wstETH Collateralization
Last updated
USDN Protocol
Last updated
At this moment, the Long-Only Perpetual is designed to provide users with exposure to the price of ETH, but the Protocol operates on wstETH behind the scenes.
On the front-end, the Perpetual is presented in ETH units and prices to simplify the trading experience. Most users are familiar with ETH, a widely traded and well understood asset. By displaying the Perpetual in ETH, we allow traders to take Long positions intuitively without requiring them to understand technical concepts like the wstETH. This approach simplifies comprehension, makes trading more accessible, and allows for easy performance comparison.
The Protocol exclusively uses wstETH (Lido Wrapped Staked ETH), a wrapped and staked version of ETH that generates additional yields, typically ranging from 4% to 8% annually through staking on the Ethereum beacon chain. While stETH holders see their yield represented as a gradual increase in balance (rebase), wstETH holders instead keep the same balance but gain value because the price of wstETH increases gradually compared to the ETH price. While users primarily interact with ETH, they still benefit from the advantages of wstETH, which provides long-term yields.
To streamline the experience, a Router contract has been implemented to automatically convert deposited ETH into wstETH, which is used as collateral in the Protocol. However, users also have the option to directly supply wstETH if they prefer. In the future, additional options, such as depositing stETH, may be supported by this Router, offering even greater flexibility.
This mechanism allows users to fully benefit from staking yields while enjoying a seamless experience, making a Long position on our platform more advantageous than a traditional Long position in ETH.
To ensure users can see the benefit of these advantages without adding complexity, the interface is optimized to account for this difference. The additional yields from wstETH are automatically subtracted from the Protocol's Funding Rate on the site, allowing for the display of net Funding Rates (Protocol FR - wstETH Yield). In other words, the extra yield generated by wstETH is used to offer more competitive Funding Rates in terms of ETH while maintaining a simple and intuitive user experience.
By choosing our Long-Only Perpetual, users gain simplified exposure to ETH while enjoying the yield offered by wstETH. This makes Long positions more advantageous. For more information about wstETH, you can refer to Lido’s documentation.
