unshETH
unshETH aims to further validator decentralization by creating a marketplace for staked ETH liquidity in which liquid staking protocols can compete for dominance through incentive mechanisms.
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- Documentation
- Auditors
- Please see our FAQ on experienced auditors
- Website
- Token: USH
- Tags: Market Making
- TVL: $489.5K (Rank #220)
- TVL Ranking by Market Making: #0
- Blockchain: Ethereum
- Chain TVL
- Ethereum: $489.51K
- Code reviewed by at least one experienced auditor
- Anonymous team reduces transparency
- No documented protocol hacks since launch
- Latest protocol version launched in 2023; maturity over one year minimizes technical risk as smart contracts are well battle-tested
- Top 10% by total value locked reduces risk
- Multisig wallet controls protocol upgrades
- Multisig consists of less than 4 signers, which makes the protocol more susceptible to centralization risks
- No timelock exists or no information documented, which mean a malicious actor could approve upgrades without any delay
- Low voting power concentration reduces risk
- No death spiral concerns
- This protocol is susceptible to risks related to yield optimizers which deploy custom strategies to automatically manage user funds
How unshETH works
unshETH is a protocol that uses liquid staking derivatives (LSDs) to improve validator decentralization on Ethereum. LSDs are tokens that represent staked ETH and allow users to access the liquidity and composability of their staked assets. unshETH allows users to deposit their LSDs from different providers: Lido, Rocket Pool, Coinbase, and Frax Ether, while earning underlying staking yield, swap fees, and USH token rewards. Users can also withdraw their LSDs at any time. USH tokens are governance tokens that can also be staked for more rewards. unshETH also introduces innovative LSDfi primitives, such as validator decentralization mining and validator dominance options, that use incentive engineering to distribute capital and yield across the LSD ecosystem in a way that promotes validator decentralization.
How does the vdAMM work
The vdAMM (virtual decentralized automated market maker) enables seamless swaps between LSD-LSD and LSD-ETH pairs by pooling all LSD liquidity via unshETH. The vdAMM charges a base fee plus a dynamic fee based on whether swaps bring the unshETH basket closer to the governance decided target weights. The target weights are determined by the unshETH community and can be adjusted over time through governance proposals. The vdAMM fees accrue to unshETH holders, who can claim them by withdrawing their LSDs from the protocol, as well as unlock another source of real yield. The vdAMM also rewards users with locked/staked vdUSH tokens, which are omnichain dual-token locked governance staking tokens. The vdAMM aims to increase the liquidity and efficiency of the LSD ecosystem and promote validator decentralization by incentivizing users to swap between different LSDs.
How do withdrawals work
Users can burn their unshETH at any time and receive a proportional amount of each LSD backing unshETH. the vdAMM also keeps 5% of the target unshETH basket as WETH to facilitate direct withdrawals into ETH without relying on external DEX liquidity or blockchain level withdrawal queues. Please note there is an additional instant redemption fee of 20bps to swap WETH from the vault as it is a more scarce asset.
