After the success of Ethereum's Shapella upgrade, the most discussed trend in the cryptocurrency community is LSD, and new projects related to LSD are increasing. With the emergence of protocols created to add liquidity to LSD, a new term has emerged to replace LSD, namely LSDfi. LSDfi is gradually becoming a potential "scenario" as Binance Research detailed in an 18-page research report on the prospects of this field. So what is LSDfi? Let's find out in the article below!
LSDfi is
Stands for Liquid Stake Derivatives Finance, which means that DeFi protocols are built and run on the Liquid Stake platform. These protocols contain the basic building blocks of DeFi, such as decentralized exchanges (DEX), lending, or more complex projects to take advantage of the unique properties of LSD. LSDfi allows users to flexibly use their LSD assets for multiple purposes, while helping LSD tokens increase liquidity, improve funding efficiency, and generate profits in the ecosystem.
For Ethereum validators, LSD (Liquid Staking Tokens) is a very important factor. Before Shapella was upgraded, their ETH was locked in the network and could not be withdrawn. This problem was solved when LSD protocols such as Lido Finance, RocketPool, Frax, etc. appeared, and validators could stake ETH through these protocols and obtain LST (Liquid Staking Tokens). LST helps ETH stakers increase profits and capital efficiency while guaranteeing their role as validators.
After the successful Shapella upgrade in April 2023, validators no longer have to worry about not being able to withdraw their ETH from the network. At the same time, users of the LSD protocol can easily convert LST to ETH at a 1:1 ratio. This makes staking an attractive opportunity for ETH speculators.
This has led to more and more LSD protocols emerging and offering attractive incentives to attract users to stake ETH on their platforms. As LSD has become more popular, another sub-field of DeFi has emerged to take advantage of the LSD trend, increase utility, and open up more profitable opportunities for LSD holders: LSDfi.
LSDfi Ecosystem
The LSDfi ecosystem consists of mature DeFi protocols and projects that have integrated LSD as part of their product suite or have recently launched major products around LSD.
The components of the LSDfi ecosystem can be listed as follows:
DeFi Liquid Staking Provider: A DeFi protocol that provides staking services. Users who stake their tokens will receive LST (LSD Liquid Staking Certificate) and use it for different purposes.
CEX Liquid Staking Provider: A centralized exchange that provides staking services.
CDP Stablecoin: CDP stands for Collateral Debt Position, which means Collateralized Debt Position. The CDP protocol allows users to mint stablecoins using LSD tokens as collateral.
Index LSD: Users lock their tokens in order to be able to obtain the project's LSD tokens. In this way, they will be able to hold more LSD tokens to maximize the return on their assets.
Yield Strategies: Protocols that allow users to better increase the returns on the assets they own through various strategies.
Money Market: A lending protocol that allows users to use LSD tokens as collateral to borrow other tokens.
Featured LSDfi Projects
Libra Financial (LBR)
Lybra Finance is a pioneering protocol in the LSDfi space that allows users to mint interest-bearing eUSD stablecoins by locking ETH or stETH. Lybra Finance's eUSD is the fastest growing stablecoin in the DeFi space.
Agility (AGI)
Agility is an LSD project on Ethereum that focuses on providing liquidity to holders of LSD and other LSD protocols. Agility aims to be a platform that meets users' profit needs by increasing real returns and releasing LSD liquidity at almost negligible costs. At the same time, Agility also aims to meet the liquidity needs of other LSD protocols.
Pendle Finance
Pendle Finance is a yield derivatives platform that allows users to trade and invest future profits as collateral. The project introduces a concept called "discount assets" that allows users to buy assets at a lower price, but they need to wait a certain amount of time to get the amount of the asset. In addition, Pendle has built an ecosystem around the PENDLE token, including two well-known projects Equilibria and Penpie.
unshETH (USH)
unshETH is a Liquid Staking Derivatives (LSDs) project developed on Ethereum that allows users to participate in staking ETH and LSD tokens for profit. The goal of the project is to build an aggregation platform, called unshETH, that enables users to access and optimize profits from LSD tokens on Ethereum.
Maverick Protocol (MAV)
Maverick Protocol is an AMM DEX platform that uses a directional LPing solution (aimed at providing liquidity in a specific direction) to provide the best interest rates to liquidity providers. Maverick AMM features support for native LSTs, which helps maintain liquidity within the yield range of these native LSTs.
Summarize
The above is all the information about LSDfi, a new and promising decentralized financial project. Through this article, you must have gained a preliminary understanding of the necessary information about LSDfi for use in the research and investment process. Wish you good luck!