# Collateral Basket Change Proposal 7 - Updating the ETH+/WETH Convex LP Plugin
[https://app.reserve.org/ethereum/token/0x005f893ecd7bf9667195642f7649da8163e23658/governance/proposal](https://app.reserve.org/ethereum/token/0x005f893ecd7bf9667195642f7649da8163e23658/governance/proposal)
This proposal seeks to update the dgnETH collateral basket by migrating its 75% allocation from the Convex CryptoSwap ETH+/ETH LP to the StableSwap variant. The migration aligns the dgnETH basket with ETHplus’s own liquidity optimisations. The new StableSwap pool offers tighter spreads for pegged assets, reduced slippage on large trades, and improves ETHplus scalability. The StableSwap pool has recently delivered higher yields than the CryptoSwap pool (5.91% vs. 2.27% 30d average), though dilution is expected as liquidity migrates, mitigated in part by a subsequent migration of incentives by ABC Labs. In addition, the new plugin introduces gas optimisations that cuts dgnETH transaction costs by ~33%, albeit with a modest increase in stale-data risk as it moves the plugin uses 24h refresh window compared to the current plugin which refreshes on every action.
# [IP] Collateral Basket Change Proposal: Add Re7 WETH Morpho Vault
[https://forum.reserve.org/t/rfc-collateral-basket-change-proposal-add-re7-weth-morpho-vault/1217](https://forum.reserve.org/t/rfc-collateral-basket-change-proposal-add-re7-weth-morpho-vault/1217)
Summary
This proposal seeks to add the Re7 WETH Morpho Vault back into the dgnETH collateral basket.
# Collateral Basket Change Proposal: Adding Wrapped OETH (wOETH) to the dgnETH Collateral Basket
[https://forum.reserve.org/t/rfc-collateral-basket-change-proposal-adding-wrapped-oeth-woeth-to-the-dgneth-collateral-basket/1196](https://forum.reserve.org/t/rfc-collateral-basket-change-proposal-adding-wrapped-oeth-woeth-to-the-dgneth-collateral-basket/1196)
Origin Ether (OETH) was launched in May 2023 and is an ERC20 that generates yield while sitting in your wallet. Similar to stETH, OETH yield is paid out daily and automatically (sometimes multiple times per day) through a positive rebase in the form of additional OETH, proportional to the amount of OETH held. OETH is a full-fledged LST with an extremely tight peg (1:1 redemptions to ETH thru Origin’s ARM) and high yields thanks to DVT direct staking through SSV/P2p and a Curve AMO.
wOETH is a ERC-4626 tokenized vault designed to accrue yield in price rather than in quantity. When you wrap OETH, you get back a fixed number of wOETH tokens. This number will not go up - you will have the same number of wOETH tokens tomorrow as you have today. However, the number of OETH tokens that you can unwrap to will go up over time, as wOETH earns yield at the same rate as standard OETH. The wOETH to OETH exchange rate can be read from the contract (0xDcEe70654261AF21C44c093C300eD3Bb97b78192 , function number 16), or via the OETH dapp.
# dgnETH Backing Buffer change from 0.1% to 0.15%
[https://forum.reserve.org/t/rfc-dgneth-backing-buffer-change-from-0-1-to-0-15/1116](https://forum.reserve.org/t/rfc-dgneth-backing-buffer-change-from-0-1-to-0-15/1116)
This proposal recommends increasing the Backing Buffer from 0.1% to 0.15% to better protect RToken stakers from slashing events during basket changes. The Backing Buffer is essential in safeguarding RToken holders by maintaining extra collateral to handle slippage during a rebalance. An optimal buffer level prevents RSR slashing and stabilizes yields for RToken stakeholders. This proposal addresses a recent significant slashing event linked to insufficient backing and collateral mispricing. Raising the buffer to 0.15% aims to mitigate future risks while monitoring it’s impacts.
# Collateral basket change proposal: Removal of apxETH and addition of the Morpho Re7 WETH Vault
[https://forum.reserve.org/t/rfc-collateral-basket-change-proposal-removal-of-apxeth-and-addition-of-the-morpho-re7-weth-vault/1056](https://forum.reserve.org/t/rfc-collateral-basket-change-proposal-removal-of-apxeth-and-addition-of-the-morpho-re7-weth-vault/1056)
This proposal discusses three changes to the Degen ETH, dgnETH collateral basket including the removal of apxETH, the re-introduction of the Re7 WETH Morpho Vault at 25% and increase of of the Convex ETH+/ETH LP to 75%. While these changes reduce the diversification ratio of the basket and concentrate risk on the Convex ETH+/ETH strategy, they are proposed to boost sdgnETH yield providing closer alignment with the dgnETH mandate of capturing high yields which consistently outperform the LST market rate.
