Behind the Scenes of a DeFi Whale's $800K ETH+ Zap Minting
Decoding Reserve Protocol’s Stablecoin Alchemy Transforming 330 WETH to ETH+
Have you ever considered creating your own stablecoin? What if you could back it with diverse assets to ensure stability and reduce risk? The Reserve protocol makes this possible by offering a decentralized platform that functions like a central bank but without centralized control.
In traditional finance, stable currencies are backed by reserves held by central banks. The Reserve protocol mirrors this concept by backing its stablecoins, known as RTokens, with baskets of tokenized assets. These assets are diverse, which helps minimize the risk of value loss. Unlike traditional banks, the Reserve protocol allows anyone to issue a stablecoin with their preferred assets and governance structure.
The protocol also supports over-collateralization, ensuring stability even if some assets in the basket fail. This means that RTokens have an added layer of security, maintaining their value in uncertain market conditions. Additionally, the use of yield-bearing collateral enables revenue generation, providing an incentive for users to participate in the ecosystem. This combination of flexibility, security, and potential for revenue makes the Reserve protocol a special solution for creating stable currencies in the decentralized finance space.
Strategy One-liner
In 44 steps via Balancer, Curve, Enso, Kyber, and Solidly, a big whale uses the Reserve protocol to mint 323.522 ETH+ by swapping 330.2836 WETH for sfrxETH, rETH, and wstETH.
Simplified Illustration
We omit the transfer from the whale’s contract to the Reserve protocol for clarity.
Big Picture
https://bit.ly/3TvLhOY
Key Steps
We break the 44 steps of this transaction into four stages. Step 0 transfers the whale’s contract to the Reserve protocol’s Zapper Executor contract, which acts as an asset-exchanging router.
Stage 1: Reserve Zapper Executor Swaps WETH for stETH.
Step 1: Zapper Executor sends 110.3241 WETH to Kyber Network’s router.
Steps 2-5: Kyper router exchanges 15.4454 WETH for 15.4465 stETH via a Solidly V3 pool.
Steps 6-9: Kyper router exchanges 7.7227 WETH for 7.4527 stETH via the Maverick Protocol.
Steps 10-15: Kyper router exchanges 39.7167 WETH for 39.7188 stETH via the Balancer V2 Protocol.
Steps 16-19: Kyper router exchanges 47.4394 WETH for 47.4419 stETH via the Curve Protocol.
Step 20: Kyper router sends 110.0599 stETH to the Reserve Zapper Executor.
Stage 2: Reserve Zapper Executor Swaps WETH for frxETH.
Step 21: Reserve Zapper Executor sends 109.5534 WETH to Kyber Network’s router.
Steps 22-25: Kyper router exchanges 88.7382 WETH for 88.8782 frxETH via the Curve Protocol.
Steps 26-28: Kyper router exchanges 20.8151 WETH for 20.8481 frxETH via the Curve Protocol.
Step 29: Kyper router sends 109.7262 frxETH to the Reserve Zapper Executor.
Stage 3: Reserve Zapper Executor Swaps WETH for rETH.
Steps 30 - 32: Reserve Zapper Executor sends 110.4061 WETH to EnsoShortcuts contract for 99.4235 rETH via Enso and a Uniswap V3 pool.
Stage 4:Reserve Zapper Executor Generates ETH+ RToken.
Steps 33-34: Reserve Zapper Executor wraps 109.7262 frxETH as 100.7020 sfrxETH.
Steps 35-36: Reserve Zapper Executor wraps 110.0599.stETH as 94.0702 wstETH.
Steps 37-41: Reserve Zapper Executor sends 100.7020 sfrxETH, 93.7849 wstETH, and 98.9566 rETH to its BackingManager contract and mints 323.5220 ETH+ that is sent to the whale’s contract.
Steps 42-44: Reserve Zapper Executor returns the exchange surplus to the whale’s contract.
Key Protocols
Zapper Executor is a Reserve Protocol contract that executes a bundle of instructions and data from the user.
The Leaf node connected with Steps 38, 39, and 40 is the Reserve ETHPlus Backing Manager contract, which manages the collateral assets backing the ETH+ token. It ensures proper over-collateralization, handles yield generation and executes rebalancing operations to maintain the token's stability and value.
The contract labeled “FurnaceP1,” used in Step 37, is Reserve ETHPlus Furnace, designed to systematically burn a portion of the protocol's revenue. By reducing supply and distributing value to token holders over time, this could potentially increase the value of ETH+ tokens.
Solidly Protocol is a decentralized exchange optimized for trading like-kind assets (e.g., stablecoins). It incentivizes users to lock their SOLID tokens to vote on token pair incentives.
Maverick Protocol, whose address is shown as 0x0eB1C92f9f5EC9D817968AfDdB4B46c564cdeDBe, is a decentralized exchange platform featuring a Dynamic Distribution AMM (ddAMM) that optimizes capital efficiency by allowing liquidity providers to dynamically allocate assets across customizable price ranges.
Kyber Network, whose router address is shown as 0xf081470f5C6FBCCF48cC4e5B82Dd926409DcdD67, is a multi-chain decentralized exchange protocol that aggregates liquidity from various sources to provide traders with optimal rates for token swaps while offering liquidity providers flexible earning opportunities.
wstETH: wstETH (Wrapped Staked Ether) is a tokenized representation of stETH issued by Lido that maintains a fixed balance while automatically accruing staking rewards. This makes it easier to integrate with DeFi protocols and provides a more gas-efficient solution for users.
EnsoShortcuts: Enso Shortcut is a decentralized asset management protocol that allows users to create, manage, and invest in customized on-chain investment strategies. It enables seamless portfolio rebalancing and yield farming across multiple DeFi protocols with a single transaction. We have a case study explaining how Enso Solves 73.5ETH in 116 Steps in One Transaction.
Key Addresses
The oval “to GnosisSafeProxy” is the contract used by the whale.
The oval “0xf08…cdd67” is the router of Kyber Network.
The oval “0x0eb…dedbe” is Maverick Protocol.
The pentagon labeled “leaf,” connected to Step 28, is Kyber Network’s fee address.
The oval “leaf” connected with Steps 38, 39, and 40 is the Reserve ETHPlus Backing Manager contract.
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