Original author:The DeFi Investor

Compilation of the original text: Deep Tide TechFlow

Original author:

Compilation of the original text: Deep Tide TechFlow

A new narrative has emerged in DeFi. The upcoming Ethereum upgrade will have a huge impact on liquidity staking protocols. Here’s why I think liquidity staking is a growing trend, and the opportunities to invest in it.

First, what's so interesting about Ethereum's Shanghai upgrade? (coming soon in March)

Once the upgrade is complete, pledged withdrawals for $ETH will be enabled. Many are skeptical about committing $ETH since withdrawals are not currently possible.

This is why only 14% of the ETH supply is staked. In contrast, most L1s have a stake ratio of 40% or more.

Here's where things get interesting: If more people will stake ETH after the Shanghai upgrade (which is quite possible), most will opt for liquid staking derivatives.

Revenue rises -> their tokens benefit too.

$LDO

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advantage:

• Lido is the largest $ETH liquidity staking provider. It charges a 10% fee on staking rewards. A portion of this fee is sent to the DAO treasury.

• advantage:

• It is the fifth most undervalued protocol based on the price-to-fee ratio.

shortcoming:

• shortcoming:

$RPL 

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advantage:

• The second largest liquidity staking protocol.

• advantage:

• $RPL has a low inflation rate (5%).

shortcoming:

• shortcoming:

$SWISE 

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advantage:

• Another liquidity staking protocol.

• advantage:

• Anyone can stake $SWISE for a percentage of protocol revenue.

shortcoming:

• Anyone can join as a node operator (more decentralized).

• Not popular enough for mainstream users.

$FXS 

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advantage:

A protocol to build an ecosystem of DeFi products around $FRAX and $FPI. $frxETH (FRAX's $ETH liquid collateralized derivative) was launched a few months ago and has experienced tremendous growth since then.

advantage:

Curve offers $frxETH with an attractive yield.

shortcoming:

• 8% of $ETH staking proceeds are shared with $veFXS holders.

• shortcoming:

$frxETH is relatively new and not as popular as other liquid staking derivatives.