Crossing the Bull and Bear The LSD Battle of Project Parties

Bull vs Bear The LSD Battle of Project Parties

Summary

After the upgrade of Ethereum in Shanghai, LSDfi and ETH derivatives have undoubtedly become hot topics and narratives, as well as tracks sought after by funds. Unlike RWA, ETH staking solves the income problem of encrypted users in a more native way and has become an important part of Defi’s future narrative.

According to incomplete statistics, the current scale of ETH staking is $22.7 million ETH, about $41.4 billion, while the funds locked in the LSDfi protocol are less than $1 billion.

• A summary of 10 projects worth paying attention to recently DeFi, DEX, games, and on-chain tools
• Full-chain gaming becomes the market focus, in-depth analysis of the pioneering project Dark Forest.
• Using Tornado.Cash as an example to expose the scalability attacks on zkp projects.

https://dune.com/defimochi/lsdfi-summer / https://ethereum.org/en/staking/

How to use ETH derivatives to create “risk-free” underlying income, and use the huge ETH fund reservoir to create a flywheel, has become a major highlight of future DeFi. In addition to protocols such as Lybra and UnshETH that use newly issued protocol tokens to rent ETH and LSD TVL, there are also Defi projects that have already experienced a bull and bear market silently competing to absorb TVL.

This article will take stock of how the projects that have been issued are laying out the ETH staking/derivatives track.

1. Redacted Cartel

The bribery protocol Redacted Cartel officially announced its stablecoin protocol Dinero in April, which is supported by Ethereum block space and combines with ETH staking to create a derivative protocol that uses high-quality block space markets to create public and permissionless RPC.

https://commonwealth.im/redacted-cartel/discussion/11005-launch-dinero-protocol

The stablecoin DINERO is minted by over-collateralizing ETH CDPs, and the user’s ETH collateral is used to launch the Redacted Relayer RPC and block builder to protect users from the impact of MEV. Redacted Cartel will also use its governance rights over CVX and CRV to guide the liquidity of DINERO and pxETH.

At the same time, similar to the first-generation DAI, DINERO will introduce the PSM Anchoring Stability Module in the first version, using USDC as collateral to alleviate price pressure. In addition, when users mint DINERO with ETH/pxETH, the generated staking income will be paid in DINERO, and the interest rate will be managed by the DAO. Dinero will also adopt the oracle design inspired by Liquity, using two oracles.

Redacted Relayer is the final piece of the Dinero protocol, which allows users to perform meta-transactions, that is, complete transactions with 0 gas fees by paying any token as a fee to Redacted Relayer. By absorbing enough ETH TVL, the ability of Redacted Cartel to process transactions and build blocks will greatly increase, allowing privacy transactions through the memory pool in the future, such as payments for order flow.

Currently, the Dinero product is not yet launched.

2. ManiFold Finance

ManiFold Finance launched the ETH staking derivative mevETH in 23 and launched a liquidity staking solution that achieves full-chain functionality through LayerZero. Previously, ManiFold Finance has been committed to building the MEV stack: block builder, SecureRPC Relayer, and validator.

mevETH is an ETH staking derivative supported by LayerZero. Users can earn additional income from multiple MEV strategies supported by the stack by minting mevETH using ETH. Initially, the protocol will generate profits through arbitrage between ETH and mevETH. In addition, because they will run their own validators, they can create custom blocks and ensure that these blocks are included on the chain.

To launch the protocol, Manifold acquired Cream Finance’s validator set. This means that users who stake ETH in Cream Finance will now stake it in Manifold’s liquidity staking protocol. This will give them control of over 20,000 ETH when the protocol launches. In the future, Manifold aims to add re-staking functionality to mevETH, allowing stakers’ ETH to be used to protect multiple chains or protocols and generate more income while taking on more risks.

As of now, all ETH users staked within Cream Finance to launch the new ETH validation node, and the protocol has over 50,000 ETH staked to launch mevETH.

https://etherscan.io/address/0x617c8de5bde54ffbb8d92716cc947858ca38f582#internaltx

3. Yearn Finance

Yield aggregator Yearn will launch a new yield product called yETH, aiming to replace a basket of LSD assets with yETH, diversify risks through the diversification of LSD, and utilize the protocol’s CRV voting power to guide liquidity and increase yield.

Users can mint yETH by depositing LSD assets supported by the protocol and stake it as st-yETH to earn compound interest. The basket of LSD assets in yETH will be added in the form of a whitelist, and each protocol seeking whitelist addition will pay an application fee to yETH holders in the form of yETH before the voting period begins or adjust relative weights, and the application fee will be allocated to the POL contract.

