Global overview of the LSDFi ecosystem
UnshETH, Pendle, Flashstake, Eigen Layer, LSDx, Ethena, Tapio, Mori, Tokemak V2, Tenet, Diva, Puffer, Vibranium, StakeStone, ION Protocol, Seneca, Zero Liquid, Lucid, gUSHer, Davos and Raman Finance
Disclaimer: The content presented in this article, along with others, is based on opinions developed by the analysts at Dewhales and does not constitute sponsored content. At Dewhales, we firmly adhere to a transparency-first philosophy, making our wallets openly available to the public through our website or DeBank, and our articles serve as vehicles for self-expression, education, and contribution to the ecosystem.
Dewhales Capital does not provide investment advisory services to the public. Any information should not be taken as investment, accounting, tax or legal advice or as a recommendation to purchase, sell or hold or to pursue any investment style or strategy. The accuracy and appropriateness of the information is not guaranteed by Dewhales Capital.
Introduction
1. UnshETH
2. Pendle
3. Flashstake
4. Eigen Layer
5. LSDx
Upcoming Releases
6. Ethena
7. Tapio Finance
8. Mori Finance
9. Tokemak V2
10. Tenet
11. Diva
12. Puffer
13. Vibranium Finance
14. StakeStone
15. ION Protocol
16. SenecaUSD
17. Zero Liquid
18. Lucid Finance
19. gUSHer
20. Davos Protocol
21. Raman Finance
Conclusion
Introduction
In previous articles, we have reviewed LSD protocols and multiple LST-based stablecoins. See below:
However, beyond these protocols and platforms lie an even broader realm of LSDFi, which includes various projects offering flexible strategies to optimize returns, derivative instruments and infrastructure solutions. Thus, we can form the following vision of LSDFi infrastructure similar to blockchain and DeFi:
Level 1 is the protocols that help LSD to work. These include, for example, DVT Obol, SSV Network, Safe Stake and Diva technologies.
Level 2 - the underlying LSD protocols that allow users to get liquid derivatives and profit from ETH staking - these are Lido, Rocket Pool, Frax, Ankr, Stakewise and others
Level 3 are products that operate based on LST tokens derived from LSD protocols such as stETH, sfrx/frxETH, rETH, ankrETH, swETH and others. All the LSDFi projects that we have considered in this research: Raft, Gravita, Lybra, Flashstake, Eigen Layer, UnshETH and many others can be classified in this category. And this particular category is the most dynamically evolving with innovative experimental mechanics. Separate trends can be highlighted here:
CDP - Gravita, Raft, Lybra, Lucid Finance, PrismaFi
Index LSDs - UnshETH, LSDx, Indexcoop, Asymmetry (as a rule, index products usually come as part of multi-index platforms)
Protocols that improve return strategies (including those that offer strategies for LST assets among other products) - Flashstake, Pendle, InstaDapp
Infrastructure protocols, have any infrastructural basis - Tenet, Eigen Layer
Level 4 - auxiliary. This level has started to appear quite recently, it includes projects that work as satellites of LST or LSDFi protocols or on top of them. Since such projects are still quite few, they cannot be categorized by functionality and are easier to combine into "auxiliary level". Such projects include Puffer, Raman Finance and gUSHer
UnshETH
UnshETH offers support for both direct ETH staking and LSTs such as: ETH, wETH, sfrxETH, rETH, wstETH, cbETH, ankrETH, and swETH.
One of the key distinctions of UnshETH from other LSDFi-protocols is the Omnichain nature of its USH token, made possible through integration with LayerZero. This token is currently available on networks like BSC, Arbitrum, and Ethereum, with plans to extend to zkSync and Optimism. UnshETH introduces a unique use case of swapping between LST assets using vdAMM, which also generates revenue for the protocol's participants. Additionally, UnshETH provides the unshETH token, a diversified basket of multiple LST assets. A future feature of unshETH, which sets it apart from other LSDFi, is the potential to use staked ETH for gas payments. UnshETH is also actively working to onboard staking validator providers without liquid staking tokens to expedite their entry into the omnichain DeFii ecosystem.
The base APR for unshETH staking stands at 5.01%, with a reward APR ranging from 5.93% to 13.40% based on the chain selection. When trading ETH and its LSD derivatives, ushETH exhibits an APR of 11%.
Tokenomics:
The unshETH token is an index token, issued 1:1 for LST assets, and functions as an Omnichannel token, enabling farming with unshETH across different networks (e.g., on Pancakeswap at BSC). Holders of unshETH can earn returns from ETH-staking fees and protocol revenues from LST-asset swaps.
USH, the protocol's primary token, has a known Circulation Supply of 49.34m according to Dune, and a Total Supply of 143.5m tokens as per the token contract and Discord information. The token serves the following purposes:
Protocol management through USH staking, in return for vdUSH. Notably, with a minimum lock-in period of 1 month and a maximum of 1 year (to return 100% of locked USH), there isn't as much negativity in the unshETH community as there was with LSDx due to excessive penalties and extended minimum lock-in periods. vdUSH is also an omnichain token.
The quantity of vdUSH can be amplified by multipliers - 2.5x for USH/unshETH 80/20 BPT and 3.5x for locking LP-token Sushi USH/ETH.
While there are no precise metrics for distribution and token quantity, Discord information reveals that the current inflation rate is 4% per month.
Additional Information:
The growth of the UnshETH community has stalled for the moment and there is a slight churn of users - Discord has 2140 members as of July and 2335 as of 13 August, Twitter had 8.3k followers as of 18 July, 7.8k as of 8 August and 9.5k as of 13 August. Perhaps the community growth is due to the fact that on 7 August, UnshETH announced a $3.3m contribution from VCs and DAOs such as Soma Capital, MH Ventures, The LAO, ICONIQ Growth, Electric Feel, Backend Capital, 300DAO, MH Ventures. UnshETH has been audited by Certik and Paladin, but that didn't save it from compromising its private keys when the hacker withdrew $375,000.
