Optimizing utility for Mantle blockspace with Redacted
Introduction
The demand for innovative solutions that enrich the user experience in DeFi is accelerating. Notably, a challenge facing users is the lack of liquidity and flexibility in staking Ether. Additionally, the lack of competition in the liquid staking vertical has led to monopolization, which poses its own set of risks to both Ethereum and Mantle.
In response to these challenges, Redacted has built a new type of Liquid Staking Token, called Pirex ETH or pxETH. We’re also planning to launch DINERO, which is an overcollateralized stablecoin backed by pxETH that will have other direct utilities on-chain. Combined, the Dinero Protocol will offer unprecedented utility for staked Ethereum.
Background
The Redacted Cartel is the DAO building out the Redacted ecosystem. The DAO consists of developers, writers, researchers, and more who are all focused on building out and extending the reach of DeFi. The Redacted ecosystem is a product suite of smart contracts empowering on-chain liquidity, governance, and cash flow for DeFi protocols. We’ve built two products inline with this mission: Hidden Hand and Pirex - and now, Dinero.
There are some unique opportunities that are opened up when an L2 works with an aligned ETH staking solution, here we present the benefits of staking ETH with Dinero and some of the possibilities of what a partnership between Redacted and Mantle could involve.
pxETH
Redacted has built a new type of Liquid Staking Token, called Pirex ETH or pxETH. pxETH is designed to bridge Ethereum staking and DeFi in a way that allows users to make optimal use of their ETH holdings. pxETH is built on top of Redacted DAO’s Pirex platform and forms an integral part of the Dinero protocol, a protocol which aims to integrate ETH staking and Ethereum network validation, block proposal and building into a single synergistic ecosystem comprising pxETH, the Redacted Relayer, and the DINERO stablecoin. pxETH provides users with a liquid and fungible tokenized staked ETH which benefits from Ethereum staking rewards and other revenue forms such as MEV tips and block rewards. Future pxETH yield and pxETH withdrawals can be tokenized and used within DeFi.
Our hope, with pxETH and Dinero, is to deliver a holistic solution that combines several useful and capital efficient tools under a singular easy-to-use protocol, while contributing to true decentralization of the liquid staking landscape.
Integration and Execution
1. Mantle stakes 50,000 ETH into pxETH to bootstrap DEX liquidity and integrations across Mantle, increase the frequency when we land a block, as well as earn more fees on each block landed.
2. Establish pxETH pairings with Mantle’s LST.
3. Mantle opts in to sending batch transactions via Redacted’s private mempool.
MEV protection/kickback
pxETH will validate a private mempool, and bundles that we want shielded from MEV can be executed at the top or bottom of every block when a block is produced by pxETH.
For L2s, this means that at block production, we would be able to deliver the bundle directly on-chain, with additional possibility to add transactions on either the L1 or L2 side to capture MEV (most likely arbitrage between L1 dexes and L2 dexes) and direct that value back towards the chain and its users.
Liquidity Syncing
Another possibility that is offered when we land a block, is that we can atomically execute transactions on both the L1 and L2 as if they were the same chain. Meaning a L2 user can submit a transaction to buy tokens which only have liquidity on a L1 pool, and at the next block produced, we atomically send the users funds from the L2 to the L1, make the swap, and deliver the desired tokens back to the L2.
This means that even without really deep pools on the L2, the traders on L2 could get access to the entire liquidity present on the L1 (albeit with a bit more time delay).
It’s also possible to do liquidity syncing across L2s that share the same block building stack or messaging layer (e.g. OP superchains, Base rollups)
Stablecoin gas with DINERO
With meta transactions, it’ll be possible to do gas payments in any token that can be swapped on-chain back to ETH, and there is some appeal to users who wish to use the chains without exposure to ETH price fluctuations. We envision DINERO to be the best decentralized on-chain stablecoin designed specifically for the purpose of paying transaction fees.
Our plans include seamless swaps between DINERO <> pxETH <> ETH so that users are never overpaying for gas costs, as well as on/off-ramping solutions for DINERO to make it as convenient as possible for users.
Liquidity
ETH can be withdrawn from the Dinero protocol in exchange for pxETH via two mechanisms: (1) Normal pxETH withdrawals; and (2) Priority pxETH withdrawals.
Under Normal pxETH withdrawals:
- if the amount of unstaked ETH is greater than the ETH buffer upper limit, pxETH can be redeemed for this excess ETH. However the excess amount is likely to be less than 32 ETH, given the automatic process of validator creation.
- if there is no excess ETH available, validators will be spun down to provide ETH for withdrawal. In this case the ETH will be exchangeable for upxETH and RFN 1155 NFTs, with the upxETH being redeemable for ETH once the relevant ETH has been unstaked. The time for this ETH to become available depends on the length of the unstaking queue on the Ethereum network, if any.
Under Priority pxETH withdrawals, when the ETH buffer is greater than the ETH buffer lower limit, pxETH can be redeemed for ETH in the buffer immediately. This style of withdrawal allows for quicker withdrawals in the event that there is an unstaking queue for ETH on the Ethereum Network. A withdrawal fee is levied on withdrawals, with a larger fee for Priority withdrawals, reflecting the greater ease of withdrawal. These withdrawal mechanisms allow for ETH:pxETH peg maintenance and for greater liquidity, especially during times of market volatility.
Conclusion
Besides contributing to true decentralization of the liquid staking ecosystem, pxETH offers several advantages over existing LSTs. The ability to provide a fixed yield, increased liquidity, and improved scalability, while preserving optionality for DeFi interaction. Combined with DINERO, Mantle will achieve complete capital efficiency for both their own LST and ETH reserves by staking with pxETH, while effectively furthering staked ETH decentralization. The unique design of pxETH offers a new approach to risk management in the DeFi space and potentially transformative stablecoin and yield generation strategies. Aggregators can use pxETH in their yield farming strategies, and borrowers and lenders in the Mantle ecosystem can utilize pxETH to their benefit.
Mantle allocating into pxETH will attract a larger audience to the platform, as well as to allow for more composable and efficient DeFi use cases.