The Yearn team officially launched the proposal in April and received unanimous approval. The yETH product is not officially launched yet.

https://snapshot.org/#/veyfi.eth/proposal/0x8969cde98d5d8a7be745e442a3288ce0cf3b35bf99ab72265f66c96d117a0f78

4. Index Coop

Cryptocurrency index protocol Index Coop launched the diversified ETH staking index token dsETH, which currently consists of stETH, rETH, wseth, and sETH2.

Similar to Yearn’s yETH, dsETH aims to provide holders with diversified exposure to LSD. dsETH charges a 0.25% streaming fee to the protocol (stream fee), with no minting or redeeming fees. Currently, dsETH has a TVL of 1.5 million USD.

https://dune.com/index_coop/dseth

In addition, Index Coop has partnered with Gitcoin to launch gtcETH, allowing users to provide funding for Gitcoin grants through ETH staking rewards, while charging a 2% streaming fee, with 1.75% directed to Gitcoin grants and 0.25% to Index Coop. In addition, Index Coop also has icETH, a leveraged liquidity staking strategy product based on Set Protocol, which can provide higher ETH returns. Currently, the TVL of gtcETH is $138,282.

https://dune.com/indexcoop/gitcoin-staked-eth-index

5. Aura Finance

Aura, an ecological yield governance platform built on Balancer, is also using its over 35% BAL voting power to incentivize different LSD and LSDfi protocols to pool on Balancer.

Founder 0xMaki has established close partnerships with leading ETH staking protocols through active collaboration. RocketPool is the first underlying staking protocol to closely collaborate with Aura, and TVL has increased tenfold since the partnership.

Currently, the TVL incentivized by Aura Finance for wstETH exceeds $30 million, and the liquidity guided by Aura for LSDfi Raft Finance exceeds $30 million. The liquidity of BadgerDAO’s native token and rETH is approximately $15 million, with a total of over $200 million in LSD-related funds absorbed.

https://aura.defilytica.com/#/pools

6. BadgerDAO

The once popular yield protocol, BadgerDAO, has also announced the introduction of synthetic asset eBTC, collateralized by ETH and LSD, aiming to bring BTC into ETH DeFi.

eBTC adopts a CDP-based design, allowing anyone to borrow eBTC using stETH at 0% interest, with the goal of becoming the most capital-efficient way to utilize stETH on the mainnet. eBTC allows for a minimum collateral ratio of 110% and provides users with over 10x leverage, allowing them to maximize their capital exposure. At the same time, the protocol allows users to adopt various market strategies, including longing ETH to earn interest and shorting BTC with 10x leverage. Due to the correlation between ETH/BTC, users can also mitigate liquidation risks by utilizing their ETH staking rewards.

Currently, eBTC is still in internal testing.

https://github.com/Badger-Finance/ebtc-purple-LianGuaiper/blob/main/eBTC_Protocol_-_Purple_LianGuaiper.pdf

7. Pendle

Pendle is undoubtedly one of the biggest winners in the LSDfi narrative in 2023. The protocol timely incorporated different LSD assets and successfully borrowed the momentum of the LSD narrative, giving Pendle a relatively robust source of assets and telling its interest rate story to the fullest. This article will not elaborate further.

After the V2 update, the upgrade of vePendle reduces gas fees and supports paying ETH to stakers. It has also spawned the ecosystem projects Equilibria and Penpie based on its veToken. As of now, the ETH staked TVL absorbed by Pendle AMM has exceeded $50 million.

https://defillama.com/protocol/pendle

8. Tokemak

The liquidity protocol Tokemak, after a significant loss of TVL that has been stagnant for a long time, announced the upcoming launch of Tokemak V2, which will introduce the Liquidity Management Pools (LMP) primarily for serving LSD assets.

The new system includes two independent products. The first one is the dynamic pool allocator Autopilot, which optimizes the yield of LPs in different pools and DEXs. The second one is the liquidity order book, which enables DAOs to rent liquidity based on transparent market rates. Tokemak V2 will be launched in sequence, with Autopilot being the first product, followed by the DAO Liquidity Marketplace.

Tokemak V2 provides liquidity management pools for DAOs and LPs. The initial focus is on ETH liquidity staking tokens, providing LPs with dynamic exposure to ETH and new liquidity management tools for LSD protocols. Afterwards, Tokemak V2 will expand its product range to stablecoins, other stable pools, and volatile asset pairs.

https://medium.com/tokemak/tokemak-v2-introducing-lmps-autopilot-and-the-dao-liquidity-marketplace-86b8ec0656a

Overall, the current LSD and LSDfi related protocols are still growing rapidly, with many new protocols emerging, such as the stablecoin protocol Prisma based on the Curve ecosystem, and the ETH Delta Neutral stablecoin protocol Ethena proposed by Arthur Hayes, etc. Currently, it is only the first shot fired in plundering the massive ETH TVL.

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