SLURP-37 | Moving Liquidity and Incentives to New StableSwap-NG (Next-Gen) Curve Pool as Preparatory Measure to Enable Lending

[LP_Matias]

Abstract

Core Contributors of the stake.link DAO propose migrating liquidity and incentives from the current, older stLINK/LINK StableSwap Curve Pool (version 0.2.15) to a newer design stLINK / LINK StableSwap-NG Curve Pool. This strategic move will leverage the advanced features of Curve NG combined with setting optimized parameters with the help of LlamaRisk, to enhance the health of secondary markets, ensuring readily available redemption liquidity, and paving the way for future lending capabilities, potentially through a Curve Lend market and a potential listing on Aave. This upgrade aligns stake.link with the trajectory of leading ETH-based LSTs like stETH and pxETH and was strongly suggested by third parties while evaluating the possibility to add wstLINK as collateral in DeFi.

Rationale

The current older Curve Pool Design, while functional, presents limitations in terms of trading efficiency. Upgrading to a StableSwap-NG Curve Pool offers several key advantages which are detailed here:

• Improved Health for Secondary Markets: LlamaRisk will provide parameter recommendations, optimized for improving the health of secondary markets. This is crucial for ensuring readily available redemption liquidity, meaning as much LINK as possible for stLINK → LINK swaps, ideally aiming for a 50:50 balance. This focus on redemption liquidity is essential for a smooth user experience, mirroring the performance of successful ETH-based LSTs, and is a key requirement for a successful Aave listing. It also supports liquidations and overall market stability.
• Potential Facilitation of Lending: The StableSwap-NG Curve Pool architecture simplifies the setup of a Curve Lend market, opening up exciting new possibilities for stake.link users. This will enable borrowing against wstLINK and further enhance its utility within the DeFi ecosystem.
• Alignment with Leading LSTs: This migration positions stake.link alongside other prominent LSTs, adopting best practices and ensuring compatibility with evolving DeFi standards.

Specification

1. Migration of Liquidity: All liquidity from the current, older stLINK/LINK StableSwap Curve Pool (version 0.2.15) with address 0x1c899ded01954d0959e034b62a728e7febe593b0) should be migrated to the new StableSwap-NG Curve Pool.
2. Parameter Optimization: LlamaRisk will provide recommendations for optimal pool parameters, focusing on maximizing readily available secondary redemption liquidity. These parameters will be designed to maintain a healthy balance of LINK in the pool and align with successful ETH-based LST strategies.
3. Migrated Incentive Structure: The migrated incentive structure for the new StableSwap-NG Curve Pool will remain the same as last determined in SLURP-31.
4. Oracle Considerations: The new pool will leverage the enhanced capabilities of StableSwap-NG Curve Pools, which includes a more robust framework for oracle integration across lending venues like Euler. Further details regarding specific oracle implementations will be explored and communicated as needed.

Conclusion

SLURP-37 represents a significant step forward for stake.link, enhancing its infrastructure and positioning it for future growth. By migrating to a StableSwap-NG Curve Pool, we improve trading efficiency, and unlock the potential for lending capabilities. This move not only strengthens stake.link’s position in the LST landscape but also creates new opportunities for users and the DAO. We encourage community discussion and feedback on this proposal. We believe this upgrade is crucial for long-term success and will solidify stake.link’s role as a leading LINK LST protocol.

ADDENDUM: LlamaRisk just published their analysis and recommendations over at [Analysis] stLINK/LINK-ng Pool Optimization - Proposals - Curve.fi Governance

[smartcondrums]

sounds good to me, so lets go

[Ari]

Thanks for bringing up the SLURP. As someone who has been looking into this topic for a while, I’m glad to see it strongly recommended by third parties and now moving forward. While I hadn’t considered the oracle factor for venues like Euler, this makes a lot of sense, and I’m eager to see it become a reality.

For reference (SLURP-26):

@Ari

The image below gives some insights of how analogous protocols are adjusting A (amplification) and the Offpeg Fee Multiplier

• A ranging from 1 to 5,000: A is an amplification coefficient, which defines the pool’s liquidity depth. The higher the value of A, the deeper the liquidity.
• Offpeg Fee Multiplier from 0 to 12.5: A multiplier that adjusts the Swap Fee based on the pool’s state.

While we probably could have anticipated this earlier, I beleive the sooner, the better.

---

Questions:

• What’s the expected timeline for this? ASAP or alongside the POL deployment?

• Will this SLURP incur expenses for the DAO (e.g., LlamaRisk assistance or other costs)?

[Jonny]

Hey Ari, to answer the questions. It will be done ASAP since this pool will be the main facilitator for DeFi integrations and the new pool parameters optimising secondary liquidity.

No expected costs as part of this SLURP, just the migration of liquidity & incentives will be important.

[Erazz]

Honestly not super eager for this proposal as this could cause liquidity fragmentation, LPers have already been tossed around with Metis and camelot( or was it Lancelot?).
Some stability could be nice.
It took some time to reach that liquidity on curve and even now the stlink to link ratios often fluctuate a lot.
As read from sylvarant’s it’s not a priority.