In the case of unshETH it is worth bearing in mind that this protocol was one of the first representatives of LSDFi and had security issues, which is a critical factor for protocols that store users funds. Although this incident in early June didn't significantly impact the TVL, the token price did drop by 37% on that day (as of June 1) and has been on a downward trend since.
The TVL currently stands at $13,67m, with apparent downward trend:
But at the same time Dune shows $18,1m TVL as of 16 August, most likely because Dune counts across all pools and chains:
Outflow has been looking bigger than Inflow lately. Attention is drawn to the fact that Inflow has been missing since early June, which may be related to the hacking and the drop in the token's value:
UnshETH Price, the token price fell by 37% on hack day (1 June) and continues to fall with 24h trade volume:
Pendle
One significant distinction of Pendle is that it is not solely an LSDFi protocol but a multi-asset product that encompasses various instruments and assets. The $PENDLE token was launched back in 2021.
Pendle offers a range of functionalities focused on tokenization and yield trading. It provides an Automated Market Maker (AMM) where users can trade between two composite tokens: the yield token and the principal token. Thus, Pendle is a multi-component product rather than a traditional LSDFi protocol that exclusively deals with ETH and its derivatives. It offers a broader range of functionalities, including token farming for yield generation and issuing stablecoins through overcollateralization.
What makes Pendle interesting is its capability to deposit ETH into liquidity pools and generate returns from different sources such as Lido (yield ranging from 9.49% APY in 10 days to 24.1% APY in 1655 days), Frax (7.9%), and stafiETH/WETH and ankrETH/WETH pairs via Aura Finance. Due to the inclusion of other assets and products beyond ETH and LSDFi, the overall TVL may not provide an accurate representation of Pendle's performance.
Unlike other protocols, Pendle functions as a protocol that enables users to employ various yield management strategies, including trading yield-bearing ETH interest. This is achieved by wrapping a yield-bearing token into a standardized yield token (SY token). The SY token represents a wrapped version of the underlying yield-bearing token and is compatible with the Pendle AMM (e.g., stETH → SY-stETH). The SY token is further split into two separate tokens: the base token (PT) and the yield token (YT). Pendle's approach of separating the yield into a distinct token allows for fixed maturity when tokenizing the yield. Both PT and YT can be traded on the Pendle AMM.
Token metrics:
The total supply of Pendle tokens is 235,890,444. Unlike the LSDFi project tokens, the Pendle token is not a new token but was launched in May 2021. Currently, over 259 million $PENDLE out of the 235.89 million tokens have already been unlocked. Pendle also features a governance token called vePENDLE, which can be obtained by staking $PENDLE for a period of 1 week to 2 years. As the staking period progresses, the amount of vePENDLE decreases until the staking period concludes. Holding vePENDLE allows users to increase the yield per liquidity provider (LP) up to 250%. However, it is important to note that LP yield can only be obtained if the participant has voted for the pool.
Yield is generated from swap commissions on the Pendle AMM and YT commissions. Currently, all protocol revenue is distributed to vePENDLE with no allocation to the Pendle treasury. However, in the future, a portion of the protocol revenue may be redirected to the Pendle treasury.
Token Distribution:
Team: 5.7%
Incentives: 10%
Ecosystem Fund: 19.2%
Circulating Supply: 65.1%
Additional Information:
Pendle is not a new protocol, as it was introduced back in 2021 and therefore has several audits - from Ackee, cmichel, DeDaub, Dingbats, WatchPug - and a relatively large community that continues to grow: Twitter grew from 59.1k followers as of 18th July to 63.6k as of 8th August and 77,2k as of 13th August, and Discord grew from 11.55k members as of 18th July to 12.4k as of 13th August. In addition, Pendle has a active GitHub in private repositories.
At present, the outflow exceeds the inflow, yet the TVL is not experiencing a decline:
The dynamics of the Pendle token, again, are worth considering given that this protocol offers yields across multiple asset types and its token launched back in May 2021, unlike the new tokens of young LSDFi projects. Since January 2023, when the LSDFi narrative began to actively accelerate, $PENDLE has shown very good growth of more than 20x:
Flashstake
Flashstake supports direct ETH staking and LSTs such as stETH and rETH. Moreover, it provides options for staking ETH and wETH through Lido (offering 6.37% APY) and RocketPool (providing 4.87% APY).
What sets Flashstake apart from other LSDFi protocols is its unique feature that allows users to profit and withdraw their deposit at any given moment. For instance, instead of simply exchanging $1,000 worth of ETH for another $1,000, Flashstake enables users to stake $1,000 for a predetermined duration and instantly earn $100 of ETH as an immediate upfront profit. However, it's important to note that Flashstake doesn't fit the strict definition of an LSDFi protocol as it supports not only ETH and LST but also other tokens like GLP, sUSD, and USDC.
Flashstake's history also adds to its appeal. It was launched in the summer of 2022 and has been gradually increasing its TVL since then. The platform's token began trading in February 2023, according to CoinMarketCap. This steady growth makes Flashstake a promising prospect in comparison to the influx of new LSDFi protocols.
Token metrics:
The total supply of Flashstake's token ($FLASH) is 150 million. The distribution is as follows:
Team: 15%
BZ Treasury: 15.17%
Community Airdrop: 18.68%
Growth: 38.84%
Flashback Staking: 12.34%
Additional Information:
Since August 2022, Flashstake's TVL has been on an upward trend. The platform has experienced several significant events, but its TVL remains relatively small. According to the official Flashstake website, the total TVL is $4.96 million. However, DeFiLlama reports a TVL of $4.14 million, which is still at odds with the Strategy TVL figure ($4,2m) listed on the Flashstake website.
