LSDfi: Exploring a new storyline in DeFi.

23-05-30 11:00
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Original author: Yugi AI  
Original translation: Kxp, BlockBeats


LSDfi is the most exciting storyline in both LSD and the entire DeFi industry. If you want to know what it is and which projects it includes, don't miss this thread and let's uncover its mysterious veil together.


1. LSDfi


LSDfi refers to a group of protocols based on LSD. It includes a series of projects that may cover classic DEX and lending protocols, as well as more complex protocols built using unique LST attributes.


With the widespread adoption of LST, these protocols will play an important role in DeFi, laying the foundation for the DeFi ecosystem; while projects that build more complex products on top of LSD will be at the next level.


LSD has become a major category in total locked value (TVL), with Lido being one of the largest projects. Therefore, LSD plays a key role in driving growth across the entire DeFi ecosystem.


The integration of DeFi and LSD industries is an important trend, and LSDfi is the result of this evolution. As this trend develops, LSD is becoming one of the main forces in DeFi. Currently, LSDfi has developed into an independent field within DeFi and is making positive progress. It includes not only classic DeFi protocols, but also more complex protocols such as Baskets protocol, stablecoins, yield strategies, and more.



2. DeFi Classic


LSD has long been an important component of classic DeFi. Many LST can be used as collateral and traded on decentralized exchanges.


Classic LST DeFi examples include:


• $stETH as collateral in Aave

• Liquidity pools in Curve Finance

• The treasury of Yearn


With the increasing popularity of LSD, we can anticipate the emergence of decentralized exchanges or aggregators tailored specifically for LSD. Examples of protocols focused on LSD include LSDx Finance (similar to Curve) and Cat-in-a-Box Finance, which serves as a lending protocol.


3. LSD Basket


Currently, there are many liquidity staking solutions for ETH. Therefore, in theory, there should be a protocol that can integrate them into one basket and create corresponding indices. This approach can achieve risk diversification and make LSD-related investments more convenient.


LSE Basket Protocol:


• Index Coop has launched two index-based LSDs, dsETH and icETH. dsETH includes top Ethereum LST, while icETH utilizes leverage.

• unshETH has launched a basket containing top Ethereum LST called unshETH.

• Asymmetry Finance supports depositing ETH and receiving safETH supported by the top three LST holders.


4. Profit Strategy


LSD is a Token that can generate sustained returns. Naturally, you can develop a strategy around it. For example, allocate it to different pools, use it as collateral, leverage it, and manage staking rewards.


Profit Strategy Agreement:


• 0xAcid allows you to invest ETH in a diversified investment basket consisting of original LST and various strategies.  

• Parallax Finance is a leveraged LSD yield strategy platform designed to integrate multiple LSTs.


Another method is Pendle, which offers a unique approach: as a platform for purchasing futures, you can buy ETH at a discounted price and receive it later, while it is invested in the designated LST.


Asymmetric returns:


• asymetrix.eth is a protocol that generates asymmetric yield distribution through staking, inspired by Premium Bonds with similar mechanisms. It is similar to a lottery, where a few winners will share all the staking rewards over a period of time.


5. Stablecoin


Using LSD for over-collateralized stablecoins is a very logical choice. LSD will continue to generate revenue from collateral, making stablecoins profitable. In this case, everything is still supported by ETH.


LSD Supported Stablecoins:


• eUSD launched by Lybra Finance• aUSD introduced by Agility

• Introduced by Raft, R


6. Summary and Reflection


LSD has become the standard for PoS ecosystems and has become one of the main trends in DeFi. LSD can generate stable, low-risk passive income, which helps maintain the stability of the blockchain. LSDfi is a reasonable extension of LSD, which creates a complete economic system that can generate considerable income while simplifying interaction with the LSD project.


LSDfi will continue to develop and gradually witness the increase in complexity and uniqueness of the project. Let us look forward to its future development.


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