Original author: waynezhang.eth

last timeLSDFi MapAfter the release, most of the products we predicted have appeared, such as stablecoins supported by LST (R, TAI, USDL, etc.), Governance War (Pendle War) triggered by veToken, etc. But there are also many unexpected data and discoveries. This article will organize most of the LSD-related items that can be found and raise questions, thinking and action guidelines.

The first is the organized LSD MAP 2.0, as shown below. For the detailed data part and subjective evaluation part, please see Personal OrganizerGoogle Sheet。

pattern

The LSD track has formed a preliminary pattern. If divided by level, DVT technology service providers such as SSV Network and Obol Labs can be regarded as L0. DVT technology can make the verifier more stable and more secure to exercise the signature responsibility. As the first project in the hierarchy to issue tokens, SSV Network has a first-mover advantage in terms of brand awareness.

LST issuers such as Lido, Ankr, and Coinbase can be regarded as L1. L1 is mainly a commission model, and the main benefit point for users comes from the POS income of ETH. After the upgrade in Shanghai, according to statistical data, the number of projects at the L1 level is far more than that at the next L2 level, exceeding the first version of MAP predictions. However, after investigation, it was found that more than 20% of them are in the testnet stage. according toDefilamaAccording to the data, Lido accounts for 74.45% of the liquid staking share. Lido and Rocket Pool accounted for about 82.5%, and LST issued by centralized exchanges led by Coinbase accounted for more than 12% of liquid pledges, leaving a narrow space for other decentralized pledges. Some of the participating projects at this level are multi-chain LST issuers to get a share of the pie, but in fact, the gameplay of Ethereum LSD is slightly different from other public chains. Except for Ankr, which has the first-mover advantage, no other outstanding results have been seen yet. s project.

TVL Share Chart (Source: DeFillama, Time: 2023.6.23)

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The price trend chart of a project with an APY over 1,000 in Shanghai after the upgrade

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A fixed-income agreement uses LSD products to achieve Token 1 0x increase

This paper adopts the product established based on L2 as the definition of L3. StakeDAO, Equilibria, and Penpie triggered by Pendle War meet the definition based on L3; AcidTrip, which automatically reinvests 0x Acid; and gUSHer, which simplifies unshETH operations and improves returns; it can be seen that the mainstream is still the governance rights competition triggered by veToken. There is a lot of room for imagination at this level, not just L2 tools and aggregated governance projects. For example, the L3 of multiple L2 products, the front end of the aggregation strategy.

In Eigenlayer, individual ETH holders pledge ETH and stETH to the pledge service provider, allowing the node operator assigned by the service provider to participate in the Eigenlayer agreement, the verification node directly participates in Eigenlayer, or entrusts other operators to help manage through entrustment. All kinds of middleware, data availability layer, etc. pay certain remuneration (project party token, handling fee, etc.) to obtain income. In fact, it uses the principle of ETH pledge, but instead of producing LST, it can pledge LST (currently supports rETH, stETH, cbETH), so it is recorded at the L2 level.

first level title

Overall

【1】L0 has the most technical barriers, but we should pay attention to the actual utility of tokens

【2】Leaders appear in L1, except for internal or systemic risks, time and space conditions do not allow new TOP 3, rookies will.

[3] A large part of L2 does not have a moat, and the test team and BD capabilities are more. The more LST-based basic DeFi strategy projects, the more prosperous L2 will be.

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Pledge rate

Before the upgrade in Shanghai, the predicted result was that the first wave would pick up and the second wave of pledge rate would drop, but the result was not the case. After the upgrade in Shanghai, the two biggest waves of staking were the collection of staking rewards and continued staking, and the first wave was The principal (mainly from CEX) was released from the pledge, and then began to rise steadily. The pledge amount exceeded 20 M in mid-May, and exceeded 16% in June.