From the DeFiLlama data it looks like total Inflow is higher than outflow (as evidenced by the lack of a clear TVL downtrend), but from the Dune data it looks like the picture is much worse. In general, there is more of a tendency for outflow to increase against the background of low TVL values, but on the 12th of August there was a slight inflow:
The price of the token peaked on 15 April 2023. But nevertheless, even then the 24h vol was max at $1,06m, and currently the 24h vol is $3.6k (as of 17 August):
Twitter Flashstake has 9877 followers as of 8 August 2023, Discord has 2187 members. Audits have been passed by PeckShield and Openkertify / Secure3.
Eigen Layer
EigenLayer, a recent addition to the Ethereum mainnet launched on June 15, is a unique protocol that, like Flashstake, doesn't fit neatly into the LSDfi category. This is due to its distinct concept and the variety of assets it supports, although LSTs can be utilized. Notably, EigenLayer has secured an impressive $64.4 million in backers contribution, which is somewhat unusual for LSDFi projects.
EigenLayer supports direct ETH staking and various LSTs such as rETH, cbETH, and stETH. There are also plans to integrate additional LSTs in the future.
Unlike many other platforms, EigenLayer's goal isn't to profit from derivative assets. Instead, it uses rETH and stETH for a process known as restaking. Restaking allows LST owners to contribute to security by restaking their LST assets, not just for the Ethereum chain, but also for other platforms. Validators also have the option to restake LP tokens of pairs that include LSD tokens with other assets and pairs that incorporate ETH.
EigenLayer stands apart from LSDFi protocols in another way. Beyond restaking, the platform's developer, Layr Labs, is also working on EigenLayer DA. If we think of EigenLayer as a platform that enables permissionless development by connecting to the Ethereum trust network, then EigenDA is the first service being developed on top of it. Data availability, a crucial component of the blockchain stake, refers to the accessibility of data to nodes for verification when a block is proposed. This ensures the block's validity. EigenLayer introduces an intermediary consensus layer where users agree to give EigenLayer additional rights to manage their converted $ETH, enabling its effective transfer to other applications. This makes EigenLayer distinct from other LSDFi projects as it also provides infrastructure solutions.
Additional Information:
Egen Layer's social media activity metrics show strong interest in the protocol: between 18 July and 13 August, Twitter followers grew from 83.1k to 95.4k and Discord grew from 115k participants to 134,6k. Additionally, there are some big wallets amongst the restakers, including Wintermute, and free slots are being filled in the first block after new restaking slots open up. Eigen Layer has audits from Consensys Diligence and Sigma Prime.
TVL: Coindesk it is reported that EigenLayer reached TVL $16m on 16 June. In addition, EigenLayer has a limited contract capacity (at the start each of the contracts for stETH, cbETH and rETH was limited to 3200 tokens). As of 17 August, Eigen Layer holds the equivalent of 44,963 ETH.
There is no information about the EigenLayer token at the moment, but it is likely to be planned.
LSDx
Note: despite a disastrously low TVL (233k) and little community activity, LSDx's social networking development and maintenance is actively ongoing unlike Acid and Agility, so we decided to review it.
The LSDx protocol operates on both Ethereum and zkSync Era chains. It supports direct ETH staking and LSTs such as stETH, frxETH, and rETH, with a current APR of 3.03%.
In summary, LSDx can be likened to a combination of Curve and DAI. The Curve-like component provides low slippage and efficient exchange of LST assets, while the DAI-like component is based on ETHx, a basket of assets used for stablecoin lending.
The LSDx protocol also has its own LST token, ETHx, similar to UnshETH. ETHx is minted by ETH, stETH, fraxETH, and rETH. The amount of ETHx minted is proportional to the amount of assets deposited and the current proportion of the three assets in the ETHx pool. ETHx enables the swapping of other LSD assets with each other (similar to UnshETH), with a 0.1% fee for each swap, theoretically providing a return on the protocol.
Additional Information:
Despite the active ongoing development of the project, social activity is falling along with other indicators: at the beginning of April, Twitter had 10k followers, Discord had 3.2k participants, and by the time of 13 August it had become 5.2k and 2.9k respectively. LSDx has 2 audits from Salus Secutiry, but they are currently unavailable.
The LSD token was initially issued with 1 billion tokens, but after a vote, 500k tokens were burned. The token is used for managing the protocol via LST staking and receiving veLSD, and for receiving rewards for mining and veLSD staking. Interest in veLSD was likely dampened due to the long blocking periods and high penalties for early withdrawal of blocked LSTs, which led to community disapproval.
There were also plans to issue a UM stablecoin, backed by ETHx with a 200% overcollateralization. It was proposed that for every $2 of ETHx charged, $1 UM could be received, and liquidation would occur when collateralization reached 110%.
TVL in LSDx is $169.38k as of 18 July and 246,6k as of 13 August, according to DeFiLlama:
Foresight Ventures was the sole backer in LSDx, and they also staked a significant amount of LSDx in the governance. The performance of the LSDx token has been disappointing, largely due to a lack of clarity from the team about how tokenomics works. The team seemed to assume that this would be managed by the community through governance proposals on Discord. Looking at the token price dynamics, it's clear that the rewards output has significantly outweighed the economic incentives, such as positive news, new partnerships, and the burning of half the token supply (from 1 billion tokens down to 500,000), also token price began to decline after listing on MEXC on March 17th:
The main point is that as the price of the token decreases, the appeal of staking in veLSD diminishes, along with the attractiveness of staking in LST assets and ETH. Consequently, this leads to a loss of community interest and a decrease in TVL, exacerbating the situation. It is worth noting that out of the total 53.34 million $LSD in circulation, 16 million $LSD are currently locked in ve.
Upcoming Releases
Ethena
Information about the Ethena Labs product is still pretty scarce, but what is known is that it are going to issue a native USDe stablecoin that will be backed by delta hedged Ethereum collateral. Stability is provided by short leveraged perpetual positions executed against the collateral immediately upon issuance, ensuring that the position is delta neutral and that USDe is never issued to users without fully hedging the initial notional balance. There will also be another product that will be based on USDe, capturing the yield of stETH and a basis in the futures markets.
