Migration from nWETH to nETH

#1

1. Context

nWETH [1] is today being used on Ref Finance to:

  • Swap
  • Provide liquidity
  • Mine liquidity (Farm)

The amount locked of nWETH on Ref Finance is approx 1.2K ($5.3M) and the nWETH/wNEAR pool is one of the most traded pools with roughly $200K of daily volume [2].

2. Problem

On Wednesday 27th October 2021, Aurora announced that the bridge, one of Aurora’s solutions, will stop supporting the bridge of WETH from Ethereum to NEAR [3]. Note that the bridge of nWETH from NEAR to Ethereum will still be supported.

Although wrapping ETH makes sense on Ethereum, because it allows users to trade directly with ALT tokens (other ERC-20 tokens), WETH does not make sense on NEAR and has often confused users who have bridged nETH instead of nWETH and vice versa [4].

That is one of the reasons why Aurora, to facilitate future adoption (via a better ‘token consistency’) on Aurora and NEAR, has taken this decision.

3. Plan

In order to have a smooth migration, Ref Finance will:

  1. Whitelist nETH (supported by Aurora) and un-whitelist nWETH on Ref
  2. Create a new nETH-wNEAR pool
  3. Create a new corresponding nETH-wNEAR farm

4. Additional support

To ease the migration, Ref Finance will:

  1. Extend the liquidity incentives in the current nWETH/wNEAR farm for another week (will end on the 9th of November) [5]
  2. Trigger potential airdrops to Liquidity Providers that come back on the new nETH/wNEAR pool to mitigate the costs of the bridge back and forth (from NEAR to Ethereum to NEAR)

Again and as mentioned above, please note that the bridge of nWETH from NEAR to Ethereum will still be supported.

References

[1] nWETH Token Account Id: c02aaa39b223fe8d0a0e5c4f27ead9083c756cc2.factory.bridge.near

[2] https://www.sodaki.com/

[3] Check at 5:01:36: https://twitter.com/auroraisnear/status/1453349517990907904?s=20

[4] Check historical feedback from users: Telegram: Contact @rainbowbridgesupport

[5] Ref Finance

13 Likes
#2

Great news! The move is certainly timely and necessary.

The only issue that I see is that transferring funds back to Ethereum back be expensive (ETH gas).

I’d like to explore how we can provide guidance and support for users who, as I understand it, would have to withdraw from REF, send back to Ethereum over the bridge, unwrap WETH, and then hopefully send the ETH back over to NEAR as nETH.

I’m wondering whether there is even a way to batch transfers to make it easier for users and reduce the overall costs. Open to suggestions on this.

Either way, let’s mobilise degens + other guilds to start creating guides and tutorials on how to complete this successfully.

8 Likes
#3

That’s really great…a lot of users were confused due to it.

is it possible to have a Swap/migrate Pool directly for nWETH to nETH for few days?
where maybe Team can add Liquidity for users to swap through.

so within that time period we can aware users to swap it through & after that team can have their Liquidity back.

3 Likes
#4

yeah definitely will need hardcore awareness campaigning and handholding for this one

1 Like
#5

Hello,
As a user, I think the airdrop should give to the current users of the pool nWETH/ nWNEAR, which consider as the ETH fee for them to unwrap the WETH back to ETH and start to add to the new pool nETH/wNEAR again.
The airdrop could be based on the ETH fee of the current time.

#6

I agree that this move is really necessary atm, thank you Didier for the proposal.

Since the journey to exchange nWETH to nETH is quite long and confusing (especially for non-Defi Users), I suggest we should have a tutorial video for this situation + an appropriate reward to compensate for the gas fee they have to pay

2 Likes
#7

The pb is that we would need serious liquidity with nWETH to do that, which will be a challenge if users can’t bridge WETH from Ethereum anymore. Plus, the current pools are not designed to provide competitive pricing on stables (which would be the same logic behind nWETH/nETH pool I believe).

