimizing returns while maintaining diversified risk exposure.​ The strategy not only captures restaking rewards on multiple lending markets but also maximizes returns through leveraging high APR opportunities on newly launched L2s along with other strategies including basis trade arbitrage.

2. Battle tested strategy

• The vault’s strategy is powered by Edge Capital and UltraYield, managing over $700 million with a proven track record of 10%+ APR returns.

3. Consistent returns—one of the highest in the markets available

• hgETH has been the best performing vault at 1-month & 3-month time framework through automated multi-protocol strategy, significantly outperforming traditional staking and positioning within the upper tier of available DeFi yield opportunities

Vault Specifics

Security

Detailed audit report by Sigma Prime - Link

Transparency

Weekly strategy allocations can be directly checked on the Gain Dapp under the ‘Strategy Reports’ section - Link

Weekly disclosures of strategies can also be found on Kelp’s X account - Link

hgETH vault addresses

1. 0x1f0df950095269c602eaa46d91e664e7c2b3770f

2. 0x72dbfd4989b68b8b4efc27c6272d7586f1f0d483

3. 0xbcaf70ef342378755e82c9f374225604f04a36e3

4. 0x457adb2c68214d7dd2d1e89fcc10e4cce27e2608

5. 0x02efaa6a4e6abefd0f376bcffdb3988a6e55fb82

6. 0xd8495b95a3a6a85f4e3baa003e8b7ed1ed85562d

7. 0x08b6470e62235947b766ac63f584a52d25cb14e6

Further info: https://kerneldao.gitbook.io/kernel/getting-started/gain/high-growth-gain

Addendum: rsETH due diligence

Smart Contracts Overview

rsETH is built via modular smart contracts governed and maintained by KelpDAO across Ethereum and major L2s:

Ethereum Mainnet

• LRT Config: 0x947Cb49334e6571ccBFEF1f1f1178d8469D65ec7

• rsETH: 0xA1290d69c65A6Fe4DF752f95823fae25cB99e5A7

• Deposit Pool: 0x036676389e48133B63a802f8635AD39E752D375D

• Oracles:

  • LRT Oracle: 0x349A73444b1a310BAe67ef67973022020d70020d

  • Chainlink Price: 0x78C12ccE8346B936117655Dd3D70a2501Fd3d6e6

  • EthX Price: 0x3D08ccb47ccCde84755924ED6B0642F9aB30dFd2

  • Other Chains

• Arbitrum, Optimism, Base, Linea, zkSync

  • rsETH, wrsETH, and Deposit Pools are deployed with unique proxy addresses

  • Full list available here

[Themind]

I support integrating hgETH vault, as it effectively diversifies yield beyond lending spreads to capture significantly higher returns from restaking. The institutional expertise of Edge Capital and UltraYield is appreciated here and their returns have been consistently high since inception.

[DecentraLord]

Full support for this proposal. Diversifying the High-Risk vault beyond just lending markets (Morpho) is a smart move. Integrating hgETH allows us to capture restaking yields and boost the overall vault APR significantly.

[Justemilyr]

Integrating hgETH makes sense given the high return and the reasonable risk considering what Kelp and Edge Capital have disclosed in this post.

[jensei]

thank you @gonemultichain for bringing up this RFC and welcome to the Lazy Summer DAO.

I am in support of this ark to be added, at the same time I am curious about the technical implementation need, …maybe @halaprix would have some thoughts around this?

I am also curious about other @Recognized_Delegates thoughts, as well as risk assessment from the @BlockAnalitica before this can be promoted to an SIP.

[samehueasyou]

love it - greeat to see new folks on the forum!

[NoMoneyNoProblem]

Does anyone even do any due diligence around here? There are so many red flags with this ‘asset’, which is more of a tokenised cowboy hedge fund than anything else. In my opinion, it is only a matter of time before this vault incurs severe ETH losses.

My main question is: why does an ETH vault take directional bets on Hyperliquid on non-related assets? Why short ZEC and UNI? Why trade Fartcoin and other non-ETH assets?
Can you explain why there was a $250k (unrealized) loss just ten days ago?

In the past 10 minutes, over 300 orders were placed and closed on hyperliquid by the main wallet with hgETH user funds. This is very very risky behavior, imo. Not very different from Alameda taking user funds and trading with them.

Additionally, these vaults are upgradeable proxies (behind a 7 day timelock, but still). And then you have the exit queues and LRT de-peg risk, and various positions which are leveraged to the tits. A disaster waiting to happen.

