The LSDFi trend is coming: Unlocking the liquidity of staked ETH with diverse strategies to compete for the market.

LSDFi is a DeFi product based on LSD. Through LSD, stakers can convert their staked ETH into tradable assets, unlocking liquidity while lowering the threshold for staking ETH. Any amount can be staked, and after staking, LSD is obtained, which can also generate multiple returns.

The core of LSDFi is DeFi Lego, with yield Lego behind it. New projects attract users to stake ETH/LSD through incentives or by obtaining third-party tokens to gain market share and control over LSD. Some projects utilize dynamic yields to encourage users to choose smaller decentralized staking platforms to achieve decentralization of validators.

LSDFi mainly has five forms:

1. LP ( yield 10%+)

Before the Shanghai upgrade, LSD could not be directly exchanged for ETH, and many DeFi projects established LSD-ETH liquidity pools. The basic yield usually does not exceed 5%, primarily increased APY through token subsidies. Stakers not only receive ETH staking rewards but also LP fee rewards. It is expected that after the Shanghai upgrade, the LP scale may increase.

2. Circular Lending ( Yield 10%+)

Obtain high yields by cycling operations across multiple platforms:

• Stake ETH on a certain platform to receive LSD
• Deposit LSD into the lending platform and borrow ETH
• Repeat the above steps

This strategy has a high liquidation risk, and the actual APR depends on the number of cycles. Theoretically, all lending protocols can be applied, and automatic cycling lending products may emerge in the future.

3. Yield Aggregation (10%+)

Some established DeFi projects like Yearn Finance increase LSD APY to 5-6% by creating liquidity pools on platforms like Curve. These projects enhance overall returns by aggregating yields from multiple platforms and providing subsidies.

4. EigenLayer (收益未知)

EigenLayer offers various staking methods, including Liquidity staking and Super Liquidity staking. The latter allows for the staking of LP pairs, for example:

• Stake assets that have already been staked in Lido or Rocket Pool to EigenLayer again.
• Stake Curve's stETH-ETH LP Token to EigenLayer

5. Incentive LSDFi Project

These types of projects improve capital efficiency through leverage, structured strategies, options, bond derivatives, and other methods, or attract savings with high APY. Representative projects include:

Pendle: A Decentralized Finance yield protocol that offers staking services and liquidity pools for ETH, APE, LOOKs, and more. Users can purchase ETH at a discounted price, with the price difference representing the yield. Currently, the TVL is approximately $38.44 million, and the market cap is $32.80 million.

Ion Protocol: Tokenizes LSD tokens and stakable asset tokens into allETH and vaETH. Plans to leverage EigenLayer for LSD yield aggregation. In early stages.

unshETH: Improve the decentralization of validators through dynamic allocation of incentives. Provide higher rewards to LSD platforms with lower market share to encourage users to stake ETH on smaller platforms. Currently, the TVL is $8 million and the FDV is $20 million.

LSDx Finance: Committed to becoming a DEX for the LSD asset sub-market. It adopts a GLP architecture similar to GMX and establishes a unified liquidity pool ETHx. The locked amount reached 55,000 ETH within 48 hours of launch. Currently, the market value is 2.21 million USD, and the TVL is 134 million USD.

Liquid Staking Derivatives: LSD aggregator, which addresses liquidity issues and maximizes asset leverage through tokenization and issuance of derivative tokens. Staking ETH can earn 6.3% APR. Currently in a very early stage.

Stader Ethereum: ETHx is coming soon. After users deposit ETH, the Stader Pools Manager will mint ETHx as a reward and allocate ETH to different pools. It is expected to collaborate with 30+ Decentralized Finance protocols. TVL is $125 million, FDV is $181.7 million.

Hord: stake ETH to obtain LSD hETH. Achieve higher APR through ETH staking, MEV rewards, and HORD subsidies. Currently APY 17.9%, staked amount 223.22 ETH, FDV 12.8 million dollars.

Parallax Finance: Providing liquidity infrastructure on L2. Its product Supernova not only offers staking rewards but also provides leverage and lending services for staked assets. Currently in the testing phase.

bestLSD: The testnet is about to begin. It may be a Real Yield aggregator that utilizes the actual yields aggregated to subsidize its own LSD.

0xAcid DAO: A management protocol that maximizes LSD asset returns. Most assets are placed in stable nodes, while a portion is invested in high-yield strategies. TVL is approximately 4800 ETH, FDV 9.48 million USD.

EigenLayer: Provides multiple staking options, which may bring more Decentralized Finance Lego possibilities in the future.

Index Coop: Issued two LSDFi related products, dsETH and icETH. dsETH is composed of various LSDs, while icETH is a leveraged liquidity staking strategy product.

Gitcoin: Collaborating with Index Coop to launch the Gitcoin Staked ETH Index (gtcETH), with a portion of the proceeds used for public goods donations.

Overall, the LSDFi industry is highly competitive, with various projects vying for LSD influence. The stability of strategies and high yields are key factors in project development. In the future, LSDFi may form product tiers with different risk and return levels, ranging from 4% to 500%+. The LSD War has already begun and is expected to continue until the Ethereum stake rate stabilizes above 25%.