Although KelpDAO has taken positive strides in making rsETH a suitable collateral asset, we generally advise caution when assuming exposure to any liquid restaking token. The sector remains highly speculative, driven by points programs that may lead to rapid shifts in demand for the asset, potentially resulting in sustained depeg events. LRTs are generally a less mature asset class with substantial centralization vectors and reliance on off-chain services that often involve processes overseen by the protocol team.

We advise that KelpDAO must address concerns critical to its security and transparency before being considered for collateral onboarding. We have been working with the KelpDAO team to resolve what we consider blockers. Their team has been receptive and has committed to addressing these points.

• Implementing a bug bounty program is urgently needed given the protocol's high TVL, and any delay poses significant risks.

• KelpDAO's communication needs improvement, particularly regarding changes like the unannounced removal of sfrxETH.

In addition to immediate blockers, we await the transition to a fully decentralized DAO structure, which should be expedited to ensure proper governance and community involvement and reduce reliance on off-chain services. Progressive decentralization is a common theme for many LRTs and DeFi protocols generally, but the current centralized management level highlights the protocol's immature state.

After addressing the two primary points described above, we advise a conservative approach to onboarding with low exposure limits, conservative LT parameters (exclusion from e-mode in Aave, for instance), and a gradual onboarding process that matches the protocol's maturity over time.