LSDFi War is heating up, detailing 5 strategies to generate excess returns.

LSDFi is a DeFi product based on LSD, which allows staked ETH to be converted into tradable assets, unlocking liquidity. LSD lowers the staking threshold for ETH, allowing any amount to be staked, and after staking, users can receive LSD while also benefiting from multiple sources of income generated by LSD.

LSDFi is built on DeFi Legos, and the composability of DeFi is backed by yield Legos. New entrants attract users to stake ETH/LSD on their platforms by acquiring third-party tokens or leveraging their own tokens as incentives, thereby gaining market share and control over LSD. Some LSDFi projects utilize variable incentive multipliers or dynamic yields to encourage users to stake on smaller decentralized staking platforms to obtain LSD, aiming for a more decentralized validator network.

The following are the five forms of LSDFi:

1. LP( yields 10% + )

Before the Shanghai upgrade, LSD could not be directly exchanged for ETH, and many DeFi projects established LSD-ETH liquidity pools. Taking stETH as an example, the basic yield does not exceed 5%, and the APY is mainly increased through token subsidies. Stakers not only receive ETH staking network rewards but also LP fee rewards. As the base of LSD increases, the LP scale may actually grow rather than shrink after the Shanghai upgrade.

2. Circular lending ( yield 10% + )

Leverage betting on the activation of Ethereum's post-merge mainnet through AAVE and LIDO's STETH:

• Stake ETH in LIDO to receive STETH
• Deposit STETH into AAVE and borrow ETH
• Repeat the above operation

The liquidation risk is relatively high, and the APR depends on the number of cycles. In theory, all lending agreements can be implemented, and automated revolving lending products may emerge in the future.

3. Yield(10%+)

Yearn Finance created a liquidity pool in Curve, raising the LSD APY to 5.89%, with the option to directly stake stETH. The current value of the pool is 16.4 million dollars. There are many similar old projects that increase yields by aggregating revenues from multiple platforms and providing subsidies.

The involvement of established DeFi players like Yearn in the LSD industry reflects the importance of the LSD sector.

4. EigenLayer(收益未知)

EigenLayer offers various staking methods, including liquid staking similar to Lido and ultra-liquid staking. Ultra-liquid staking allows LPs to stake:

• LSD Staking: Assets that are already staked in Lido or Rocket Pool are restaked to EigenLayer.
• LSD LP Staking: For example, re-staking the Curve's stETH-ETH LP Token into EigenLayer

5. Incentive LSDFi projects

Improve capital efficiency through leverage, structured strategies, options, bond derivatives, etc., or attract savings or achieve other goals by utilizing extremely high APY.

Pendle: A DeFi yield protocol that allows users to execute various yield management strategies. It offers staking services and liquidity pools for ETH, APE, LOOKs, etc. Users can buy $1,600 worth of $1,800 ETH, and the 10% price difference is the yield. ( needs to be locked for 466 days ), while also earning yield through adding liquidity.

The current yield from its liquidity pool is established on Lido or Aura, and after locking for a certain period, it gains Pendle subsidies. The current yield is considerable, with a discount price of ( and a locking period of about one year at ) around 12.5%. The annualized yield in the Pool is approximately 95.7%. Note that the high APY mainly comes from PENDLE token subsidies.

Ion Protocol: The project is not yet launched. The principle is to tokenize LSD tokens and collateralized assets into allETH and vaETH. allETH is an ERC-20 token, 1 ETH = 1 allETH. vaETH tracks all earnings generated from the allETH position.

The project will leverage EigenLayer and others for LSD yield aggregation, and currently no further information has been disclosed. It is in the early stages.

unshETH: A protocol that enhances the decentralization of validators through incentivized dynamic allocation. It offers higher rewards for LSDs with lower market shares, while providing less rewards for LSDs staked on leading platforms like Lido and Coinbase, encouraging users to stake ETH on smaller platforms to promote decentralization.

Currently, unshETH only supports sfrxETH, rETH, wstETH, and cbETH, and the goal of decentralization is still far off. Direct staking requires a lock-in period, and LSD/ETH staked on the platform is exchanged for unshETH, which can yield approximately 500% returns. The tokens can be further staked to earn about 70% returns. The LP Pool depth is about $580,000, with 60% of the LP fee income. Staking on the platform can earn 666%+ APY incentives.

LSDx Finance: The goal is to become a DEX with high barriers like Curve in the LSD asset segmentation market, capturing a share of the LSD asset liquidity market. Adopting a GLP architecture similar to GMX, a unified liquidity pool ETHx will be built, and a stablecoin UM is planned to be launched.

48-hour lockup of 55,000 ETH, 8,000 new followers in 2 days, tokens listed on Bitget and MEXC, backed by Foresight Ventures. Currently, the number of supported LSDs is limited, and not all functions have been fully developed. Note that after the 16th, there will be a 14-day Genesis Mining phase, with the first reward halving occurring after 4 days.