[LP_Matias]

Hey Erazz, appreciate your thoughts on SLURP-37, but I want to clear up a few points.

I personally wouldn’t agree with the characterization that LPer’s were “Tossed around” when looking at the context of the transitions that happened.

When we discontinued the SDL/ETH and wstLINK/ETH pools on Camelot, it was because the Priority Pool successfully staked so much LINK that it ran out of LINK to stake. This made it a necessary shift to shore up liquidity on the stLINK/LINK LP on Curve which ultimately worked.

As for Metis, there was never a wstLINK LP actually deployed on Metis. While a SLURP was passed in favor of it, governance later voted against moving forward and no LPs were ever affected.

Regarding concerns about Curve liquidity and pool ratios, the new StableSwap-NG design is specifically aimed at improving secondary market health to ensure deeper and more reliable redemption liquidity. LlamaRisk’s optimized parameters will help stabilize the peg, ideally bringing the pool closer to a 50:50 balance of LINK to stLINK, reducing volatility and making exits easier for LPs.

In reference to Sylvarant’s message of priority, that perspective was based on September 2024 data when stake.link had 2.59M LINK staked—we’re now at 3.64M LINK, a 40%+ increase, making this upgrade far more relevant. This even lines up with the end of Sylvarant’s message that you referenced with it not being a priority “right now.”

The protocol has made significant strides since September 2024, 5 months ago now as of writing. With the growing demand for lending integrations via Curve Lend and future potential DeFi listings, this transition is critical for ensuring stake.link remains competitive with leading LSTs – we have to stay competitive, we cannot get complacent.

Far from fragmenting liquidity, this proposal strengthens the protocol’s foundation, improves LP security, and unlocks DeFi integrations that drive long-term adoption.

Thanks for your input and I hope I was able to address the points you made.

[Erazz]

Hi,

You addressed some of my concerns, i apologize if have been rude.
But as a decent sized LP (~ 8%), switching from and old pool to a new one always come with extra work, as i’m not familiair with the new stableswap-NG Curve pool.

I don’t know if it has been as much battle tested as the standard one and i’m usualy very careful about migrating to new products as maybe the yield doesn’t offset the extra-risk.
For example, it took me a year to deposit on the old curve one, and i know some people rather keep their link on a cold wallet than taking this extra risk.

Would you guys have any ressources for us LPers that are not too familiar with this one so we can ease our concerns ?

Thanks,

Erazz

[Jonny]

Hey @Erazz, it’ll be through the same Curve UI just in a new pool. So if you’re familiar with unstaking and withdrawing the LP, then it’s just doing that and then browsing to the new pool and taking the same actions to stake them back as you did before.

[Asymmetric]

LlamaRisk just published their analysis and recommendations over at [Analysis] stLINK/LINK-ng Pool Optimization - Proposals - Curve.fi Governance

[LlamaRisk]

Hi, StableSwap-NG implementation has been in prod for over 1 year. While the UX is entirely the same as the existing pool, features/enhancements include:

• Supports pools up to 8 tokens
• Supports yieldbearing tokens, including internal rate oracle, rebasing, and ERC4626
• Dynamic fees calculate the swap fee based on pool balance and rates of tokens being exchanged (offpeg swap imposes a fee multiplier)
• A manipulation-resistant EMA price oracle is built into the pool (This could be useful, for example, in creating a Curve Lend market)

You can find here an audit report on StableSwap-NG by MixBytes. Docs for more info are here.

[Erazz]

Thank you for your reply.
I’ve read the analysis on stlink/link ng pool optimization as well.
If i’m correct, all of this is to ultimately enable Aave lending for stlink ?
It is said in the analysis that the most sensitive unpeg would be the upside one.
In the event of an aave listing, considering that the staking pool is actualy 45 millions, and the link borrowing supply available on aave seems to be around 25m (at a rate near 0%) all networks included.
Does the looping opportunity and hence the buying pressure on the stlink/link pair has been included in the analysis’s parameters ?

Do we trust aave to tweak the number’s correctly or is it another SLURP’s problem ?

We have seen some huge depegs on steth in the early days, with completely different factors, so i’m wondering if we thought this through.

[LlamaRisk]

Aave would control exposure to stLINK through the supply cap param, that’s on them to manage. The leverage loop use case will depend on the LINK staking pool, either that cap should increase or space should open in the pool to allow for direct looping.

stETH deppeged to the downside when withdrawals were not possible, in the case where SDL is soon releasing a robust withdrawal mechanism, there should be a strong assurance to protect against a downside depeg (>25% of the supply would need to be redeemed within a week to break this assumption). Also, since the stETH depeg, most lending platforms have transitioned from secondary market pricing to internal rate oracles for these leverage loop use cases. A sustained upward depeg isnt ideal, but it’s less harmful to LPs- it may deter or penalize new LPs, but existing ones will be able to exit at a premium and potentially arb through the staking queue, depending on the opportunity cost of doing so.