In the first week of 2025, the Crypto Market staged a thrilling scene. Before the final showdown of the BTCFi track, people from different perspectives and positions had complex emotions and moods. This article will not gossip, but summarize the previous landscape and analyze future market opportunities. LSD, starting from Lido, has gradually ignited a new wave of DeFi demand. After the two months of additional confidence brought by Trump's potential victory, how the Crypto bull market will move forward is likely the most concerned question for everyone in Q1 2025.
tl;dr
1. LSD narrative definition ignites the market, LYD emphasizes Yield and weakens the negative impacts of Staking on Liquid
2. LSD originated from Lido, providing a liquidity balance mechanism for token issuers and holders, gradually evolving to form an industry landscape
3. LSD captures the BTC ecosystem and BTCFi as a development carrier, achieving several projects in the 2024 TVL and Listing competition
4. LSD essentially drives the deposit-gathering process in the Crypto market, with project competition similar to TradFi banking thinking
5. LSD leads to two negative problems due to Over Staking, presenting potential risks and unsustainable development
6. LYD focuses on Yield, introducing sustainable value to the market through the Trade Off process between Liquid and Yield
7. LYD solves the sustainable Real Yield problem, with project parties assuming roles of Crypto funds, asset management, and asset-side
8. LYD will promote Protocol Asset Management and serve as the foundation for AI Agents participating in financial management, forming AIFi
9. LYD will trigger Crypto's transformation from virtual to real, becoming the development basis for actual payment, asset interest generation, and other financial scenarios
1. What are LSD and LYD
LSD (Liquid Staking Derivatives) originally means creating various derivative scenarios through Crypto liquidity staking to provide returns for Crypto holders. LSD is an extremely ingenious narrative concept that cleverly combines Liquid, Staking, and Derivatives into one word, forming a pattern that natively addresses the essence of Crypto and DeFi approaches, successfully igniting the market and leading the rapid development of a new DeFi and CeDeFi ecosystem.
LYD (Liquid Yield Derivatives) means seeking balance in the binary state of Crypto liquidity and interest-bearing returns, forming various derivative scenarios. LYD inherits LSD's native concept, weakening the negative issues and bubble phenomena of Staking on Liquid, emphasizing the importance of Real Yield for Crypto Market and Derivatives sustainability, and initiating the next stage of a healthy market environment that is Secure, Scalable, & Sustainable.
The process of choosing between Liquid and Yield is a trade-off, and the right to choose this trade-off should not be restricted by unilateral rules from one party, but rather by a market game mechanism that can be embodied by a Protocol in Web3 and Crypto. The R² Protocol proposed by CICADA in 2024 Q4 achieves this well.
The problem with LSD is that the Staking process limits the game mechanism, and for Crypto to truly pump value creation into the market and form sustainable development, this limitation must be released, allowing the market to form a free game between Liquid and Yield. Such an ecological mechanism and financial derivative is LYD.
7. Surface Problems Solved by LYD
The emergence of LYD will shift the focus of the market, project parties, and competing capital to truly sustainable interest-bearing assets, gradually introducing various Real Yield Assets (RYA) into the Marketplace, working and competing in developing, selecting, and providing Real Yield, forming a stable and benign development environment.
Projects advocating LYD and Crypto Protocols will play the role of Crypto asset management and asset-side in this process, similar to asset management, trust, fund, and family offices in TradFi, corresponding to the Crypto deposit-taking and bank-like fund institutions formed by the LSD cycle, providing various truly real yield interest-bearing solutions, forming a more complete financial system.
8. Essential Problems Solved by LYD
From a micro perspective, LYD allows Crypto Holders and Crypto Investors to choose the balance between Liquid and Yield themselves. Each institution and individual can make a trade-off between Liquid and Yield based on their own situation, needs, information analysis, and risk preferences. This is the common practice of TradFi iteration, giving freedom back to the market, and the inevitable path for Crypto Market sustainable development.
From a macro perspective, LYD is driving the trend of Real Yield Assets (RYA) and Real World Assets (RWA) rapidly entering the Crypto Market, a trend that will soon undergo quantitative to qualitative change, pushing the global economic and financial system into the Protocol and AI era. More Protocol Asset Management and Smart Contract Asset Management will emerge, which will become the basis for AI Agents to participate in economic and financial management, forming AIFi.
9. LYD Will Trigger a Turning Point in Crypto
The relay transformation from LSD to LYD is likely to trigger or even become an important turning point in the Crypto Market for many years. This turning point is not a change from prosperity to decline, but precisely a transformation from virtual to real.
Many people in the early stages of this bull market have been saying this is the last opportunity. In fact, the so-called "last round" is not the last round of the Crypto big market. On the contrary, Crypto is changing the global economic, financial, and payment systems in an unstoppable way. The "last round" here actually refers to the end of the early Crypto dissemination stage of constructing consensus through narrative.
The next stage will be a period of rapid development of Crypto in practical applications, including actual payments, asset interest-bearing, and various financial scenarios. These will quickly enter the Crypto Market to form components of a new generation of global economic and financial system, with LYD playing a crucial bridging role.