Thus, Ethena offers 3 products:
USDe, a stablecoin that provides price stability through delta-neutral hedging on centralised and decentralised platforms. The returns generated by Ethereum rates and futures premium are accrued to the user, unlike centralised stablecoins.
Bonds available globally with floating and fixed rates, denominated in US dollars, which can be created through the use of expiring futures or perpetual swaps.
Collateralised lending in stETH and USDe to provide both enhanced yields and componentised leverage.
Ethena distributes collateral across a diverse set of safe, programmable and transparent MPC onchain custodial contracts.
Additional information
The launch is planned for Q3 2023 after the completion of the second security audit and testing process. Ethena is generating interest from the community, which can be clearly seen in the growth of the number of participants: Twitter grew from 8.8k followers on 28 July to 10,2k on 13 August, and Discord grew from 6.6k to 8.1k members.
Among other things, this may be due to the fact that Ethena has committed $6.5m in funding and has an impressive list of backers with lead DragonFly and include Wintermute, GSR, Delphi Digital, Gemini, Bitmex, ByBit, Deribit, Maelstorm, Lightspeed, Huobi Ventures, OKX Ventures and others. Moreover, Ethena mentions on its Twitter that the idea was inspired by Bitmex's Arthur Hayes' "Dust on the Bark" article, in which he outlined his vision of a derivatives-backed stablecoin to solve the biggest problem in the space.
Tapio Finance
The development of the project started back in 2021 and the public testnet was only launched at the end of June 2023. The protocol is being developed by NUTS Finance, founded in 2018. In October 2022, Tapio committed a $4m seed round from Polychain, Hypersphere, Arrington, Spartan, LongHash, 0xVentures, CMS, D1 Ventures, 11-11 DG Partners, Genblock, Valhalla, PAKA, and Double Peak. And the commitment announcement indicates that Tapio is going to introduce a new liquidity standard for Polkadot. However, we can now see that this project belongs to the LSD industry in Ethereum, as Polkadot is not a network that is interesting for liquidity-staking. This among other things demonstrates the refusal of one of LIDO's liquidity-staking operators, MixBytes, to provide liquidity-staking services for Polkadot and Kusama.
As a differentiator from other LSD protocols, Tapio promotes the LSDFi (LSTfi) interaction narrative, despite the fact that the project was launched long before the emergence of a formalised LSDFi industry. Tapio offers an LP token issue tapETH, serving as a liquidity aggregator and arbitrage centre. tapETH represents stable pools between LST and ETH such as:
stETH-ETH
rETH-ETH
cbETH-ETH
That is, unlike traditional liquidity pools and LP tokens, tapETH is ETH-linked and can be used in DeFi as an exchange token, and will allow for the underlying LST rewards and fees generated by pools, providing real APR yields. It is also mentioned that tapETH could be used to issue a stablecoin, with which users can build up yields even further. The rate of tapETH relative to ETH will be regulated by arbitrage mechanisms (which work similarly to those described for LST-backed stablecoins in the sections about Gravita and Lybra). But it should be taken into account that due to the fact that tapETH collateral will be formed by providing liquidity in Reward-bearing LSTs, the price of which varies depending on the accrued yield from ETH staking (rETH, cbETH) and therefore the link to the ETH exchange rate will be soft and the documentation indicates that the value of tapETH will fluctuate relative to ETH.
It is also known that Tapio will have a token that will be used to manage the protocol (when locked into veTAPIO) where participants will be able to determine things like fees, scale voting to allocate incentives to specific DeFi projects and so on.
Additional information
Judging by the growth of social media, Tapio Finance is attracting interest from the crypto community: Twitter grew from 69.5k followers to 75.3k as of 13 August, and Discord from 26.7k and 34k members as of 8 August for 41,4k as of 13 August. In addition, Tapio has its own GitHub, where there has been moderate activity in repositories related to the current direction of the project since May 2023, and previously there was activity in repositories related to Polkadot. Tapio has an audit from Secbit, passed in June 2023.
Mori Finance
Mori Finance offers to generate stable assets with low volatility without any losses by securing ETH. This stablecoin is not pegged to USD, but is issued based on native ETH assets, fully regulated through smart contracts. But the main difference with the protocols presented above is that users can create dual assets to hedge ETH price fluctuations, allowing long ETH positions without the risk of liquidation.
Thus, Mori Finance offers two different tokens into which stETH can be divided and which offer different levels of risk to users and users can decide for themselves in what proportion stETH is divided into these two tokens:
ETHS (ETH Stable), which is like a stablecoin backed by ETH and allows for LP ETH/USDC yields. The mechanism of forming a soft price peg is interesting: if the price of ETH rises or falls by 10%, the price of ETHS changes by 1% relative to the $1 price. At the moment, the price of ETHS is $1 and the price is governed by arbitrage mechanisms similar to what we have seen in Gravita and Lybra.
ETHC (ETH Coin), which is similar to a leveraged perpetual option with no forced liquidation. The price of ETHC, like ETHS, is set at $1 at launch. Currently, the price of ETHC is resting at $1.1.
The key risk here relates to ETHc. If ETHc is not enough to absorb ETH volatility, especially during Black Swans. In such a case, the protocol could undergo cascading liquidation and go into a death spiral. Therefore, Mori Finance will have a risk management module that in negative scenarios is likely to buy back ETHc from the market to absorb the volatility.
Mori uses xTokenomics, popularised by Camelot DEX. Protocol has a MORI token that will be able to be locked into xMORI to manage and generate yield with increasing yield, and its token metrics are already known:
Additional information
Mori is currently running in the Goerli testnet since 21 July. The protocol has committed a total of 150ETH at 0.005 ETH per MORI for the private and public rounds, according to the IDO page, which gives a price of $9.45-9.5 per token at the time of IDO on 20 July and a valuation of $9.45-9.5m.