Strong DISAGREE to add this to Summer.fi

---

Debank of main wallet

Hyperliquid explorer

[samehueasyou]

@NoMoneyNoProblem this is exactly what we love to see in the RFC process, excellent points raised here.

[telegin]

Hey, I’m leading UltraYield (part of Edge Capital) and the team is currently preparing a comprehensive response to all of these points. In short - you don’t see the full exposure of the positions, and Hyperliquid trades have a corresponding ones on other venues/CEXs, so there is no directional exposure taken.

We’ll provide all the details shortly, and are happy to answer any questions. Also to point out, we are one of the few curators on the market that never had any exposure to Stream finance and other affected markets that touched it, in fact we’ve been actively avoiding it in all the vaults and markets we curate. We have rigorous DD Process and allocate only to the protocols we fully understand and teams that we can trust.

[Eren_DAOplomats]

Valid concerns raised, but I’m keeping an open mind here. If the Edge team can effectively prove the hedging mechanism and safety checks in their response, this could still be a solid addition to the platform. Looking forward

[telegin]

Thank you for the feedback. We appreciate the scrutiny as due diligence is critical for any vault onboarding. However, I want to correct a few misconceptions regarding the strategy’s nature and risk profile. The hgETH vault is not a directional hedge fund taking “cowboy” bets; it is a systematically managed, Delta Neutral ETH strategy designed to generate ETH-on-ETH returns. While the vault maintains exposure to ETH (as it is an ETH-denominated product), the underlying strategies (such as Basis Trades and Incentivized Liquidity Provisioning) are structured to be ETH-market-neutral.

The “short” positions you observed (e.g., ZEC, UNI) are standard components of Basis / Funding Rates Arbitrage strategy or hedging rewards which can’t be sold immediately (e.g. vesting rewards such as LINEA, FLR, XPL etc.), not directional shorts betting on asset depreciation. In a basis trade or funding rates arbitrage strategies, the fund holds the spot asset and shorts the perpetual or, alternatively, can open a short perpetual position on one leg and long perpetual position on another to capture funding rates difference, maintaining a net-neutral exposure.

It is important to note that positions on Hyperliquid often may represent only one leg, while the second one can be on Bybit or Binance, i.e. offchain and not visible through the onchain screeners. The vault operates under a strict Risk Control Framework that does not allow any material directional exposure, ensuring it does not become a directional trading vehicle as suggested.

Regarding the “lindyness” and track record, this vault is effectively a tokenized version of the ETH-on-ETH strategies that Edge Capital has been successfully managing since August 2020. The strategy has a proven and fully audited history since 2021, generating consistent returns through various market cycles (including a 31.8% return in 2024 and maintaining positive performance in the 2022 bear market). It is not a new or experimental “cowboy” fund but an institutional-grade strategy with over $650M in total assets under management and 4+ years of live performance data.

We also employ rigorous risk parameters, including strictly defined LTV ratios to manage liquidation risk and diversification rules that limit exposure to any single protocol or chain. The team has 24/7 coverage for the vault. The strategies are “Active Management” but within a “Conservative” risk profile defined by these hard limits. We believe hgETH fits the “Higher Risk” category of Summer.fi purely due to the sophisticated nature of the underlying DeFi strategies, not because of reckless directional trading. We are happy to provide further transparency on specific recent trades to clear up any remaining doubts.

Answers

1. Context on Specific Assets

The vault operates under a delta-neutral mandate, which does not allow it to carry any material directional risk to any asset. Spot and derivative positions on Hyperliquid reflect basis or funding-rate arbitrage strategies that are fully hedged. In some cases, arbitrage positions may be distributed across different venues, for example, a short position on Hyperliquid and a long position on Bybit, or vice versa, but the key point is that all positions are continuously monitored, and no directional exposure is permitted.

2. Hyperliquid Activity

For trading execution we use our partner solution - CoinRoutes, which provides tools for precise control of the execution process and allows us to place smart orders that manage both legs of an arbitrage position simultaneously, ensuring no directional risk at any point. Orders are sometimes executed in smaller sizes, which enables more accurate control of execution costs and slippage.

3. Drawdown Clarification

Since you are referring only to the Hyperliquid leg and not taking into account for the offsetting positions on venues such as Bybit or Binance, drawdowns on Hyperliquid alone may appear confusing and could give the false impression that the vault incurred losses from a directional bet. To answer your question: this was a mark-to-market equity fluctuation, fully offset by the PnL on the corresponding leg, which is typically held on a CEX.