# [IP] Collateral basket change proposal: Removal of Morpho Re7 WETH Vault
[https://forum.reserve.org/t/ip-collateral-basket-change-proposal-removal-of-morpho-re7-weth-vault/899](https://forum.reserve.org/t/ip-collateral-basket-change-proposal-removal-of-morpho-re7-weth-vault/899)
This proposal discusses the removal of the Morpho Re7 WETH Vault weighting from the Degen ETH, dgnETH collateral basket. To instead favor an equal 50/50 weighting of Dinero’s apxETH and Convex ETH+/ETH LP. In order to provide closer alignment with dgnETH’s mandate of capturing high yields which consistently outperform the LST market rate.
# [IP] Collateral basket change proposal: Removal of Morpho Re7 WETH Vault
[https://forum.reserve.org/t/rfc-collateral-basket-change-proposal-removal-of-morpho-re7-weth-vault/899](https://forum.reserve.org/t/rfc-collateral-basket-change-proposal-removal-of-morpho-re7-weth-vault/899)
**Summary**
This proposal is to remove of the Morpho Re7 WETH Vault from the Degen ETH, dgnETH collateral basket. To instead favor an equal 50/50 weighting of Dinero’s apxETH and Convex ETH+/ETH LP. In order to provide closer alignment with dgnETH’s mandate of capturing high yields which consistently outperform the LST market rate.
# [IP] Increase the Degen ETH (dgnETH) Backing_buffer from 0.03% to 0.10%
[https://forum.reserve.org/t/rfc-increase-the-degen-eth-dgneth-backing-buffer-from-0-03-to-0-10/878](https://forum.reserve.org/t/rfc-increase-the-degen-eth-dgneth-backing-buffer-from-0-03-to-0-10/878)
# Summary
Increase the Degen ETH (dgnETH) Backing_buffer from 0.03% to 0.10%
#### Current Backing_buffer
0.03%
#### New Backing_buffer
0.10%
# Abstract
This proposal recommends increasing the Degen ETH (dgnETH) backing buffer from 0.03% to 0.10%. The backing buffer determines the amount of extra collateral held in the BackingManager to absorb potential losses due to trading slippage during rebalancing. The current buffer of 0.03% is insufficient, posing a risk of a slashing event where RSR stakers may lose their stake if the buffer fails to cover slippage. Such a low buffer could also lead to preemptive unstaking by RSR holders, destabilizing the protocol. Raising the backing buffer to 0.10% enhances protection for stakers, aligns with industry standards, and ensures long-term stability for the protocol.
# Problem Statement
Currently at 0.03% backing, the rate is too low and could cause a slashing event to RSR stakers. The backing buffer is a percentage value that describes how much extra collateral to hold in the BackingManager. This can be important for preventing RSR seizure during normal rebalancing as a result of trading slippage. If the backing buffer is set too low, it’s possible to get into a situation where RSR stakers begin individually unstaking before rebalancing proposals to avoid being slashed. The backing buffer should be high enough to prevent this outcome for expected rebalances.
# Rationale
By increasing the backing buffer to the default value of 0.01%. RSR holders are incentived to stake Degen ETH knowing there is a higher backing buffer protecting its users. 0.01% is the default value for RTokens. The current buffer of 0.03% is insufficient and poses a risk of slashing events, where stakers could lose assets if the buffer fails to cover slippage. By raising the buffer to 0.10%, the protocol not only provides better protection for stakers but also prevents preemptive unstaking, which could destabilize the system. This increase aligns dgnETH with industry standards, ensuring it remains competitive and attractive to users while contributing to the long-term stability of the protocol.
# Risks
Reward distributions could decrease for a period of time as the backing_buffer is filled reducing the distribution to staked Degen ETH (sdgnETH) holders. Generally for long-term holders this shouldn’t be an issue, but short term stakers will be affected.
# [IP] Collateral Basket Change: Adding apxETH to the Staked Degen ETH (sdgnETH) Yield Basket
[https://forum.reserve.org/t/rfc-collateral-basket-change-adding-apxeth-to-the-staked-degen-eth-sdgneth-yield-basket/868/1](https://forum.reserve.org/t/rfc-collateral-basket-change-adding-apxeth-to-the-staked-degen-eth-sdgneth-yield-basket/868/1)
# Summary
This proposal looks to diversify the Degen ETH (dgnETH) collateral basket by adding apxETH to the underlying yield strategy. At 9% APR adding apxETH will increase the staked Degen ETH (sdgnETH) base APY.
