This article takes stock of LSDFi protocols worthy of attention

Author: AN APE'S PROLOGUE

Compilation of the original text: Deep Tide TechFlow

With $ETH staking infrastructure maturing and users increasingly willing to stake and profit from $ETH, now is the time to look ahead to the next step in DeFi compositionality - LSDfi.

Interest in staking $ETH remains strong after Lido V2. Currently, the total amount of LSD accounts for nearly 48% of the 18.8 million $ETH pledged to date;

In anticipation of continued growth in staked $ETH, various protocols have emerged to serve capital pools looking for more utility and yield.

While not comprehensive, here are the protocols we currently consider noteworthy in the LSDfi category.

The LSDfi protocol allows LSD holders to efficiently manage the income of their pledged assets, simplifying technical complexity and reducing Gas costs. Examples of this include $eUSD "sell" yields via Lybra or base yield boosts via $unshETH.

Thanks to Lido's dominant market share of over 70%; in the LSD market, $stETH is the most widely accepted LSD in the LSDfi protocol. Origin Protocol's $OETH and $unshETH are currently one of the products that accept LSD most widely.

While Lido has limited outflows beyond Celsius after enabling $stETH withdrawals in V2, it must remain vigilant in maintaining its market leader position.

With $rETH and $frxETH proliferating, competition for LSD market share is heating up. Both $rETH and $frxETH have steadily gained market share this year, something the LSDfi protocol may consider when developing their products.

LSDfi products generally fall into two categories: Loans and Yield Optimizers:

1;) Lending - offsetting itself or disproportionately rewarding loan token holders with staking proceeds;

2;) Yield Optimizer - Provide higher yield for pool contributors.

First, Lybra Finance stands out with its LSD-backed stablecoin $eUSD. $eUSD is adjusted based on the yield earned on LSD collateral within the protocol. TVL has increased by 400% in the past week; $LBR has attracted the most attention in the LSDfi category.

unshETH and its derivative $unshETH generate optimal risk-adjusted returns through a basket of pledged ETH assets.

LSD held in the protocol also earns additional benefits through its vdAMM swap fees as they make the protocol a liquidity hub for $ETH LSD.

Although Origin Protocol is not a new product, it launched a new product $OETH on May 17. It pools a variety of LSDs to generate enhanced yields by providing liquidity on top of standard staking yields.

Gravita Protocol issues $GRAI, a 0%; interest loan token with a natural price cap of $1.10 and a hard price floor of $0.97.

Backed by a mixed basket of LSDs and bLUSD (the enhanced version of LUSD provided by Liquity), interest continues to accrue during the loan period.

Bringing Alchemix's concept of self-repaying loans to LSDs, Zero Liquid allows users to mint $zETH using LSD collateral with no risk of liquidation.

The protocol then periodically harvests users' staking yields to reduce debt.

LSDfi is an interesting innovation that offers LSD holders a wider range of unique yield strategies. Catering to the needs of various LSD owners increases the attractiveness of holding $ETH as an income generating asset, thereby enriching the entire Ethereum ecosystem.

Nonetheless, investors should consider LSDfi incumbents like Frax Finance, Pendle, and Alchemix when speculating on these protocols, as they have the ability to build similar products, so long as they choose to commit resources to them.

In any case, the overall LSDfi sector should be around for a long time.