Regarding security issues - Mori has an audit from PeckShield and in process from Halborn. Twitter went from 2k subscribers as of 28th July to 2.7k on 13th August, and Discord went from 1425 members to 1634.
Tokemak (v2)
This project is not new, as it was launched back in 2021 as a decentralised liquidity engine for decentralised exchanges, built on top of Convex in the days of Curve Wars. But with the launch of v2 Tokemak has reoriented towards LSDFi and the first v2 addressable marketplace is focused on LST token liquidity. In short, Tokemak introduces a protocol for automated deployment of ETH from a liquidity management pool (LMP) between trusted pools and DEX (rebalancing), automatically aggregating revenue and saving gas costs. Tokemak supports pools such as, for example, stETH/ETH and rETH/ETH on Balancer, cbETH/ETH on Curve and sfrxETH/ETH on Maverick.
Additional information
Tokemak commitmented $4m in a seed round back in 2021 from backers such as Framework Ventures, Electric Capital, Coinbase Ventures, North Island Ventures, Delphi Ventures and ConsenSys and the token is already trading, currently showing negative value momentum with a Mcap of $11.2m as of 28 July to $9,5m as of 17 August.
Social activity also stagnated: on Twitter, the number of followers fell slightly from 36.2k as of 28th July to 36.1k as of 13th August, while the number of Discord members remained unchanged at 11.5k. Audits appear to have been passed as early as 2021-2022 from Halborn, Omnisica and Quantstamp, according to the documentation.
Tenet
Tenet offers a stand-out way to use ETH (in the form of stETH), LST - stETH, cbETH for validation or delegation in Layer 1 Tenet. In addition to income from staking the underlying asset (ETH), users get transaction fees from blockchain rewards in the Tenet network (which is deployed using the Cosmos SDK). This makes the Diversified Proof of Stake logic as an add-on to the Cosmos SDK-based blockchain. It is claimed that apart from Ethereum Tenet supports other chains - ATOM, BNB, MATIC, ADA, and DOT. On the technical side, what's also interesting is that Tenet uses a bridge developed in collaboration with LayerZero that makes it possible to make a unified OFT out of LSDs on any chain.
When a user stakes an LST, they get a tLST, which is Tenet's representation of the steaked LST. It is the ownership of tLSD that allows to earn revenue through the rewards of the underlying LSD, the rewards of Tenet's chain validator/delegator rewards in the form of TENET tokens and when tLSD is used in DeFi.
In addition, Tenet has its own CDP stablecoin LSDC, which is based on the Liquidity codebase with a collateral ratio of 125%, which can be backed by tLSTs such as twstETH and tcbETH (according to the documentation, during Genesis), as well as tstETH according to a blog post on Medium:
There's some confusion in the documentation and blog at the moment, but it's likely that stETH, cbETH, wstETH and bETH can be used for staking in DiPOS Tenet. And for the same assets, users can get tLSD for LSDC borrowing. In addition to the low Collateral Ratio, Tenet provides positive interest rate loans on LSDC due to the yield from the underlying collateral. It is also possible to contribute LSDC to the stability pool, which will generate income from liquidation profits and in the form of TENET tokens from the Native Rewards pool.
Tenet Protocol has its own native token ($TENET) that accrues rewards for LSDC validators, delegators and stakers. The staked/delegated version of the token (i.e. tTENET) entitles holders to rewards paid in TENET. And in order to get veTENET governance token, users need to lock tTENET, not TENET. The lock time is from 1 week to 4 years and veTENET holders can receive rewards from additional sources - such as, for example, LSDC issuance and redemption fees, borrowing fees, DEX (Metadrom) administrative fees and others - in addition to the previous rewards.
Metadrom, in turn, is designed to aggregate all LSD assets and allows for the creation of larger assets - Meta LSD - on their basis.
Additional information
There is no data about Tenet's seed backers, but it is known that the project committed $500k in 2 rounds on DAO Maker.
A strong gap can be noted between the number of followers on Twitter and the number of participants on Discord, but perhaps this could be due to the presence of a large group on TG: Twitter growing slightly from 135k subscribers as of 28th July to 135.4k as of 13th August (2k less than the 8th of August), the number of Discord members increased from 719 to 920, and the number of TG chat members decreased from 45.5k to 43.8k over the same time. Tenet is also one of the few projects that has an open Github, but activity on it is low at the moment, which is consistent with the low activity on the blog - the last articles were in mid-July. Perhaps the team is heavily focused on development and audits.
Diva
Diva differs from the other projects in that it is a DVT protocol that offers LST divETH, which is a Rebase LSD similar to stETH (where the balance of tokens in the wallet increases due to rewards), and wdivETH, which is a reward-bearing token that can be more widely used in DeFi protocols that do not support rebase (instead, rewards are built into the token price and the premium to ETH grows). DVTs are typically an intermediate solution to realize the ability to run a distributed validator by an operator without economic mechanisms and LST like SSV and Obol.
Additional information
In January 2023 Diva announced the closing of a $3.5m seed round from A&T Capital, Gnosis, Bankless, OKX Ventures, Metaweb, DCV Capital, Alphemy Capital, Very Early Ventures, staked.vc and angels from projects such as Metacartel, Aave, Staking Rewards, zkEVM, ZKValidator, EthGlobal, EigenLayer, Aragon, Stakely and many more.
Diva development is being handled by Shamir Labs, who announced the Diva testnet on 12 August 2023.
Social networks show a slight increase, Twitter grew slightly from 6,2k subscribers as of 28th July to 6,4k as of 13th August, the number of Discord members increased from 2951 to 3018.
