LSDFi ecosystem: current situation and future prospects

The essence of LSDFi is to combine the LSD market with DeFi products and protocols to provide users with more unique staking and lending opportunities. On the basis of LSD, LSDFi continues to innovate and explore more niche application fields.

The current staking ratio of ETH is relatively low, much lower than the average level of other PoS chains. This means that the LSDFi (liquidity pledged derivatives finance) market still has huge growth potential, especially as the pledge ratio increases and more institutional funds inflow, which will promote the expansion and development of the market. The inflow of institutional funds has brought new development opportunities to LSDFi. The intervention and support of top institutions have brought more confidence to the LSDFi market. The inflow of institutional funds not only increases the depth of the market, but also drives more innovation and brings more choices to LSDFi.

Revenue competition is one of the important features of the LSDFi market. The LSDFi protocol attracts users to participate by providing higher yields, forming a revenue war. Protocols such as Pendle Finance and Lybra Finance have attracted widespread attention through their unique revenue models and strategies. This competition drives LSDFi to continue to innovate and provide more efficient and sustainable revenue opportunities.

#The Essence of LSDFi

The essence of LSDFi is to combine the LSD market with DeFi products and protocols to provide users with more niche pledge and lending opportunities. The development of LSDFi is driven by multiple factors such as the increase in the pledge ratio, infrastructure upgrades, re-pledging mechanisms, institutional capital inflows, and revenue competition. As LSDFi continues to innovate, we can expect more attractive LSDFi products and protocols to emerge.

The development of LSDFi is driven by multiple factors. First of all, the current pledge ratio of ETH is relatively low, and it has greater growth potential than other chains. As the pledge ratio increases, the scale of the LSD market will continue to expand, creating more opportunities for the development of LSDFi. In addition, the development of infrastructure also has a positive impact on LSDFi. With the advancement of technology and improvement of infrastructure, LSDFi can realize pledge and lending operations more efficiently and provide a better user experience.

Re-staking is another important factor driving the development of LSDFi. By introducing a re-pledge mechanism, LSDFi can encourage more participants to put their pledged assets back into the market, increasing liquidity and market activity. This mechanism lowers the threshold for staking, and at the same time provides more income opportunities, attracting more users and funds to flow into the LSDFi market.

#LSDFi competition

The core of LSD’s current competition is the competition between various institutions for ETH in the hands of borrowers. Both centralized and decentralized institutions play important roles in this competition. They offer different staking and lending options to attract users and gain market share.

In terms of centralized institutions, the LSD services provided by exchanges such as Coinbase, Binance, and Kraken have a high reputation. They have a certain share in the market and have attracted a lot of user participation. These centralized institutions usually provide convenient interfaces and processes, attracting users who are not familiar with decentralized processes or prefer traditional financial institutions.

And decentralized institutions are also showing competitiveness in the LSD market. Projects such as Lido, Rocket Pool, Ankr, Frax Finance, Stader Labs, and StakeWise are all offering decentralized LSDFi solutions. These projects provide more security and credibility through decentralized design and smart contract execution, and help users achieve better benefits in the LSD market.

In addition to centralized and decentralized institutions, the LSDFi market also covers multiple fields and projects. From protocols that mint stablecoins using LSD as collateral (like Curve, Lybra Finance, Raft, and Prisma), to index protocols that issue baskets of LSD tokens (like Index Coop and unshETH), to protocols that offer automated yield strategies Protocols (such as Instadapp, Pendle, Flashstake, Swell, and Asymetrix), the LSDFi marketplace offers diverse functionality.

In this competition, market share and total value locked (TVL) are important indicators to measure the competitiveness of each solution. The current LSDFi market is relatively concentrated, with the top five players accounting for more than 80% of TVL. This shows that a few projects have a greater influence in the market. However, as time passes and the market develops, new projects and innovative solutions will continue to emerge, reshaping the competitive landscape.

Future Outlook for #LSDFi

In the future, how LSDFi can truly use the pledge mechanism to empower the long-term health of the public chain ecosystem without ensuring systemic risks, as well as the evolution of its competitive landscape, are all issues worthy of in-depth discussion.

In order to achieve the long-term healthy development of LSDFi, it is first necessary to design a more simplified staking process to lower the threshold for user participation and improve user experience. The simplified staking process will attract more participants to join the LSDFi market, facilitating the provision of liquidity and the increase of funds. At the same time, it is also crucial to introduce security measures, such as mechanisms such as validator deposits, liquidity restrictions, and self-guarantees, which can effectively prevent malicious behavior and systemic risks. These security mechanisms will provide users with confidence and enhance the stability and reliability of the market.

In addition, strengthening the governance and consensus mechanism is also the key to achieving the long-term healthy development of LSDFi. Through community governance and consensus mechanism, it can ensure that the rights and interests of stakers and verifiers are protected and reduce potential disputes. The healthy development of the public chain ecosystem requires the balance and coordination of the interests of all parties. Good governance and consensus mechanisms will provide a stable operating environment for the LSDFi market.

Based on the above understanding, the author believes that the future competition of LSDFi will focus on two important opportunities: safe aggregate mining and the development of “LSDFi+”. By combining these two aspects, a more secure, efficient and value-added LSDFi ecosystem is created.

First, in order to solve the security problem, we propose a secure aggregate mining module. This module can integrate multiple safe and reliable pledge agreements, and coordinate the mining opportunities of different pledge agreements through optimization, aggregation and cross-chain, so as to provide users with safer and more diversified mining options while reducing potential systemic risks . This will bring a more stable operating environment to the LSDFi market, attract more user participation and increase funding sources.

Secondly, we will further develop the application layer of “LSDFi+” to meet users’ needs for secondary value-added. By introducing innovative SDK module applications, we can convert native tokens into LSD tokens without unlocking the pledge, improving user experience. In addition, we will explore ways to create more value-added opportunities, such as creating a highly transparent and robust Venture DAO, launching well-managed active funds, and providing Pre-Listing new opportunities, quantitative strategies, etc. Through innovation in the “LSDFi+” field, these designs will further expand the scale of the LSDFi market and provide more incremental possibilities.

In short, as an important part of the public chain ecosystem, LSDFi’s future development needs to achieve long-term healthy empowerment by simplifying the pledge process, introducing security mechanisms, and strengthening governance and consensus. At the same time, market decentralization, the rise of innovative solutions, and cross-chain cooperation will become the characteristics of the LSDFi competition landscape. These trends will drive the prosperity of the LSDFi market and provide users with more choices and a better experience.

Liquidity pledged derivatives are gradually attracting market attention. Centralized institutions and decentralized institutions have demonstrated their respective competitive advantages in the market. The LSDFi market covers multiple fields and projects, providing a rich variety of solutions and functions. Market share, TVL and pledge ratio are important indicators for evaluating competitiveness. As time goes by and the market evolves, the LSDFi market will continue to change, bringing new competitive landscape and opportunities.