Compilation of the original text: The Way of DeFi
Compilation of the original text: The Way of DeFi
Liquid Staking Derivatives (LSD) are booming with the upcoming Ethereum Shanghai upgrade.
I've spent a lot of time exploring the LSD narrative.
In this article, you'll learn about:
Ethereum Shanghai Upgrade
Ethereum Shanghai Upgrade
key players
Innovative Liquid Staking Protocol
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Overview of Liquid Staking
Before the era of liquid staking, staking encrypted assets was one of the main ways to generate income for investors.
Even now, it's still profitable.
But it's not without some drawbacks.
Accessibility, immovability, and illiquidity are the biggest drawbacks of crypto staking.
The pledged assets on the DeFi protocol stipulate a lock-up period, restricting users from trading or withdrawing assets.
But Liquid Staking solves this problem.
With Liquid Staking, investors obtain Liquid Staking Derivatives by staking their assets, which represent their interest in a given staking pool and its yield.
For example, when you deposit ETH into Lido, you will receive stETH.
Essentially, liquid staking allows stakers to:
- Earn yield on collateralized assets and likewise have the leverage to trade, borrow, and use assets as collateral for other protocols.
Ethereum Shanghai Upgrade
Ethereum Shanghai Upgrade
The most anticipated Ethereum Shanghai upgrade, scheduled for the first quarter of 2023, will allow users to withdraw their staked ETH.
Currently, users cannot withdraw the ETH pledged as an Ethereum 2.0 validator, and can only use derivatives to trade on the DeFi protocol.
But Ethereum Shanghai changed everything.
The ETH pledge ratio is currently 13.79%, and more than 15 million ETHs have been deposited.
Considering the size of the Ethereum network, this is only a fraction.
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Lido Finance (stETH)
Lido is the leading liquidity staking protocol and the protocol with the largest market share of Ethereum staking.
Not only that, Lido is now the largest DeFi protocol by TVL, controlling about 16.03% of the TVL of the entire DeFi market.
On the Lido platform, users pledge ETH at a ratio of 1:1 in exchange for stETH.
These stETH can be deployed on other platforms such as Yearn, Aave, etc., thereby improving the capital efficiency of users.
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Rocket Pool (rETH)
Rocket Pool is the second-largest player in the liquid staking vertical with about 7% market share.
Unlike Lido, Rocket Pool is permissionless and highly decentralized.
They've experienced incredible growth since the ethereum merger, and it won't be stopping anytime soon.
Likewise, you will receive rETH from every ETH deposit in a 1:1 ratio.
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Stakewise (SWISE)
Stakewise is another innovative liquid staking product that is emerging really fast. They are preparing to launch their v3 version before the Ethereum Shanghai upgrade.
Interestingly, their v3 upgrade aims to improve the ability of independent stakers to participate in liquidity and delegate staking.
Stakewise v3 also brings more utility to SWISE Token holders.
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Frax Finance (frxETH)
Through Frax Finance, users can deposit ETH in exchange for frxETH.
Frax Finance offers an APR of around 8%: arguably the highest among LSPs.
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Other innovative products
In addition to these top liquid staking offerings, there are a few other promising protocols with game-changing models.
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pStake Finance
Marinade Finance
Benqi Finance
Meta Pool
decoupling risk
Smart Contract Risk
decoupling risk
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