# Abstract
The proposed change involves adding apxETH to the collateral basket of sdgnETH. Currently, sdgnETH’s base yield stands at 5.27%, derived from Convex ETH+/ETH and Morpho Blue Re7 WETH Vault strategies. By incorporating apxETH, the new basket yield is projected to increase to 6.95%. The updated collateral exposure will consist of 35% Convex ETH+/ETH, 25% Morpho Blue Re7 WETH Vault, and 40% apxETH. apxETH, built by Dinero (Redacted Cartel), offers a 9.01% APY by auto-compounding rewards from staking pxETH. The integration of apxETH is expected to elevate the staking yield of sdgnETH from 12.8% to 17%, assuming the current percentage of dgnETH staked remains constant. This addition aims to enhance the overall yield of sdgnETH by leveraging the higher returns provided by apxETH.
# Problem statement
At $2 Million market cap, Degen ETH is growing rapidly and will continue to. The long term vision is to keep sdgnETH staking yield between 10% and 20% by keeping a high base yield and total % dgnETH staked below 50% of the total supply. Currently, the sdgnETH base yield 1 stands at 5.27% which means at 50% ratio of sdgnETH to dgnETH, sdgnETH yield stands at the lower boundary of its yield goals at 10%. This signals the opportunity to add more yields to the basket to drive up base APY.
# Rationale
By adding apxETH to the sdgnETH collateral basket, another highly respected DeFi product is being added increasing the overall collateral basket to
The current sdgnETH basket yield earns a base yield of 5.27% from two strategies
## Current Basket Yield = 5.27%
| Collateral Exposure | APY |Collateral Exposure |
|--------|--------|--------|
| Convex ETH+/ETH | 7.07% |50.00% |
| Morpho Blue Re7 WETH Vault | 3.47% |50.00% |
**Convex ETH+/ETH:** Token obtained by providing liquidity to the ETH±ETH liquidity pool on Curve Finance and staking the LP token on Convex Finance. This variable yield is generated from a combination of native asset yield, CVX rewards, and boosted CRV rewards leveraging Convex’s veCRV power.
**Morpho Blue ETH (Re7):** ETH lent to a vault that supplies deposited assets to Morpho Blue markets whitelisted by the vault Curator. The Curator can set supply caps for each market. If the supply cap is reached, deposited assets will be supplied to another whitelisted market. This vault is curated by Re7 and aims to outperform staked ETH yields by lending WETH against a diverse set of Liquid Staking and Liquid Restaking Token collateral markets.
## New Basket Yield = 6.95%
| Collateral Exposure | APY |Collateral Exposure |
|--------|--------|--------|
| Convex ETH+/ETH | 7.07% | 35.00% |
| Morpho Blue Re7 WETH Vault | 3.47% |25.00% |
| apxETH | 9.01% |40.00%|
**Staked pxETH (apxETH):** Built by Dinero (Redacted Cartel), apxETH is obtained by depositing pxETH into Dinero’s auto-compounding rewards vault (i.e. staking their ETH). Depositing pxETH into the vault results in a boosted staking yield for apxETH, as not all pxETH is staked. Each apxETH benefits from the staking rewards of more than one staked ETH, amplifying apxETH’s yield.
The current staking yield of sdgnETH stands at 12.8% which is 243% times the 5.27% base yield. With the additions of apxETH, the base yield increases to 6.95%. At the current % of dgnETH staked, the staking yield will increase up to 17%.
Dinero’s apxETH has completed 3 audits including 2 audits by Spearbit and 1 by Pashov (independent researcher). Adding apxETH drives up base yield, adds a well-audited yield product to the collateral basket, and is integrated with Redacted Cartel, a well-recognized group in the DeFi space.
# Risks
Risks include smart contract risks added from adding apxETH, exploit likeliness can be significantly lowered through audits and bug bounties but the chance is never 0. Volatility apxETH is variable yield, adding another variable yield product adds more dependencies which means a dip in apxETH yield lowers the overall yield.
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# [IP] dgnETH revenue distribution change
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The goal of this IP is to adjust the revenue distribution for DegenETH (dgnETH).
Currently with the RToken launched as is, 100% is going to RSR stakers. It will be adjusted to 95% staked degenETH (sdgnETH) and 5% to RSR stakers.
Originally in the RFC, it was 5% Protocol Owned Liquidity (POL), 5% RSR stakers 90% to dgnETH stakers.
After deliberation, this will be the new yield distribution model.
The RFC Introducing dgnETH, will be edited to match this new yield distribution