LSDFi War Intensifies: Analyzing 5 Excess Return Strategies

LSDFi is a DeFi product based on liquid staking derivatives (LSD). Through LSD, users can convert staked ETH into tradable assets, unlocking liquidity and lowering the staking threshold. LSDFi is backed by DeFi Lego, with new projects attracting users to stake ETH/LSD through incentives, thereby gaining market share and control over LSD.

The following are the five main forms of LSDFi:

1. LP Mining ( Yield 10%+)

Providing liquidity for trading pairs such as LSD-ETH can earn basic staking rewards, LP fees, and token incentives. After the Shanghai upgrade, the scale of LP may further increase.

2. Circular Lending ( Earnings 10%+)

Leverage returns can be obtained by looping borrowing LSD and ETH on platforms like AAVE. The liquidation risk is relatively high, and returns depend on the number of loops. Automated looping borrowing products may emerge in the future.

3. Yield Aggregation ( Yield 10% + )

Projects similar to Yearn Finance enhance the APY of LSD by aggregating yields from multiple platforms. This reflects the traditional DeFi projects' emphasis on the LSD sector.

4. EigenLayer( profits unknown)

Allow users to re-stake staked LSD or LSD LP tokens, achieving "super liquidity staking".

5. Incentive LSDFi Projects

Improve capital efficiency through leverage, structured strategies, options, etc., or attract funds using high APY. Major projects include:

• Pendle: Provides staking services and liquidity pools for ETH and others, offering high APY through token subsidies.

• Ion Protocol: Tokenize LSD into allETH and vaETH

• unshETH: Improve the decentralization of validators through dynamic reward allocation

• LSDx Finance: The goal is to become a high-barrier DEX for LSD assets.

• Liquid Staking Derivatives: LSD Aggregator, maximizing asset utility through tokenization and derivatives.

• Stader Ethereum: The upcoming ETHx is planned to collaborate with 30+ DeFi protocols.

• Hord: Achieve higher APR through multiple channels

• Parallax Finance: Providing liquidity infrastructure on L2

• bestLSD: Real Yield Aggregator

• 0xAcid DAO: LSD asset return management protocol

• Index Coop: issues LSD index products such as dsETH and icETH

• Gitcoin: Collaborating with Index Coop to launch gtcETH

The LSDFi project is competing for market share and influence in the LSD sector. High yields may persist for a while, but they also bring sustainability challenges. In the future, products with various yield tiers ranging from 4% to 500%+ may be formed. This LSD war may continue until the Ethereum staking rate stabilizes above 25%.