Puffer
Puffer is the first native liquid-staking protocol on Eigenlayer and is more of an application engineering project compared to the other projects discussed. At its core, the Puffer Protocol is a liquid-staking protocol that allocates ETH to node operators without requiring permission to run the Ethereum PoS validator. It addresses common problems in the LSD space by incorporating the unique Secure-Signer technology, a remote signature tool specifically designed to improve validator security and mitigate offenses. This significantly reduces validator collateral requirements from 32 ETH to a more manageable 2 ETH, while ensuring robust protection of validator keys and minimizing the risk of loss due to user error.
Users who stake ETH in Puffer receive LST pufETH in return, which is a reward-bearing LSD that accumulates value. Tokenomics involving the governance token are not yet known.
With the introduction of Secure-Signer, validators of all sizes are offered the opportunity to contribute to the security of the Ethereum network through the Puffer Pool. The protocol implements innovative solutions such as permissionless delegated threshold validator (pDTV) and Secure-Router for efficient idle management and effective transaction delegation, respectively.
The integration of SGX (Intel SGX is the technology that powers the Secure-Signer software) provides a significant enhancement in security, protecting honest NoOps from hacker attacks. On the rare occasions when a malicious NoOp breaches the SGX, they merely expose their own private validator key, leaving the pool's security uncompromised. Remote Attestation Verification (RAVe) confirms that NoOps are using Secure-Signer, thereby creating an environment of trust and transparency throughout the ecosystem.
Puffer also charges a modest protocol fee of 2.5%. This is considerably lower compared to Rocketpool's 15%, Lido's 10%, Frax Eth's 10%, and centralized staking exchange services that can charge up to 25%.
Additional information
Puffer received contributions totaling $5.5m from backers such as Lemniscap, Animoca Ventures, Bankless, Brevan Howard, Concave, DACM, LBANK Labs, Wagmi33 Foundation, IoTeX, and others. Moreover, Puffer obtained a grant from the Ethereum Foundation and added Dankrad Feist and Justin Drake to the list of notable DAO members who possess the SGX encryption keys.
As of August 14th, Puffer has 3.7k followers on Twitter and 1.9k members on Discord.
Vibranium Finance
Vibranium is interesting because it is a hardfork of Lybra Finance, only unlike Lybra, it initially supports rETH in addition to stETH and ETH. This is probably the newest of the projects in the selection, with Twitter launching in July 2023 and testnet launching on 21 July.
The platform will be issuing its vUSD and rvUSD stablecoins, which can be obtained for LST, and there will also be a VIB token and an esVIB governance token, which are similar in functionality to Lybra's LBR/esLBR tokens. VIB tokens will be available by participating in Vibranium IDO, getting rewarded for a vUSD mint or becoming a vUSD/ETH liquidity provider. The difference with Lybra is that in V2 Lybra, the linear conversion period of esLBR to LBR will be set to 90 days, while esVIB will convert to VIB within 30 days.
Initially, vUSD will be backed by ETH and stETH, while rvUSD will be backed by rETH. This is also similar to Lybra, which in V2 has eUSD being an Interest-bearing stablecoin and backed by stETH (ETH), bETH and other rebase-LSDs that accrue yield in the form of tokens to users' wallets. And peUSD is backed by wstETH, wbETH, rETH and other reward-bearing LSDs that accumulate value by accumulating rewards and their premium relative to the ETH price increases, and since these LSDs are rebase-free, they can be supported by a large number of DeFi protocols without risk of yield loss.
And unlike Lybra eUSD, Vibranium stablecoins will initially be launched as omnichain stablecoins, since based on all the data, Vibranium is a fork of Lybra V2 specifically. The yield is projected to be 8%, the same as eUSD coupled with a 0% credit.
Additional information
Despite the marketing narrative that Vibranium is an improved LSDx and the recent IDO, social media has a relatively small following: Discord has 157 members as of 13 August, and Twitter has grown from 1737 to 2138 followers between 28 July and 13 August.
StakeStone
Another fairly new project, like Vibranium, Twitter is launching in May 2023. There is not much information on the project yet. But nevertheless, it is known that steaking ETH through Lido allows to get STONE tokens, which are reward-bearing LST. What makes Stone unique is that in addition to ETH staking, STONE will combine the underlying assets of blue chips and various DeFi protocols across multiple chains - most likely through the use of LayerZero's omnichain technology. Yields are generated by both ETH staking and various blue chip assets, examples of which include , Lido, Balancer, Aura, etc. Moreover, the documentation even mentions support for RWA.
In addition, what sets StakeStone apart from other LSDFi protocols is that it is positioned as a Cross-Chain LST that will support networks such as Mantle and Linea in addition to Arbitrum.
To increase yield, STONE tokens are proposed to be used in Stone's LSTFi Eco, which will include:
DEX with dynamic liquidity pools
Stablecoin collateralisation - STONE tokens can be used as collateral for minting stablecoins
Lending protocol - through the placement of STONE assets, users will be able to efficiently cover interest costs, maximising returns within the lending protocol.
Derivatives market - by utilising STONE assets, a derivatives market can be created.
Additional information
Activity in social networks is currently decreasing: on Twitter the number of followers decreased from 5181 as of 28 July to 4444 as of 13 August, and on Discord - from 2371 members to 2220. Most likely, this may be due to the early stage of the project's development.
ION Protocol
Despite an active Twitter account that launched back in November 2022 and a recent blog launch (April 2023), information about the protocol remains scarce - documentation remains partially incomplete. On 13 July, Ion Protocol announced the closing of a $2m Pre-seed round with backers including SevenX Ventures, Foresight Ventures, Everstake Capital, Bankless Ventures, Portal Ventures, Maelstorm, Ryan Selkis (Messari), and others.
What makes the ION Protocol different from other LSDFi-CDPs is that it is a hybrid between a CDP issuer and a lending marketplace and offers users to issue allETH tokenised stablecoin linked to the ETH exchange rate for assets such as: LST LP tokens, re-staking positions, LST indexes - the blog mentions Eigen Layer Positions, Stakewise VLT Positions, dsETH IndexCoop, UnshETH'd, Yearn Finance yETH and Aura ERC-4626. Goerli ION's testnet currently supports stETH and rETH.