Liquid Staking Derivatives: An LSD aggregator that solves liquidity issues and maximizes asset leverage by tokenizing the deposited assets and issuing derivative tokens. Users stake ETH or LSD to earn token rewards, and the reward token LSD can be used for veLSD governance decisions or LS-ETH liquidity DEFI risk investments. Community members who voluntarily lock LSD will receive a multiplier on their staked ETH rewards.

Directly staking ETH to obtain LS-ETH can earn a 6.3% APR. Currently in a very early stage. The LSD liquidity pool is built on Uniswap V2, valued at approximately $400,000.

Stader Ethereum: The ETH product is not yet live. Previously, liquidity staking was done on other chains, and ETHx is about to be released. When users deposit ETH, the Stader Pools Manager will mint ETHx as a reward and deposit ETH into three different pools (, each pool corresponding to a validation node, with different technologies: individual 4 ETH operation, DVT technical support, and cooperative operator ). ETHx is expected to collaborate with 30+ DeFi protocols to unleash composability.

Each validator running a node must deposit 4 ETH and SD tokens worth 0.4 ETH as collateral (, with a maximum staking of 8 ETH in SD ). To incentivize node operators, Stader will distribute SD tokens worth approximately 1-2 million USD to validators in the first year. Nodes can also earn a 5% commission from rewards from other users.

Hord: Stake ETH to earn LSD hETH. Rewards accumulate in the staking pool, increasing the value of hETH over time. The project achieves a higher APR through various means:

• ETH Staking
• MEV rewards
• HORD Subsidy

Current APY 17.9%, Staked amount 223.22 ETH, Number of stakers 57.

Parallax Finance: provides liquidity infrastructure, enabling individuals, DAOs, and other protocols to generate yields on L2(, which is currently only available on Arbitrum ). It is currently in the testing phase, and usage requires obtaining Tester qualifications. Its product Supernova not only offers staking rewards to users but also provides leverage and lending services for staked assets. ( has not issued tokens yet, and testing qualifications can be applied for ).

bestLSD: The test network is about to start, possibly a Real Yield aggregator, using the aggregated Real Yield to subsidize its own LSD--bestETH. From GMX to GLP, from veCRV to veVELO, all assets that can generate strong actual returns are within the team's consideration.

0xAcid DAO: A management protocol for maximizing LSD asset returns, soon launching on Arbitrum and Ethereum. The main strategy will allocate most assets to stable nodes, with a portion placed in high-yield strategies such as Frax and Aura LP Pool with token subsidies. Today, it was announced that they will collaborate with Pendle for yield leveraging, and will provide lending, LP, and other services.

EigenLayer: In addition to the aforementioned functions, there are also some potential DeFi Lego possibilities:

• After staking LSD, can the LP or LSD of LSDs continue to be staked with ETH/LSD to form an LP?
• Re-staking leveraged yield
• Automatic Leverage Re-staking Strategy

Index Coop: A decentralized cryptocurrency index community initiated by Set Protocol. Mainly issues two LSDFi related products:

• dsETH(Diversified Staked ETH Index): Composed of rETH, wrapped stETH, and sETH2, it reduces the risk associated with a single token and stabilizes overall returns. The system automatically adjusts the proportion of different assets to maintain an ideal balance and optimize returns.
• icETH: Leveraged Liquidity Staking Strategy Product, mainly leverages AAVE v2 to provide higher ETH yields.

Currently, there are only 485 dsETH, with a fee of 0.25% and an APY of 4.59%. The supply of icETH is about 10,000 ETH, with a fee of 0.75% and an APY of 5.26%, supporting only stETH.

Gitcoin: In cooperation with Index Coop, launching the Gitcoin Staked ETH Index(gtcETH). gtcETH returns come from the earnings of users' staked ETH/LSD/USDC in various strategy pools, with Gitcoin and Index Coop taking 2% from it, of which 1.75% from Gitcoin is used for public goods donations. Currently, the supply is 113.85 ETH.

Summary:

Incentivized LSDFi projects are competing for LSD discourse power, directly affecting the number of future cooperation projects and the construction of DeFi Lego. In the end, there may be only a few players left, and Lido's dominant position may be threatened.

The stability of strategy is a contradiction in the LSDFi project; high returns may affect sustainability, but 100%+ APY is not uncommon in the short term.

From the perspective of returns, staking with Liquidity Staking Providers outside the Top 3 like frxETH( can yield a 10% return. Then, look for projects that promote decentralized verification) like unshETH and LSDx( to mine for high APY and sell in a timely manner. Proper use of lending protocols can increase APY to 1000%+), but the risks are extremely high(.

The impact of LSDFi on validators is still small, and LP+ token subsidies are mainstream. The LSD War may actually increase the level of decentralization of validators in the later stages.

The cooperation space between LSDFi projects is large, and in the future, with composability, it may form products with risk-return levels ranging from 4% to 500%+.

The LSD War has started and may continue until the Ethereum staking rate stabilizes at 25% or higher. Because