Binance Research Institute's LSDfi report: When liquidity staking meets DeFi.

Original Title: "Interpreting Binance Research Institute's LSDfi Report: When Liquidity Staking Meets DeFi"

Original Source: TechFlow

Introduction

Recently, Binance Research Institute released a research report on LSDfi, covering the overall landscape, earnings, and potential risks of the LSDfi track. The report shows that although LSDfi is growing rapidly, its size is less than 3% of LSD itself, and as a young track, there is still room for improvement.

In addition, in the BNB chain ecosystem, liquidity staking and related gameplay are also developing. Data shows that the LSD project on this chain has relatively lower fees and also offers participation opportunities.

Meanwhile, LSDfi aims to maximize ETH staking rewards while participants still need to be cautious of various risks in the early stages of the industry, and find a balance between returns and risks by locking in certain opportunities.

Shenzhen Stock Exchange has selected and refined the core viewpoints of the report, which are as follows:

Core Conclusion

In the past few months, the TVL of the LSD protocol has grown rapidly, thanks to its adoption. The cumulative TVL of the top LSD protocol has exceeded $400 million, doubling from a month ago. Favorable factors promoting LSD growth include the increase in ETH staking and the current low penetration rate of LSD.

Currently, the TVL of the LSD protocol accounts for less than 3% of the total addressable market. Although LSD provides attractive opportunities for LSD holders, users should be aware of associated risks, including but not limited to penalty risk, LSD price risk, smart contract risk, and third-party risk.

Ethereum Staking and LSD Development Status

The ETH staking market is developing rapidly. With the successful transition of Ethereum to the PoS consensus mechanism and the ability to withdraw staked ETH after the Shapella upgrade, the amount of staked ETH has grown rapidly. Currently, the total amount of staked ETH has exceeded 22.8M ETH.

LSD is developing rapidly. Running independent nodes poses technical challenges and requires high capital, which is not suitable for everyone. Therefore, the liquidity staking protocol reduces the participation threshold while maintaining the liquidity of staked assets. Data also shows that the proportion of ETH staked in the LSD gameplay is increasing in the overall staked amount.

In the market landscape, a situation of one super and many strong players has initially formed: Lido is the largest staking provider, occupying 28.9% of the market share, followed by centralized exchanges such as Coinbase, Binance, and Kraken. There are also some smaller liquidity staking providers, but their staked ETH amounts are relatively small.

In addition, the rates offered by each provider are not the same, but the returns are generally around 4%.

The liquidity staking in the BNB ecosystem is also very active, with a total staked value of approximately $150 million. Similar to ETH liquidity staking, BNB stakers receive liquid staked BNB, which can be used in other areas of DeFi to generate further returns.

Based on LSD, Financialized Gameplay: LSDfi

The LSDfi protocol allows LSD holders to maximize their assets and achieve additional income. The specific types and classifications of LSDfi are as follows:

1. DeFi liquidity provider: A DeFi provider that allows users to participate in liquidity provision and receive LSD as a reward.

2. CEX Collateral Providers: Centralized exchanges ("CEXs") that provide collateral services.

3.CDP Stablecoin: The CDP protocol allows users to mint stablecoins by using LSD as collateral for their debt positions.

4. Index LSDs: Tokens representing the holdings of a basket of LSDs.

5. Profit Strategy: A protocol that allows users to access additional profit opportunities.

6. Money Market: An agreement facilitated by LSDs to promote lending and borrowing activities.

Based on the above classification, we can see the position and related business of different protocols:

Structurally, the main LSDfi protocols and provider market share are relatively concentrated, with the top five accounting for over 81% of TVL. Lybra is the market leader, and the project has quickly risen since its launch in April, with TVL exceeding $160M.

On the upward trend, LSDfi is rapidly developing. In recent months, TVL has increased rapidly, doubling since a month ago and breaking through $400 million. The desire of LSD holders to maximize profits has driven this growth trend.

The road is long and winding. Despite the impressive growth of LSDfi, the MC of the LSD track exceeds 16.9 billion US dollars, while the total TVL of the LSDfi protocol is only 412 million US dollars, and the current penetration rate is still low, less than 3%.

Finally, LSD is a young market with both risks and opportunities. Participants need to consider risks such as pledge risk, price fluctuation risk, smart contract risk, and third-party risk, and act cautiously.

https://research.binance.com/static/pdf/lsdfi-when-liquid-staking-meets-defi.pdf

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