Another difference between ION and the rest of the LSDFi is that it offers initiation of liquidations by changes in the state of the consensus layer rather than by price oracles. The fact is that in ION liquidations are not triggered based on price volatility, but on changes in the underlying validator balances of the respective collateral providers. This is possible by operating on the basis of the ZKML (Zero Knowledge Machine Learning) platform. In this way, ION uses a method built into the validator to track the risk of different collateral vaults, which creates asset-specific risk profiles, determining the maximum LTV and stability fee of each collateral vault. It also provides the ability to create dynamic interest rates, which should make the protocol more robust under different market conditions.
Additional information
Due to the early stage of the project development, the growth of activity in social networks is small: in Twitter from 28 July to 13 August the number of followers increased from 1717 to 1847, and in Discord from 805 to 862.
SenecaUSD
Seneca is in the process of creating an isolated omnichain lending market (CDP) for LSTs and exotic collateral. This means that the lending markets will be isolated from each other. There is not much information about the project at the moment, but it is known that Seneca is building a platform on Arbitrum that will allow their senUSD stablecoin to be borrowed against various asset types, including LSTs, and a product will be announced later that will allow leverage of up to 10x on yield-bearing assets. The liquidation mechanism is standard - if the amount of collateral falls below a certain threshold, the collateral is liquidated to cover the loan.
In terms of supported asset types, Seneca is similar to ION in that it offers support for assets such as: LPs (e.g., Balancer's BPTs), LSTs, Deposit receipts (e.g., Aave's aUSDC), Principal tokens (Pendle's wstETH PT). Of interest, Seneca have announced a partnership with Root - VE(3,3)² omnichain aggregator.
It is also known that there will be a SEN token, with a total supply of 100m tokens. Holders of veSEN will receive 50% of the platform's revenue from loan fees, interest on open positions and from a share of liquidation fees. The remaining half of the revenue will be used to buy SEN on the open market and burn it. An interesting point about tokenomics is that in order to convert SEN to veSEN, users need to lock in BAL 80SEN/20WETH LP tokens for 16 weeks. This is done to encourage liquidity and prevent pressure from sellers.
Additional information
The seed round committed $200k at $0.05 per token and another $400k is planned to be in a private round in July at $0.055. According to other reports, Seneca detailed $640k before IDO. Twitter followers rose from 2158 to 2505 between 28 July and 13 August, and Discord from 766 to 913.
Zero Liquid
The concept is quite simple: Zero Liquid offers Zero Vaults, the concept of which is similar to Eigen Layer: users deposit LST or Ethereum into Zero's vault and receive synthetic ETH in return, for which they can then also buy back their assets. The protocol offers loans with no liquidations and no interest, and users can freely enter and exit positions without being tied to lock-in periods. The protocol periodically harvests staking rewards, which are credited on a proportional basis to users, reducing their outstanding debt. Zero currently supports stETH, with support for rETH announced on 18 July.
It is worth noting that zETH has a soft peg and the exchange rate relative to ETH can be levelled by arbitrageurs as well as by Zero Fund, which is designed to maintain the peg during times of high volatility in the market. Also ZeroLiquid owns the liquidity of $ZERO/ETH on Uniswap v3. The ETH generated from LP fees in this pool will be used to add zETH/ETH liquidity.
The ZERO token had a fair stealth launch on Uniswap on 19 March 2023. Currently, the token has little utility other than to be staked in return for ETH rewards. Continuous discussions and suggestions on token utility take place and are managed via Discord.
Additional Information
Zero Liquid has a Github, but there is very little activity on it. Twitter has 8.7k followers as of 8 August and 8,3k as of 13 August, Telegram has 1819 and 1848 members for the same date.
Lucid Finance
The project is similar to Lybra in that it has an LST-backed stablecoin DUSD which has the same name as Davos and is also an omnichain token. Lucid Finance will reportedly support leading LST tokens such as stETH, rETH, frxETH, frxETH, cbETH and bETH as well as LP tokens (LPT) from protocols such as Curve, Balancer and Yearn Finance from launch.
Holders of DUSD, which is a Rebase token, will receive rewards from assets held as collateral (similar to Lybra), and in addition, DUSD holders will receive their accrued esLUCID emissions. The minimum collateralisation ratio for LST like Lybra is 150% with 0% credit and for LPT is 200%.
Additional Information
IDO passed on 9 July, last Twitter post on 19 July, blog post on 4 July. Twitter has 3513 followers as of 8 and 13 August, Discord links are inactive. Github has only one inactive repository with no activity since the upload on 2 July.
gUSHer
Gusher differs significantly from the above projects in that it does not seek to use LST, but is essentially a second layer above the LSDFi protocol along the lines of Curve and Convex. Gusher aims to be the Convex layer for unshETH, boosting and optimising rewards for USH stakers and liquidity providers in unshETH protocol. Gusher will batch and automate the processes of staking, claiming, re-staking and LP-ing for users. No fees will be charged for deposits and withdrawals, but instead a protocol fee on profits distributed to USH stakers and GUSH holders.
In particular, users can block a USH token or provide an already blocked vdUSH and receive a tokenized version of the blocked tokens in the form of gushyUSH. The yield generated in USH is also automatically converted into additional gushyUSH rewards. Gusher is thus a Convex fork with new inputs and developments supported by the unshETH team and enables unshETH holders to lock more than the standard 90 days across ETH, ARB and BSC according to gUSHer DApp. USH yield will be converted to gushyUSH for reward compounding and users will also earn additional GUSH rewards. Also users can pull out earlier than their chosen lock time but will face a slashing penalty paid in unshETH.
Additional Information
As of 13 August, gUSHer has 889 readers on Twitter and 401 members on Discord.
