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Case Study: StakeWise Integrates RedStone Oracles to Bring $osETH to DeFi

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What is StakeWise?

StakeWise, a perspective staking protocol, that serves as a middleman between stakers and node operators, charging fees for certain features and providing others for free, with the total fee for a user being the sum of fees for different StakeWise V3 components.

With its liquid staking token, osETH, this platform distinguishes itself by enabling ETH staking with market advantage and providing chances to farm, stake, and borrow against staked assets for higher profits. StakeWise arranges 3 different ways of staking: One-click staking, Staking with Vaults, Liquid solo staking. Each one comes with its own advantages. It provides a staking option for regular users, along with the benefit of using staked capital in DeFi applications. The ability for solo stakers to mint osETH against their nodes creates opportunities for non-custodial, trustless staking services. Larger organizations, such as whales, funds, and DAOs, can also locate specialized staking solutions that meet their requirements and allow them to continue using their staked funds in DeFi.

Vaults are isolated staking pools that enable ETH staking with customizable terms, and they use smart contracts to handle deposits, rewards, and withdrawals in a non-custodial manner. There is also DAO component, a group of people with $SWISE tokens who run the Treasury and set the major guidelines for the StakeWise protocol. 

What is $osETH?

Liquid staking in StakeWise V3 is powered by osETH, an ERC-20 tone – an overcollateralized staked ETH token that earns staking rewards when being held. osETH and its earned incentives can always be redeemed for ETH at the current exchange rate set by StakeWise Oracles, which is based on Vault performance and osETH supply. If there’s not enough available unbonded ETH, the protocol will exit validators to ensure full redemption. What’s more, osETH provides slashing protection by having excess staked ETH to cover performance shortfalls and slashing losses, benefiting stakers in Vaults and osETH buyers on DEXs who are isolated from node-specific risks. 

Technically speaking, the amount of ETH that osETH can be redeemed is constantly rising to show accumulated rewards by validators. osETH is a repricing token because of the increase in the value to represent the actual value of rewards. The exchange rate for osETH begins at 1.00 ETH at launch and rises as additional staking incentives are gained. The osETH APY, which is always given net of the StakeWise DAO fees, reflects the rate of increase. For instance, the exchange rate for osETH would rise from 1 ETH to 1.0475 ETH if the staked ETH backing osETH earned 5% APY during the previous year (after Vault fees).

You can’t integrate osETH into DeFi without an Oracle

The trusted Oracle acts as a bridge between the liquid staking token and the DeFi ecosystem. It provides reliable and accurate external data that is crucial for various DeFi protocols to make informed decisions. This integration ensures that the utility of the liquid staking token extends beyond its initial purpose, unlocking new opportunities for users. By establishing a secure and trustworthy connection, RedStone Oracles enhances confidence in utilizing the token across different DeFi applications while maintaining integrity and minimizing risks associated with incorrect or manipulated data. Thanks to the osETH / ETH price feed from RedStone, osETH can be now used by Gravita, Morpho Blue, Enzyme and others.

DeFi protocols have historically required Chainlink price feeds as they were deemed the safest when compared to the only real alternative at the time – UniSwap TWAPs. Chainlink price feeds have been notoriously hard to obtain for many protocols due to the liquidity requirements imposed by Chainlink (such as multiple millions of dollars of trading volumes each day across several trading venues). This is often a chicken and an egg situation as without integrations it is hard to drive the necessary token volumes for such a price feed. Now there are other quality Oracle providers out there, such as RedStone, the space can move away from its Chainlink dependence and make it easier for protocols to obtain a quality price feed.” said Kirill Kutakov, StakeWise Co-Founder.

Implemented Solution

Screenshot from RedStone App 

RedStone Team implemented a price discovery mechanism based on 3 most liquid DEX’es where osETH tokens are traded:

  1. Balancer: osETH-WETH
  2. Uniswap V3: osETH-USDC 
  3. Curve: osETH-rETH

We also prepared a liquidity monitoring service to rearrange the pools in case of changes in the amount of deployed tokens to mitigate the attempts to manipulate the price. 

In the final step, we facilitated the deployment of multiple data provider nodes, relayer nodes and monitoring services to actively track the operations of data-providing infrastructure.

Exclusive Interview with StakeWise Team

Our speaker was Kirill Kutakov, StakeWise CEO

Can you describe your oracle problem in a few sentences?

Creating utility for a liquid staking token is vital to its success and a trusted Oracle is an important piece of the puzzle to allow the token to be safely integrated across DeFi. 

Why have you decided on RedStone?

Just as the decentralization of staked capital is important, so too is the diversity of price Oracle providers to ensure that the ecosystem does not become dependent on a single, (and possibly centralized) solution. Encouraging the adoption of Redstone Oracles by DeFi protocols is an important step to achieve this, and the RedStone team has shown their willingness to work alongside us to make these integrations happen. 

How did the integration process look on your end?

The process was very simple and required little work from our side. We had already designed the liquidity strategy for osETH to ensure its foundational liquidity is robust and good enough for any DeFi protocol. Once we had our liquidity pools up and running, the RedStone team went straight to work to get the price feed up and running in a matter of weeks. 

About RedStone

RedStone is revolutionizing the Oracles industry by implementing novel modular design and 3 tailor-made data consumption models. You can build the new generation of DeFi & Web3 protocols based on RedStone’s versatile data offering of long-tail, LP, LST, and Ecosystem-native tokens, as well as Real World Data and custom feeds.
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