ETH staking and contact staking/total staking graph (source: Nansen, time: 2023.06.23)

Regarding the opinions on comparing the ETH pledge rate with other public chains in the market, the author holds a strong pledge attitude. In MAP 1.0, the author also predicted that the stability will be around 25%. The reasons and judgments are as follows:

Reason 1: The degree of decentralization of ETH

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Large ETH holdings (with exchanges and bridge addresses) and the change in the number of addresses (source: Feixiaohao, time: 2023.06.23)

Reason 2: Practicality

As the most active public chain at present, ETH can be described as the golden shovel of Ethereum. Using ETH can participate in DeFi, GameFi, and NFT. At the same time, when participating in projects on the chain, it will involve ETH-denominated transactions. ETH is well-deserved number one in the frequency of on-chain activity usage. It is also a leader in usage scenarios.

Reason Three: External Scalability

With the emergence and prosperity of L2 and the arrival of the multi-chain era, ETH will also serve as a mainstream asset in multiple ecosystems, further dispersing tokens and reducing the trend of centralizing pledges in Ethereum. Of course, we will see cross-chain in the next section The protocol analysis of staking Ethereum will further explore the impact of cross-chain staking on the LSD ecosystem.

Reason 4: Compliance

As we all know, cryptocurrency is the focus of traditional finance and the supervision of various countries. Among many ETFs, ETH has the largest share after BTC, and ETH generally occupies the top 5 shares in secondary funds. With the increase of encrypted ETFs/encrypted secondary funds, some people have suggested that secondary funds and ETFs will pledge tokens in one step, but compliance issues are difficult to solve. Even if they use pledges to increase returns, it is safer to go directly to StakeFish , less legal risk.

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Distribution map of pledged ETH purchase price (source: Nansen, time: 2023.06.23)

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according to

according toNansenimage description

ETH pledge situation (source: Nansen, time: 2023.06.23)

There are also many L1 platforms that use DVT technology to make themselves more decentralized, but from the perspective of rational people, the first priority of pledgers is safety, and the second is income. Lido and Rocket Pool's LST are almost applicable to all L2 Level LSDFi project, and there are no security incidents. Lido relies on the leading position of ETH pledge to gain income and market share. As a vested interest, harming Ethereum after centralization will also harm its own fundamental interests. Of course, internal risks and external risks similar to supervision are risks that every L1 platform needs to pay attention to.

ETH principal/reward settlement pledge chart after Shanghai upgrade (source: Nansen, time: 2023.06.23)

rate of return

rate of return

Regardless of security factors, high yield and income continuity are the two most important factors related to LSD. Regarding high yield, pledgers need to rely on their own risk-taking ability to participate. When many L2 projects were launched in the early stage, LST directly pledged Under the Token subsidy, the income can reach 3 digits, and LP can reach 4 digits, but the price fluctuates violently, and mining, withdrawing and selling are inevitable. At present, the point reward model adopted by some projects and the pledge to obtain airdrops have the least impact on user retention and token prices.

Pledgers can refer to the common gameplay of DeFi Lego to increase the rate of return, and consider several methods:

1. Choose an LST with many usage scenarios/partners

2. Increase capital efficiency through leverage

3. Participate in L2 products (some L2 products can have multiple nesting dolls in L3)

4. Participate in IDO or reward activities of new projects (low security, but considerable rewards)

The use of two-layer matryoshka can basically increase the pledge yield to more than 10%. Readers can design their own strategies according to their own risks.

After research, it is found that projects that can maintain sustainability basically have one characteristic: the rate of return is not high, and many of them rely on their own Token or other project Tokens (for example, Frax uses Curve) to provide certain subsidies. If ETH → LST Part of the income is the basis, which comes from the Ethereum pledge rewards, so where does the income of L2 and L3 based on LST come from?

After the research, it was concluded that:

[1] Token incentives: own Token subsidy / other party's token subsidy

[2] Borrowing fees: some stable coins

【 3 】LP liquidity pool fee

【 4 】 Derivatives hedging

[5] Eigenlayer charges service providers to subsidize pledge nodes

【 6 】Product transaction fee/commission

……

The stability of L2/L3 income can basically be judged from the stability of the source of income. Only methods [1], [4] and [6] can meet the nature of high income, while [4] and [6] have operational advantages Strong uncertainty, so [1] is the mainstream method at present and for a long time in the future, but there are great differences in details in the specific use process. However, if the project wants to survive for a long time, it needs to adopt excellent Tokenomics by adopting the [1] method.

