LSDfi has been all the rage lately, with protocols and users scrambling to incorporate LSDs into their strategies. While there are plenty of liquid staking providers, Lido has done a terrific job of cornering the market, with their stETH now the Kleenex of the LSD market. Thanks to their first-mover advantage and the simplicity they brought to staking.
But this fascination with a single LSD resulted in an existential threat to the entire Ethereum network.
The Current State of Liquid Staking on Ethereum
Lido currently oversees the vast majority of staked ETH, which runs counterintuitive to the concept of stakers; while staking is meant to decentralize network functions as a safeguard against attackers, Lido’s dominance of the LSD market opens Ethereum up to vulnerabilities. Given the market dominance, holders of LDO, the Lido governance, have unprecedented and unparalleled control over the functioning of the Ethereum network.
The market is now at a point where it seems unlikely that Lido will lose its seat as the king of LSD. New players join the market each day, offering high yields to attract users away from stETH but often are unable to gain a meaningful foothold relative to the giant.
Much of this stems from a lack of liquidity; with a lack of liquidity, users can’t take on LSDs with size, protocols are less likely to integrate them, and as a result, they fail to capture much of the value stETH offers.
This is disadvantageous from just about every perspective; teams dedicated to keeping Ethereum decentralized are unable to compete meaningfully, so Lido is able to continue expanding its market share, and users aren’t able to fully take advantage of competitive yields offered by other LSD providers.
Driving Liquidity to Various LSDs
Thankfully there’s a protocol that has the ability to deepen liquidity for LSD providers while enabling users to lever up the yields from those LSD providers, helping to contribute to the decentralization of the Ethereum network while providing users with uncanny yields.
You guessed it; it’s Sturdy!
No, we didn’t have to pivot the protocol to try to join LSDfi; these mechanics have been baked into the Sturdy protocol since its inception.
Sturdy enables users to lever up their LP yields up to 10x while providing lenders with a cut of yield farming profits. DeFi’s best yield farmers have been levering up their stablecoin LPs for ages on Sturdy, but many are transitioning to LSD LPs.
Leveraging LSD LPs on Sturdy enables users to take in yields that dwarf those offered directly by LSD providers. Most importantly, since users are leveraging LP tokens made up of ETH(or WETH) and an LSD, the liquidation risk is relatively low (especially post-shapella), so low in fact that there has yet to be a single liquidation on Sturdy’s ETH market.
Sturdy is perfectly positioned to help users take advantage of LSDfi while also helping to mitigate centralization risk of ETH staking.
Like on most protocols, stETH was the first LSD LP to be featured on Sturdy’s ETH market and its integration helped to demonstrate the proof-of-concept, but with other LSD providers offering competitive yields and with so much talk of decentralization, it only makes sense to onboard more LSD LPs.
What Sets Sturdy Apart
Under the hood, when borrowers lever up their LSD LPs on sturdy, they are recursievely depositing the LP and borrowing ETH against it to be swapped for more LP tokens. These recursive borrows deepen the liquidity of the underlying LP with each loop, meaning even individual users can contribute significantly more liquidity.
Due to Sturdy’s experience with leveraging LP tokens, one of the major hurdles facing most LSD providers can be overcome just by being integrated into Sturdy’s ETH market and letting degens deepen the liquidity on their way to >50% yields.
How to Help Keep Ethereum Decentralized with Sturdy
Submit a proposal to integrate an LSD LP with a credible, decentralized LSD!
Sturdy is a decentralized protocol, relying upon governance to make key decisions, such as which assets to accept as collateral.
Most recently, governance approved the onboarding of rETH/WETH from balancer featuring rETH from Rocketpool, the most decentralized liquid staking provider. But there are plenty of other decentralized LSD providers offering competitive yields.
Head over to the Sturdy governance forums to browse current discussions and proposals, and consider adding to the discussions with any LSD LPs you believe could be a good fit to help keep Ethereum decentralized while snagging some nice yields.
