Liquid Staking Derivatives are protocols that allow users to stake coins to create synthetic assets that represent the amount and value of the staked coin.
For those new to reading, it may seem difficult to understand, let's use the example below to make it easier for you to understand!
Here's an easy-to-understand example:
You have 10 ETH, then go to Lido Finance to Stake and will receive a reward from this Staking, as well as receive stETH in a corresponding amount.
And with this stETH, you can use it to other protocols to make profits such as Lending at AAVE, contributing liquidity on AMMs...
Simply put, you will be able to maximize your profits!
Do you still remember Celcius? They also use this method! Bring the user's ETH to Lido to stake to receive stETH - Bring stETH to AAVE to borrow ETH - then bring this borrowed ETH to Lido to stake to receive stETH. They do this many times to optimize profits.
But stETH then lost Peg and ETH so the assets were liquidated > bankruptcy.
Interesting LSDs projects include:
Lido ($LDO) (Captures a very large market share of about 75%)
Rocket Pool ($RPL)
Stakewise ($Swise)
Frax Ether ($FXS)
Anchor ($ANKR)
Staff ($FIS)
....