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L2 LSDs

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The number of Top 3 decentralized pledged LSTs on different chains (source: blockchain browser provided by coingecko)

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user rating

Different users have different requirements for staking, but the basic elements include security, rate of return, degree of decentralization, token economics, UI/UX, ease of use, etc.

At present, the L0 level is due to the late issuance of Token, high technical barriers, VC early investment is large, and the number is small; at the L1 level, the leader appears, and many whales/big investors basically pledge ETH at the L1 level and participate in the L2 level; gold diggers, but from the perspective of L1 TVL and L2 TVL, taking Lido's stETH as an example, the total7.383 M, the statistical amount pledged in LSDFi is about150 KThere is still a lot of market space in L2.

(More detailed data tracking is recommended, the data complexity here is too high, and the analysis is simplified)

Each factor has a different degree of attraction/retention for users with different amounts of funds. The author believes that rookies at the L1 level and L2 will fully grasp each element in the future.

【1】Security: team members and internal management, auditing, fund custody, etc.

[2] Yield rate: high and low, long-lasting, diversified income varieties

【3】Decentralization degree: hosting method, DVT technology, Token concentration degree

【4】Token economics: Can the utility be guaranteed while the supply and demand are balanced or even in short supply?

【5】UI/UX: Can you have a clear and concise page and what is the user threshold?

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Project promotion

The basic information of the project has been placed inGoogle Sheet, please configure according to your own risk preference

Taking the author as an example, the author has a small amount of funds, and his personal strategy pursues high returns. He only participated in one L1 leader/L1 rookie, and the rest are L2 real income projects and L3 projects, and a small amount of new project sales.

Summarize

Summarize

Dadu LSD projects all use LSD Summer as their slogan to benchmark against DeFi Summer. From the above analysis, benchmarking is basically impossible, but Summer is available. Tracing back to the source, the entire LSD ecology is based on the POS token standard, which also means that LSDFi users need to understand Web3, and most of them are projects on the chain, and the tokens are not listed on the exchange. The income is the currency standard, which means It means that those who participate in LSD are Web3 users with certain experience, and the participants are only a small part of the small user group of Web3. External user access is extremely limited.

Moreover, liquidity in the bear market has always been scarce. During DeFi Summer, there were no NFTs, GameFi, BRC 20, etc. Now that liquidity enters the crypto market, it must first be divided by various tracks. Although LSD’s segmented track in the DeFi track is a hot track , but also unable to obtain most of the DeFi liquidity. So in addition to hot hype, the real Summer may come together with the bull market.

Due to space reasons, some of the more eye-catching projects are not introduced. Some of them have enriched their own products through strong cooperation capabilities, and some of them expected the outbreak of LSD hotspots, became monks halfway, and handed in brilliant results. This directly proves the importance of the team. The severely homogeneous L1 and L2 tracks require both technological innovation and the efforts of the project team. The Cancun upgrade is imminent, and the bull market cycle is approaching. Whether it is possible to design new products or design products for different assets may be a problem that many projects need to consider.

There are cross-level products at each level, which may be a future trend. It is also a choice for business expansion to seize the share of this level and use the advantages to develop other levels. At the same time, expanding to Layer, 2 seems to be an appropriate choice. Many projects have already In the plan development, look forward to their appearance.

As a pledger and investor, in the face of a wealth of products, I personally suggest that you first recognize your own risk preference, and then choose a product construction strategy with higher security (more attention, no safety accidents, etc.), which has recently There are Rug projects, scam projects, and you need to be vigilant.

Disclaimer: All the projects mentioned in this article do not have investment advice, and I hold some project Tokens, there is an interest relationship, and the analysis is somewhat subjective.