LSD (Liquid Staking Derivatives) protocols have been gaining traction since the successful Ethereum Shanghai upgrade earlier this year. This upgrade finally made it possible for Ethereum stakers to withdraw their capital, making #Ethereum staking much more attractive than it was before.
LSDs make staking Ethereum a lot easier for the average user as they lower the entry requirements for staking, in terms of the amount of capital as well as technical skills.
LSDs also preserve liquidity as they issue liquid staking tokens in return for the staked assets. A user locking 1 ETH in a liquid staking pool will receive in return one derivative token of ETH which can be further used in other protocols.
This is where LSD-Fi comes in. LSD-Fi protocols let you “reuse” your liquid staking tokens, making your capital much more efficient.
The LSD-Fi market has a lot of potential for growth as it provides an exciting innovation offering market-independent and stable returns and is a must on your watchlist.
In this post, we’ll cover the top 4 hottest emerging LSD-Fi protocols and their tokens (when they have one).
1. Pendle ($PENDLE) $PENDLE
Pendle is a permissionless yield-trading protocol that allows users to always maximize their yield. They can increase their yield exposure in bull markets and hedge against yield downturns during bear markets.
The protocol consists of 3 parts:
Yield Tokenization: The underlying yield-bearing tokens are wrapped into SY (Standardized yield tokens) which is then split into the principal token (PT) and the yield token (YT).
Pendle AMM where users can trade both PT and YT.
vePENDLE: Users can lock PENDLE for vePENDLE to participate in governance.
PENDLE is the native utility token and is used as a reward for providing liquidity to the protocol, voting rights, and fee accrual.
It has a market cap of 186 million with 81% of tokens in circulation and a TVL of $126 million.
The price of PENDLE is up 1800% since January.
It has recently been listed #Binance but is also listed on LBank, Gate.io, MEXC, Bitget, and KuCoin, as well as Uniswap.
2. Lybra Finance ($LBR)
Lybra Finance currently holds the biggest market share - 40% - of the LSDfi ecosystem.
The protocol allows users to mint a stablecoin, eUSD, with their LSD assets such as stETH. eUSD is a decentralized overcollateralized stablecoin that offers its holders a stable income with an APY of about 8%.
As the protocol offers zero-interest loans, users can mint (borrow) eUSD for free. This is very cost-effective for someone who already holds LSD tokens in their portfolio as they can make those holdings a lot more capital efficient at no additional cost.
LBR is the governance token of the protocol and can be earned by providing liquidity to the eUSD/ETH liquidity pool.
The LBR token has a $24 million market cap with 10% of tokens in circulation. Its TVL has been skyrocketing - going up 1000% over the past 2 months and currently sitting at $337 million.
LBR is currently listed on LBank, BingX, Bitget, Gate.io, MEXC, and KuCoin, as well as on Uniswap.
3. Gravita Protocol
Gravita is a decentralized borrowing protocol that allows users to obtain interest-free loans using their ETH liquid staking tokens as collateral.
Users can borrow $GRAI, a stable asset with a hard floor and a capped ceiling, against any of the supported LSD deposits.
$GRAI is an over-collateralized debt token that gets issued by the protocol when users deposit their collateral. Its price is contained between $1.10 and $0.97, acting as a stablecoin.
Users can earn money on Gravita by providing liquidity to the Stability Pool. The Stability Pool is used to help repay the debts of liquidated Vessels that fall below the minimum collateral ratio.
Over time, Stability Providers may earn early adopter rewards and may also make liquidation gains.
Gravita has plans to launch a governance token, GRVT, which will be used to provide benefits such as boosted yields and reduced fees.
Gravita Protocol currently has $22 million in assets locked in its protocol.
4. UnshETH ($USH)
UnshETH aims to decentralize Ethereum liquid staking by incentivizing competition amongst the protocols and promoting validator decentralization.
The protocol is essentially a diversified liquid-staked ETH basket that earns staking ETH yield and swap fees, all wrapped in a single ERC-20 token.
Users can mint unshETH by depositing a supported ETH liquid staking token and can redeem unshETH into the basket of underlying LSDs.
unshETH currently supports 6 LSDs, with plans to support more.
The unshETH token accrues yields from swap fees and redemption fees thus boosting the overall yield that unshETH holders get by simply holding the token.
The holders of the protocol’s native governance token USH can vote on proposals or stake their USH to receive vdUSH, which can be used to earn a share of the protocol’s revenue.
USH currently has a market cap of $6,6 million with about 30% of tokens in circulation. It’s listed on SushiSwap, Balancer, and PancakeSwap.
While the TVL of unshETH has exploded in the past few months - currently sitting at $25 million - this hasn’t been reflected in the price or the trading volume of the USH token.
I’m keeping a close eye on this protocol to see if USH can follow up.
Zooming Out
LSD-Fi is an emerging new DeFi trend that adds a second layer on top of LSD protocols.
In this post, we went over 4 new LSD-Fi protocols that let you use your liquid staking tokens in a wide variety of ways, allowing you to earn additional yield and making your capital much more efficient.
While most of these protocols are currently interesting more for their yield-generating capacities, some, especially Pendle, can also offer significant returns via their native tokens.
Let’s watch these protocols closely to see if their rapid growth can be reflected in the price of their tokens. #crypto2023
Disclaimer: This content is for educational purposes only and should not be considered as financial or any other advice. Always do your own due diligence before investing your hard-earned money.
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