LSD will be the catalyst of the DeFi ecosystem. By rationally utilizing the capital efficiency of LSD, the asset leverage of ETH can be leveraged. These released Liquidity leverage will greatly increase the asset value and TVL on the chain, bringing the second DeFi Summer.
LSD is a new narrative in the encryption field. This is a potential opportunity to earn huge profits. Remember the last DeFi Summer, early participants easily earned assets of more than millions of dollars, now in LSD, the same opportunity comes , but most people don't realize it yet.
LSD (Liquidity Staking Derivatives) Liquidity Staking Derivatives is a certificate that users pledge ETH in exchange for a joint pledge. LSD represents the pledged assets of the holder. LSD is a powerful force in the DeFi Derivatives track. Holding LSD You can enjoy the pledge income and release the Liquidity of pledged ETH at the same time.
Prologue
The Shanghai upgrade opened the prelude to the large-scale pledge of ETH, and LSD leveraged the Liquidity of pledged assets
The pledged volume of Ethereum exceeds 15 billion US dollars, the data comes from defillama
As of now, the mortgage ratio of Ethereum is only 14.87%, which is very low compared with Cardano's 64.98%, Solana's 72.5% and Avalanche 's 61.04%, because the pledged ETH assets cannot be withdrawn before the Shanghai upgrade return, that is to say, this part of assets will always be locked. After the upgrade in Shanghai, the last hurdle of ETH pledge extraction has been ETH , and the barriers to entry of ETH POS pledge will be cleared. More LSD shares are released to enter the crypto market.
Since the upgrade in Shanghai, the Rendu and Governor channels for Ethereum pledges have been completely opened up. The number of Ethereum pledges has continued to increase, and the number of pledge nodes has also continued to increase.
Ethereum pledge data change curve data comes from OKLink
Ethereum verification node data curve, the data comes from StakingReward
Why LSD Is a Bull Catalyst
The potential market for LSD is huge
Based on the average pledge rate of mainstream public chains of 45%, the current pledge rate of Ethereum is 15%, and there is at least three times the room for growth. The current Liquidity pledge Derivatives account for about 33%. According to the pledge rate of Ethereum in the next three years If it reaches 45%, then about 15% of ETH will eventually be converted to LSD. According to the current market value of Ethereum of 230 billion US dollars, about 34.5 billion US dollars of assets will be expressed through LSD, plus various LP certificate assets, LSD and related assets The scale will exceed US$50 billion. If these assets can be enlarged through reasonable leverage, Liquidity of more than US$100 billion will be generated.
The Crypto Market Needs LSD as a New Narrative
Since the last bull market collapsed, the market has been in a bear market and a monkey market for a long time. Against the background of the US dollar raising interest rates, the encryption market has been in a low-flow market state. The entire DeFi market is in urgent need of a new narrative. Rekindle capital's enthusiasm for DeFi, and LSD assets and LSDFi applications have become an important part of the Ethereum ecosystem. In the entire encryption market, LSD is the only asset that can have stable returns and sufficient Liquidity of ETH . Through LSD, users can Transform the pledged locked ETH into Liquidity assets, participate in operations such as Yield Farming, and obtain more income. LSD will become a new narrative and bring rich composability to the encryption market.
The prosperity of the encryption market is driven by levers
Stablecoin and lending created the last round of Liquidity prosperity. Stablecoin accounted for more than 30% of the entire DeFi market during its heyday. With sufficient liquidity, these Liquidity will be guided into various agreements through Liquidity incentives, and become the TVL of each agreement , while LSD can release the Liquidity of pledged ETH while enjoying the benefits of ETH pledge, which itself is the Liquidity leverage of ETH . Therefore, greater capital efficiency can be released through combination.
LSD is a niche asset in the crypto market
Due to the ecological activity and stable incentives of the Ethereum public chain, the Ethereum pledge income can be regarded as the encryption native risk-free rate (Risk free rate), and LSD can leverage the higher capital utilization rate of ETH by releasing the Liquidity of ETH pledge assets , and even the interest rate benchmark Staking rate of return is much higher than the previous lending rate. As one of the most Liquidity assets in the encryption field, ETH itself has abundant Liquidity, and its pledge certificate LSD assets will become a niche asset for ETH. The Shanghai upgrade has opened up the final withdrawal link of LSD products, and the anchoring of LSD and Liquidity have been greatly improved.
LSD leads DeFi 3.0
recurring income building blocks
The biggest problem with the last round of DeFi agreements was that most of them guided Liquidity through high capital leasing fees, but failed to provide sustainable returns. Eventually, the Ponzi model entered a death spiral, and a large number of agreements died, bringing the DeFi industry into Liquidity. In the cold winter, LSD is the standard risk-free interest rate of ETH. By building a basic income building block, it can establish a basic continuous low-risk income for the income of the upper layer, so as to solve the problem of the continuity of the income of the DeFi agreement.
The basic components of circular matryoshka
LSD is a standard Liquidity certificate protocol, which can be easily integrated into various protocols on the chain. Through the composability of the protocol, superimposed income leverage can release LSD to maximize capital efficiency. This will bring a new wave of DeFi innovations based on LSD assets and bring back the bright moments of DeFi.
carrier of capital gains
The rate of return of the market in a bull market is significantly higher than that in a bear market, but the instability of this investment rate of return makes it difficult for investors with long-term liabilities to invest in lower-risk "bond-like" opportunities. low-risk targets.
However, the source of income on the ETH chain, encrypted native risk-free interest rate income, can carry the income demand of a large amount of funds, which may arouse the interest of traditional institutions again. We can even regard the ETH pledge certificate LSD as a low-risk national bond in the encryption market, because of its ETH The source of interest has even surpassed that of loans, coupled with its abundant Liquidity and rich composability, it can effectively transmit Staking income to the entire on-chain world through DeFi, becoming the interest rate benchmark in the DeFi world. With the Staking rate of return, we can use this as a basis to do more financial innovation, superimpose leverage, pull the M2 of the ETH ecosystem, and obtain a higher return on investment for capital.
How to find opportunities in this wave of LSD Summer
Protocol Layers and Entrepreneurs
1. For the agreement, LSD assets can be integrated into the agreement, and incentives can be used to guide the scale of LSD assets and occupy market share.
2. For entrepreneurs, construct a nesting doll agreement for LSD assets, maximize the leverage of LSD assets, and further improve the capital efficiency of LSD.
3. Or integrate to build a more efficient and decentralized pledge infrastructure.
for users
1. Participate in POS pledge, earn stable income from Ethereum pledge, release asset leverage through LSD certificate, and obtain more income.
2. Discover and participate in new LSD-based DeFi protocols to earn early Alpha returns.
3. Pay attention to the innovation of LSD ecology, there will be more innovative projects using LSD as the underlying asset.
Some innovative projects on LSD (not investment advice)
- Unleash LSD capital efficiency: Dank Protocol;
- Driving adoption of LSD assets: EigenLayer, Lybra;
- Index products: Index Coop;
- Promote the decentralization of LSD pledge: unshETH;
Summarize
As the basic building block of DeFi 3.0, LSD can greatly release the asset efficiency of pledged Ethereum through flexible composability, and can bring new narratives to the encryption field through almost risk-free return targets, which will further leverage the value of ETH Asset leverage has brought back the explosion of the Ethereum DeFi ecosystem.
In the next article, we will analyze several innovative mainstream protocols in the current market, deeply analyze the product mechanism and analyze how to maximize LSD capital gains through them.