Raman Finance
Raman enables the unlocking of liquidity by using LST-backed stablecoins as collateral for minting synthetic assets, sidestepping the fragmentation associated with the emergence of numerous LST-backed stablecoins. Raman vaults facilitate optimized liquidity provision through Aura Finance, leading to additional yields from placing LP tokens from Balancer and, subsequently, from Uniswap, Curve, Convex, and others.
Moreover, rewards for participants encompass not only LDO and Aura tokens, along with swap fees but also esRAM tokens. Raman also asserts a lack of liquidation risk, considering its over-collateralization strategy. For every 2 LST-backed stablecoins, users will mint 1 raUSD, regardless of the current price of the collateral stablecoin.
The first stablecoin for which Raman is launching a vault is "R" from Raft. Additionally, support for eUSD from Lybra is planned at launch.
For protocol management and revenue accumulation from the protocol, Raman plans to introduce its own token, PAM. Token holders will receive returns from the operations of the Raman Vault.
Additional Information
Raman's Twitter was launched in June 2023, and the protocol itself was introduced on June 26, making it the youngest among all the LSDFi projects reviewed. As of August 15, the Discord link is inactive, but the Twitter account has 702 followers.
Davos Protocol
Davos is another LST-backed CDP protocol that has the DUSD stablecoin, which was originally developed with a multichain design and is an omnichain token available in Arbitrum, Ethereum, Polygon, Arbitrum and BSC. Davos' architecture is based on MakerDAO, which sets it apart from most other protocols based on the Liquid codebase. Users can bet or farm DUSD to generate additional income from their initial assets. The protocol prioritises collateral types such as MATIC LSTs (Matic, stMatic), ETH LSTs (rETH, ankrETH, sfrxETH and wstETH), ankrBNB and ETH LST LPs, which can be used across different chains: the BSC, Ethereum, Arbitrum, Optimism and Polygon.
Davos incentivises borrowing by redistributing only 20% of the returns generated by the LST collateral, which is different from other protocols that receive 100% of the returns generated by the LST collateral and distribute a certain percentage to borrowers as interest.
In addition, Davos want to launch a veModel with their DGT/veDGT token to run LST Wars similar to Curve Wars. This is a mechanism to capture and redistribute revenue in the form of auto incentives and will fan the flames for LST protocols by making APYs, not bribes, the central competitive factor.
Additional Information
The project itself launched back in May 2022. On January 19th, 2023, Davos comited $500K in a Pre-seed round led by Polygon Ventures and others backers: DAO5, Symbolic Capital, Mapleblock, MH Vnetures, LD Capital, J10M Ventures и Orbs. As of 8 August, Twitter has 37.2k followers and Discord has 10.9k members, as of 13 August 37k and 10,7k respectively. GitHub is moderately active, updated regularly.
Conclusion:
It is also clear to see that the LSDFi-industry goes through an evolutionary path from LSD-protocols that appeared quite a long time ago to projects that improve the yield of LST-assets and offer new strategies of use, such as for example use in LPs and as collateral for protocols such as Maker. Then came LSDFi protocols allowing LSTs to be used in CDPs to issue other assets and omnichannel-enabled protocols allowing capital efficiencies to be realised in other networks. Among the early representatives of LSDFi were projects such as LSDx, Agility, ZeroLiquid, Acid0x and others, which can be regarded as experimental and therefore they may have design flaws that prevented them from competing with newer and more advanced projects such as Lybra, Gravita, Raft, UnshETH and others. In addition, infrastructure is being actively developed around LSDs to improve stability - DVT SSV and Obol to mitigate risks associated with validators; blockchains optimised specifically to implement LST liquidity across different chains and those optimised for LSDFi dApps - Tenet and Persistence.
Based on the whole research, the following conclusions can also be drawn:
The complexity of tokenomics and mechanics does not affect the popularity and profitability of the protocol, as it is very important to build and maintain a balance while most LSD tokens repeat the path of pharming tokens that fell under the pressure of sellers selling their rewards.
If an LSD project uses vampire mechanics to pull TVL (increased issuance coupled with deflationary mechanics), the token of such a project usually has a pronounced P&D due to popularity and large TVL in the beginning followed by a cascading drop in token price, TVL and interest in the protocol.
There is a tendency for the value of LSDFi-protocol tokens to change to a downward course after listing on large CEXs
The large number of different supported LSD assets in LSDFi-protocols does not guarantee greater stability or higher returns
As we mentioned earlier, LSDFi is still evolving, and it is likely that what we see now will undergo strong and non-obvious transformations due to new technologies, protocols and strategies, such as in the case of EigenLayer and Flashstake.
The community activity of LSDFi protocols in Discord is much higher than that of DeFi protocols and NFTfi, despite the fact that the size of the communities themselves is smaller.
LSDFi-protocol tokens are in the early stages of lifecycle development, and tend to have low mcap relative to Total Supply. This may carry some risks due to future pressure of unlockable tokens.
The obvious trend so far is that the most interesting, stable and attractive protocols in terms of TVL are those LSDFi-protocols that are initially launched as lending lend-outs and issuing their own stablecoins against the loan.
Protocols that have the use of LST as one of many products - have lower TVL just by LST. Most likely, this may be due to the fact that users are simply lost among the large number of available tools and therefore protocols that use LST assets natively have better dynamics.
The trend towards a possible repeat of the “Curve Wars” scenario in the LSDFi space is becoming increasingly clear. Only if in the case of Curve there was some similarity with monopolization, as Curve was the main player for whose tokens other protocols were competing.Protocols in the LSDFi space have started to vie for a dominant spot in users' minds and get established as the main go-to platform. At a minimum, we see UnshETH, on top of which the Convex analogue for Curve, gushyUSH, is already launching, and Lybra, which is actively pushing the Lybra Wars narrative. Also, the LST Wars narrative supports the Davos Protocol.