2 Likes
#8

Got it…then bridging back to eth & come again will be the only way then.
Thanks

#9

Yes, I am afraid. Painful but for a brighter future : )

#10

I totally agree, and that problem should be solved soon. But need to come up with a good campaign to educate users.

#11

Do we have to do this like right atm? I have a cheaper idea, why don’t we wait until trisolaris release their wrap/unwrap eth function? I asked them before and this function is currently in their to-do list. In addtion, Wannaswap - a sushiswap fork AMM on aurora - they’re already developed this and it’s working, a downside is that they haven’t contacted aurora yet.

Since Near and Aurora are connected seamlessly, the migration would be much more easier this way.

2 Likes
#12

Yes, I think so. The migration has already started as the bridge does not accept WETH anymore from Ethereum to NEAR.

We can’t depend on Tri Solaris and / or Wannaswap to execute our plan.

3 Likes
#13

Couldn’t an IOU token be used and a 1 for 1 swap be done? wETH is the exact same price as nETH isn’t it? Why would there need to be a normal pool for tokens that have the exact same price?

Seems like ref could just allow users to deposit wETH in exchange for IOUnETH tokens and then swap IOUnETH tokens for nETH after ref does the mega unswap of wETH?

1 Like
#14

Good call Didier. Painful but necessary step.

1 Like
#15

Yes, @chluff suggested yesterday such a proposal in the DAO TG channel.

[…] an incentivized pool with a 1:1 peg (x + y = k) only accepts nETH as LP. Ofc we learned making fast changes to REF can be fatal, so you build this on a fork of REF contracts. No trading fees, REF (and imho aurora should also pay for this) put farming incentives on it for 1 or 2 weeks so everyone swaps.

Let’s assume that we can push such a smart contract very quickly, the question is who will provide the nETH liquidity? In other words, is the potential revenue generated from the 1-to-1 swaps greater than the opportunity costs for those nETH liquidity providers?

Any ‘collective’ of big holders or funds will do the math. The revenue they can generate from the operation depends on both; commission per swap and $ worth of ‘addressable’ capital.

First, let’s take the assumption that only the small holders (0.1 ETH or less) will be very affected by the bridge cost then interested in this specific swap.

Let’s assume that the number of nWETH on NEAR is locked in Ref (because it’s the only known use case - LP). Let’s add a 1.2 contingency rate. The addressable market would be 1.2k (quantity of locked nWETH) * 4.6k (ETH price) * 1.2 = $6.6m

Now, what would be the proportion of ‘small’ nWETH holders? Looking at the global wealth pyramid, we know that roughly 88% of the population control only 15% of the total wealth. The addressable market would drop to 6.6 * 0.15 = $990k. That’s more or less our small holders’ bag. And we know that the wealth disparity is generally exacerbated with cryptos.

Let’s say they (‘collective’ of funds) capture 100% of that amount and take a 1% commission. The estimated revenue would sit around $9.9k.

Finally, let’s assume it takes two weeks to capture the demand, the annualised ROI would be 1 / 15 * 365 = 24%.

I didn’t take into account the costs incurred by this ‘collective’ to probably (i) ‘unwind’ their existing positions on Ethereum and (ii) the associated bridge costs (although probably not relevant).

The ROI might be appealing but I don’t see them playing the game for that amount, I might be wrong though.

Last but not least, imo what would happen for small holders is that they will naturally swap nWETH to NEAR, send NEAR to a CEX for example, then sell NEAR to ETH, mitigating the cost of the bridge AND the volatility thanks to NEAR’s fast settlement.

NEAR being also an ERC-20, they (small holders) could do the same process via Sushiswap if they prefer a permissionless and trustless approach. Assuming that the swap cost on Sushi would not get them rekted, I mean being less than than the cost of the bridge.

Finally, the current nWETH/wNEAR farm is already subsidizing the migration, allowing small holders to swap (then attempt the above) and big holders to maintain their LP positions to allow that.

5 Likes
#16

All users need ref for nETH.That’s good.

1 Like
#17

More user case more TVL <3