4. Leverage Risk Management

The portfolio team employs a comprehensive risk framework and modeling approach for various spot and derivative markets in order to set up trading positions in the most efficient way from both a liquidity and risk perspective. The team analyzes market parameters such as open interest, order book liquidity depth, trading volume, index composition (for perpetual markets), ADL and liquidation mechanisms, and other relevant factors.

When the team opens a trading position, one of the most important factors is the “distance” between the mark price and the liquidation price, which effectively defines the maximum position size we are comfortable maintaining. For example, for the ZEC–USDC perpetual market, despite using 5x leverage, given the current level of margin on the cross-margin account , the position can withstand at least a 4x immediate price movement without being partially or fully liquidated. Decisions regarding the acceptable liquidation-price threshold are based on many considerations, one of which is the historical price deviation within very short time intervals (including 10/10 black-swan scenarios).

[Ceazor]

Im in support of this ARK. I hold hgETH personally and am happy with my results therein.

That said, it might be considered for High Risk Vault, as there is a lot of exposure to many assets and projects, Ie the HL positions.

[gonemultichain]

Thank you Ceazor.

We remember fondly your informative video about Kelp when we were just getting started in H2 of 2023.

[gonemultichain]

Quick update to SummerFi users: effective January 2026, we have implemented insurance coverage for the vault to further de-risk the platform for our institutional partners.

You can read more about the cover here: Insurance Coverage | KernelDAO

Excited to kick off 2026 with this added layer of security!

[Raphael_Anode]

hi there! First, thanks for coming on the forum. Love to see newcomers.

Could you tell me how you arrive at $1.5B TVL when your website tells me it’s 110M?
I don’t want to lessen your achievements. $110M is still great.

But wonder where the $1.5B figure comes from.

I also am not able to see the rebalances here: Kelp – The Leading Liquid Restaking Protocol | Restake Ethereum & Stay Liquid
What’s the best way to peek under the hood?

[gonemultichain]

Hi there ! Thanks for your question.

Our company (KernelDAO) has two main products:

• Kelp, the Liquid Restaking Token (rsETH)
• Gain, the Vault Management arm (ETH & stablecoin vaults)

In total, they have around $1.5B TVL (give or take depending on ETH price).

In parallel, in the case of Edge Capital (the vault strategists), it is worth noting that other than the $50-$60M TVL they manage for this vault, they have more than $1B on Assets Under Management (AuM) across different funds and vaults.

[NoMoneyNoProblem]

hgETH had negative performance over the past week

I rest my case…

[NoMoneyNoProblem]

@gonemultichain

they have more than $1B on Assets Under Management (AuM) across different funds and vaults.

And please stop inflating numbers.
The curation arm of Edge Capital, ‘Ultrayield’, has ~$178M AUM. Not more than one billion.
As shown both in their own webpage and on DefiLlama.

[BlockAnalitica]

KernelDAO Gain High Growth Gain (hgETH)

High Growth Gain is a non-custodial vault under KernelDAO’s “Gain” product line, designed to optimize rewards and airdrops by deploying deposits across multiple DeFi strategies, while issuing a liquid receipt token (hgETH) that can be used in DeFi. The strategy is executed by Ultra Technologies LLC as the strategist. KernelDAO provides the vault rails and smart contracts, while allocation decisions are made by the strategist within the permitted strategy set and subject to Kernel’s role-based controls and timelock governance.

Users can deposit ETH, stETH, ETHx, or rsETH into the vault, but withdrawals are only paid out in rsETH regardless of the original asset.

Backing

Users deposit ETH and ETH staking derivatives into the High Growth Vault and receive hgETH, an ERC-20 liquid token that represents a claim on the deposited assets managed by the vault strategy set.

The performance of hgETH/ETH presents drawdowns that can last several days, as observed, for example, between approximately Jan 18th and beyond Jan 23rd, 2026. This means that if Summer.fi were to deposit on the 14th and then request withdrawals on the 18th, receiving funds on the 21st (as an example given the 3 day redemption period), the ARK could realize losses. Indeed in the long term the returns seem always to be positive. However, rebalancing is a key mechanism of the fleet when seeking more attractive sources of yield. Therefore, this behavior is important.

Collateral breakdown and collateral exposure

The vault deploys deposited assets across downstream DeFi venues, creating exposure to lending markets like Aave and Compound, and to additional strategies referenced by KernelDAO such as Usual and Elixir, while the receipt token (hgETH) is intended to be used in external liquidity and yield venues like Balancer and Pendle.

