DODO Research: The battle for LSD across the bull-bear project side

Original Author: Flamie

Original editor: Lisa

Introduction

After the upgrade of Ethereum Shanghai, LSDfi and ETH derivatives have undoubtedly become hot topics and narratives, and have also become a track for funds. Different from RWA, ETH pledge 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 ETH pledge scale is $22.7 M ETH, about $41.4 billion, while the funds locked in the LSDfi protocol are less than $1 billion.

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How to use ETH derivatives to create a “risk-free” income bottom layer, and use the huge ETH capital pool to create a flywheel has become a major attraction of DeFi in the future. In addition to agreements such as Lybra and UnshETH that use newly issued protocol tokens to rent ETH and LSD TVL, there are many Defi projects that have experienced a round of bull and bear are also quietly competing to absorb TVL.

**This article will take stock of how the projects that have already issued coins have laid out the ETH pledge/derivatives track. **

1. Redacted Cartel

The bribery agreement Redacted Cartel officially announced in April that it launched Dinero, a stablecoin protocol supported by Ethereum block space, a derivative that utilizes the premium block space market by creating a public and permissionless RPC, combined with ETH staking product agreement.

The stable currency DINERO is minted by ETH over-collateralized CDP, and the user’s ETH collateral is used to start Redacted Relayer RPC and block builder through ETH pledge, thereby protecting users from MEV, and Redacted Cartel will also use its CVX and CRV’s governance rights guide the liquidity of DINERO and pxETH.

At the same time, the same as the first generation of DAI, DINERO will introduce the PSM anchoring stability module in the first version, using USDC as collateral to ease the upward price pressure. In addition, when users mint DINERO with ETH/pxETH, the generated pledge income will be paid with DINERO, and the interest rate is managed by DAO. Dinero will also adopt a Liquity-inspired oracle design, using two oracles.

The Redacted Relayer is the last piece of the puzzle of the Dinero protocol, which will allow users to conduct meta transactions, that is, to complete transactions with 0 gas fees by tipping the Redacted Relayer with any token. By absorbing enough ETH TVL, Redacted Cartel’s ability to process transactions and build blocks will be greatly increased, allowing private transactions through the memory pool in the future, such as payment for order flow.

Currently, Dinero products are not online.

2. ManiFold Finance

ManiFold Finance also launched mevETH, an ETH pledge derivative in 23, and launched a liquid pledge solution that realizes full-chain functions through LayerZero. ManiFold Finance has been working on building the MEV stack before: Block Builder, SecureRPC Relayer and Validator.

mevETH is an ETH staking derivative supported by LayerZero. By using ETH to mint mevETH, users can obtain additional benefits of multiple MEV strategies supported by the stack. Initially, the protocol will earn revenue through the arbitrage of the difference between ETH and mevETH. Additionally, since they will be running their own validators, they will also be able to create custom blocks and ensure those blocks are included on-chain.

To launch the protocol, Manifold acquired Cream Finance’s validator set. This means that users who stake ETH on Cream Finance will now stake to Manifold’s liquid staking protocol. This will put it in control of over 20,000 ETH when the protocol launches. In the future, Manifold’s goal is to add a re-pledging function to mevETH, allowing mortgagers’ ETH to be used to protect multiple chains or protocols, taking more risks and earning more returns.

Up to now, all ETH users in Cream Finance have pledged to start a new ETH verification node, and more than 50,000 ETH have been used to start the pledge of mevETH in the agreement.

3. Yearn Finance

The income aggregator Yearn will launch a new income product yETH, which aims to replace a basket of LSD assets with yETH, diversify risks through LSD diversification, and use the protocol CRV ticket rights to guide liquidity and increase income.

Users mint yETH by depositing LSD assets supported by the protocol, and pledge st-yETH to earn compound interest. The package of LSD assets in yETH will be added in the form of a whitelist, and each agreement seeking to add the whitelist will pay an application fee to yETH holders in the form of yETH before the voting period begins, or adjust the relative weight, etc., while the application fee Will be allocated to the POL contract.

The Yearn team officially launched the proposal in April and received unanimous approval. Currently, the yETH product has not been officially launched.

