LSDFi Market Analysis: Patterns, Data, Trends, and Outlook

After the initial pattern in the LSDFi track formed, we saw some unexpected developments. This article will provide a comprehensive review of LSD-related projects and offer some reflections.

Pattern

The LSD track has formed a preliminary pattern, which can be divided into the following levels:

L0:DVT service providers, such as SSV Network, Obol Labs, etc. L1: LST issuers, such as Lido, Ankr, Coinbase, etc. L2: DeFi products based on LST, such as stablecoins, yield aggregators, etc. L3: Advanced applications based on L2 products.

L0 layer

DVT technology can enhance the stability and security of validators. SSV Network, as the first project to issue tokens, has an advantage in brand recognition.

L1 layer

The main commission model is adopted, and user earnings come from ETH's POS income. Lido occupies 74.45% of the liquid staking share, combined with Rocket Pool, they account for 82.5%. LSTs issued by centralized exchanges account for over 12%.

L2 layer

Including fixed income products, stablecoins, yield aggregation, etc. The number of stablecoins is the largest, almost all of which support LST as collateral. There are fewer lending and leveraged projects, resulting in a temporary scarcity of yield aggregation and structured strategy projects.

L3 Layer

The main issue is the governance power struggle triggered by veToken, such as StakeDAO, Equilibria, etc. There are also tools that simplify operations and enhance yields, such as gUSHer. This level still has a lot of imaginative space.

Data and Trends

Staking Rate

After the upgrade in Shanghai, the staking rate has steadily increased, breaking 16% in June. It is expected that the staking rate will stabilize around 25% in the future, mainly considering:

1. The degree of decentralization of ETH is high
2. The practicality of ETH is strong
3. Good external scalability
4. Compliance Considerations

LSDFi will promote an increase in staking rates, but there are still huge investment opportunities at the L2 level.

Centralized vs Decentralized Staking

The share of decentralized staking platforms is less than 40%, while CEX accounts for about 20%. Although Lido holds a dominant position, there are also some projects in the market that offer a balanced allocation of LST.

Yield Rate

High yield and sustainability are two important factors of LSD. Stakers can increase their returns in the following ways:

1. Choose LST with more usage scenarios.
2. Increase capital efficiency through leverage
3. Participate in L2 products
4. Participate in IDOs or reward activities of new projects

Sustainable projects typically possess: real returns + application scenarios + good token economics.

LSD on L2

Arbitrum has the largest number of LSTs and also the most Layer 2 products. The low fees and fast transactions of Layer 2 make it an important battleground for LSD development.

User Level

Different users have different needs for staking, with key considerations including: security, yield, degree of decentralization, token economics, UI/UX, usability, etc.

Summary

Although LSDFi is difficult to benchmark against DeFi Summer, there is still room for development. Currently, it mainly targets Web3 experienced users, with limited access for external users. The real "Summer" may have to wait until the bull market arrives.

Future trends may include:

• The increase in cross-level products
• Expand to Layer 2
• Products designed for different assets

As an investor, one should prioritize building strategies with high security projects and be vigilant against fraudulent projects.