The current holdings can be seen by tracking the following addresses:

• 0xd845b95a3a6a85f4e3baa003e8b7ed1ed85562d
• 0x08B6470e62235947b766aC63f584A52d25cb14E6
• 0x8AE9847BD9153805b064E3c3350CbaCDF622a24a
• 0x02efaa6a4e6abefd0f376bcffdb3988a6e55fb82
• 0x457adb2c68214d7dd2d1e89fcc10e4cce27e2608
• 0xbcaf70ef342378755e82c9f374225604f04a36e3
• 0x72dbfd4989b68b8b4efc27c6272d7586f1f0d483
• 0x1f0df950095269c602eaa46d91e664e7c2b3770f
• 0xc824A08dB624942c5E5F330d56530cD1598859fD
• 0xd9b12c063d4df75b47bd5797d857c873e3c6b505

Which, according to DeBank, account for around $56M, which aligns with the $55.9M reported in their UI at the time of this writing, meaning that asset verification seems to remain transparent.

Additionally, the presence of multiple leverage positions on Aave v3 and Compound v3 across multiple chains can be observed (as confirmed by DeBank) and is also indicated by their UI:

Some examples on DeBank:

Reference

Reference

The analysis also references an OTC loan edge position taken against a looped Maple Finance position. This specific item is not independently verifiable from the materials reviewed, but it supports the broader point that the strategy can introduce non-standard and harder to programmatically/numerically audit exposures.

Similar to previous assessments, if a strategy contains leverage positions across multiple chains and, as in this case, the protocol can take OTC positions, it already puts the yield source outside LR fleets. Additionally, the strategies used in hgETH involve lending protocols already incorporated in Lazy Summer, such as Aave v3, Compound v3, Morpho, Euler, and Fluid. However, it also contains multiple other protocols, such as Monad Staking, Lighter DEX, and YieldNest, which, even though the exposure is small (around 10% allocation), indicate the possibility of introducing more exotic yield sources by the strategy managers.

Fees

The yield source hgETH has two fees: a platform fee of around 1.5%, which is an annual management fee, and a 20% performance fee.

Redemptions and liquidity

Withdrawals are requested first; claims become available in about 3 to 4 days, and same day requests are batched into a single claim transaction. They are paid in rsETH regardless of the deposit asset, which may pose a risk of slippage for Lazy Summer when converting to ETH, the native asset of the fleet. However, by using the buffer pool, some rsETH can be instantly converted to ETH, as long as enough liquidity is available. Thus, multiple transactions are required to fully withdraw the funds, with a delay period of several days. The technical complexity of this implementation is beyond the scope of this analysis, and we leave this feasibility to the Summer.fi dev team.

Governance and roles

Kernel smart contracts are governed by a timelock that has an exclusive proposer, with the timelock delay currently set to 3 days to give the ecosystem advance notice of changes. The proposer is an 8 signer multisig that requires 5 signatures, and any upgrade must pass the multisig plus the timelock. Operational control is split across three additional multisigs: an Admin multisig for admin level operations, a Manager multisig for lower impact configuration and operations, and a dedicated Pauser multisig used to pause contracts in emergencies.

Risk assessment & Conclusions

hgETH is an actively managed, multi-chain yield source that runs leverage positions on Aave v3 and Compound v3, and can also take OTC positions. This already places the vault outside LR fleet requirements, further reinforced by the ability for managers to introduce additional and more exotic yield sources (for example, Monad Staking, Lighter DEX, YieldNest), even if currently cited as a smaller allocation.

A positive mitigant is the disclosed insurance coverage: Kernel states the hgETH vault maintains a Nexus Mutual policy designed to protect against smart contract vulnerabilities and protocol specific risks, structured as a 30 day rolling, portfolio level cover with a total coverage amount of 9,769.35 ETH and coverage up to 50 percent of AUM, with onchain verification links provided (here). This improves loss containment for certain technical failure scenarios, but it does not remove path risk. In particular, hgETH versus ETH shows drawdowns that can last several days (observed, for example, between Jan 18 and Jan 23, 2026), which, combined with the 3 to 4 day redemption claim period, can crystallize losses during exit windows. For HR fleets, this multi day drawdown plus redemption period is one of the primary reasons to refrain from recommending onboarding at this time.

However, it may be possible to whitelist other ARKs where hgETH is accepted as collateral with limited caps, for HR fleets, and this can be considered in future assessments.

Note that this analysis is based on the current status of the hgETH vault configuration. Any changes to it will require a revision of the current analysis.

[samehueasyou]

thank you for your thoughtful risk assessment. it is this type of diligence that is so important for users.