4. Index Coop

The cryptocurrency index protocol Index Coop launched a diversified ETH pledge index Token dsETH, dsETH currently consists of stETH, rETH, wseth and sETH 2 .

Similar to Yearn’s original intention of yETH, the goal of dsETH is to provide holders with diversified exposure to LSD. dsETH will charge a 0.25% stream fee to the protocol, with no minting or redemption fees. Currently, the TVL of dsETH reaches 1.5 million USD.

Additionally, Index Coop has partnered with Gitcoin to launch gtcETH, allowing users to fund Gitcoin grants through ETH staking rewards, while charging a 2% streaming fee, of which 1.75% goes to Gitcoin grants and 0.25% goes to Index Coop. At the same time, IndexCoop also has icETH, a leveraged liquidity pledge strategy product based on Set Protocol, which can provide higher ETH returns. Currently, the TVL of gtcETH is $138,282.

5. Aura Finance

Aura, an ecological income governance platform based on Balancer, is also using more than 35% of its BAL voting rights to encourage different LSD and LSDfi protocols to build pools on Balancer.

The founder 0x Maki has reached a close cooperative relationship with the leading ETH pledge agreement through active cooperation. RocketPool is the first underlying staking protocol to work closely with Aura and has seen a 10x increase in TVL since the partnership.

At present, wstETH’s TVL stimulated by Aura Finance exceeds 30 million US dollars, LSDfi Raft Finance’s liquidity guided by Aura exceeds 30 million US dollars, BadgerDAO’s native token and rETH’s liquidity is about 15 million US dollars, and a total of more than 2 LSD-related fund pools have been absorbed. billion dollars.

6. BadgerDAO

BadgerDAO, a once-popular income protocol, also announced that it will launch eBTC, a synthetic asset collateralized by ETH and LSD, and is committed to introducing BTC into ETH Defi.

eBTC uses a CDP-based design that allows anyone to borrow eBTC with 0% fees using stETH, aiming to be the most capital-efficient way to utilize stETH on mainnet. eBTC allows a minimum collateralization 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 a variety of market strategies, including long ETH to earn interest and short BTC with 10 times leverage. Due to the ETH/BTC correlation, users can also leverage their ETH staking earnings to reduce liquidation risk.

Currently, eBTC is still in internal testing.

7. Pendle

Pendle is undoubtedly one of the biggest winners in the 2023 LSDfi narrative. By incorporating different LSD assets in a timely manner, the agreement successfully borrowed the power of the LSD narrative, and also gave Pendle a relatively stable source of assets, telling the story of its own interest rate to the fullest, so this article will not repeat it.

After the V2 update, the upgrade of vePendle reduced the Gas fee and supported the payment of ETH to the pledgers. At the same time, it also gave birth to the ecological projects Equilibria and Penpie based on its own veToken. Up to now, the ETH pledged TVL absorbed by Pendle AMM has exceeded 50 million US dollars.

8. Tokemak

The liquidity protocol Tokemak has announced the upcoming launch of Tokemak V2 after a large loss of long-standing TVL, which will introduce a dynamic liquidity management pool (LMP) mainly to serve LSD assets.

The new system consists of two separate products, the first being Autopilot, a dynamic pool allocator that optimizes the yield of LPs across different pools and DEXs, and the second being a liquidity order book that enables DAOs to rent liquidity based on transparent market rates sex. Tokemak V2 will be launched sequentially, with Autopilot being the first product, followed by the DAO liquidity market.

Tokemak V2 provides a liquidity management pool for DAOs and LPs, with an initial focus on ETH liquidity staking Token, providing LPs with dynamic exposure to ETH, and providing new liquidity management tools for the LSD protocol. Afterwards, Tokemak V2 will expand its product range to include stablecoins, other stable pools, and volatile asset pairs.

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In general, the current LSD and LSDfi-related protocols are still growing rapidly, and many new protocols have emerged, such as Prisma, a stablecoin protocol based on the Curve ecosystem, and Ethena, a stablecoin protocol that implements Arthur Hayes’ ETH Delta Neutral. The first shot to plunder the huge ETH TVL.

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