7 Best LSDfi Protocols in 2024: Why and How to Use

10 min read
10-best-LSDfi-protocols

Discover the 7 best LSDfi protocols in 2024, why they are so hot, and learn how to leverage their features for optimal DeFi yields.

Liquid Staking Derivatives (LSDs) emerged as a major trend in 2024, particularly following Ethereum’s Shapella upgrade. Basically, LSD enables users to stake their cryptocurrencies, such as Ether or Solana tokens, and receive staking derivatives in return. In fact, LSD protocols as a category have surpassed decentralized exchanges (DEXs) and lending protocols in total value locked (TVL), to take the top position at around $26.6 billion.

LSDs represent the staked assets and can be traded, used in DeFi applications, or leveraged for additional yield, all while the original assets continue to earn staking rewards. The ecosystem of DeFi applications that support LSDs is called LSDfi.

As the LSD landscape continues to evolve, LSDfi protocols are emerging as a pivotal trend. This article delves into the top 7 LSDfi protocols that are set to hugely benefit from the blooming season of LSD. We’ll explore their features and insights on why they will be prominent LSDfi projects, and how to use them effectively.

Pink Brains

Top 10 LSDfi Protocols in 2024

  1. Pendle Finance
  2. Lybra Finance
  3. Asymetrix
  4. Maverick Protocol
  5. Eigen Layer
  6. Origin Protocol
  7. Prisma Finance

1. Pendle Finance

10-best-LSDfi-protocol-Pendle
Pendle Finance’s website.

Being the biggest yield protocol on Arbitrum with over $82 million TVL, Pendle, an innovative DeFi protocol on Ethereum and Arbitrum, offers a unique way to tokenize and trade yield. This opens up sophisticated yield strategies for DeFi users, like betting on rising yields, buying assets at a discount, securing fixed yields on yield-bearing tokens, and more.

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Unlock the full potential of your yield-bearing assets with Pendle’s innovative product suite. Source: Kyros Insights

Pendle splits yield-bearing tokens into two types: a principal token (PT) and a yield token (YT). The YT gives its holder the staking yield from ETH for a set period, like three months, while the PT allows redeeming the underlying ETH after this period without yield entitlement.

This approach enables traders to speculate on future yields of assets like ETH and allows long-term ETH bulls to buy PTs at a discount, gaining a fixed yield equal to the discount.

Overall, Pendle offers enhanced flexibility and control for yield farmers, traders, and long-term investors.

Recently, Pendle received 2 million ARB tokens from the Arbitrum Foundation to reward liquidity providers on this chain. Additionally, the “Pendle Wars” which is now in full swing, is also a catalyst for their supercharging growth in the mid-term of 2024. It’s a competition for influence in the Pendle ecosystem among different platforms, like Penpie, Equilibria, and StakeDAO, to accumulate PENDLE token and liquidity on Pendle. The goal of these projects is to accumulate vePENDLE by locking more PENDLE, which they can use to boost their yields on Pendle and pass them on to users.

Here is how to use Pendle

  • Visit Pendle’s website, which offers both simple and pro versions.
  • Connect your wallet, either on the Ethereum mainnet or Arbitrum One.
  • On Ethereum, buy discounted assets like ETH, USDT, or APE.
  • On Arbitrum, opt for discounted assets like GRAIL-ARB, PENDLE-ETH, ARB-ETH, GLP, DAI, and USDT.
  • Participate in liquidity pools to earn boosted APYs, reaching up to 90%.
  • Boost your APY by locking PENDLE for vePENDLE.

2. Lybra Finance

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Lybra’s website

Second on our list for the best LSDfi project is Lybra Finance.

Lybra allows users to deposit Lido Staked ETH (stETH) or other high-yield liquid staking tokens as collateral to borrow its stablecoin, eUSD, with no minting or borrowing fees. Holding eUSD earns yield from underlying LSDs, converted to eUSD for convenience.

But the opportunities with eUSD extend beyond mere holding. You can also participate in liquidity pools with eUSD or pursue leveraged long strategies in ETH by using eUSD to purchase more ETH. Furthermore, those who mint eUSD or peUSD are rewarded with esLBR, Lybra’s governance token. Holders of esLBR tokens can further boost their yields from the Mint pool, earn a share of the protocol’s revenue, and vote in the Lybra DAO to earn bribes from other protocols.

The flywheel of esLBR. Source: Lybra

Like Pendle, Lybra introduced esLBR and the Lybra DAO, setting the stage for what’s known as the “Lybra Wars“. In this competition, each Liquid Staking Token (LST) pool can encourage esLBR holders to vote for them by offering token rewards as incentives. The more voting power an esLBR holder commits to a pool, the greater the rewards they can receive. The Lybra Wars has just kicked off with Lido launching an incentives program to directly reward users who mint peUSD using wstETH.

How to use Lybra

  • Head to Lybra Finance dashboard.
  • Connect your wallet on Ethereum mainnet.
  • Deposit your stETH, WBETH, or rETH as collaterals.
  • Mint eUSD up to 150% of collateral and hold to get an APY ~16%.
  • Stake eUSD in eUSD/3CRV LP for 10% APR or convert it to peUSD and utilize them on other protocols to earn yields.
  • Stake LBR to get eLBR to join the “Lybra Wars” by voting and earning bribes.
  • You can redeem eUSD, repay eUSD, and withdraw ETH to exit your debt position.

3. Asymetrix

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Asymetrix’s website

Staking ETH seems too tedious to you? You can’t miss out on the third LSDfi project, Asymetrix, an adrenaline dose for your earning routine.

Asymetrix is shaking up the DeFi world by introducing a new incentivization scheme for stETH yields, inspired by the UK Premium Bonds. In the UK, over 22 million people buy Premium Bonds monthly. It’s a government-issued bond with 0% interest that offers a chance to win between $25 to $1M tax-free. This concept is a first in crypto, bringing a touch of traditional finance and gambling to the DeFi space.

Unlike typical DeFi strategies that often favor large investors, Asymetrix allows retail users to potentially earn higher returns without risking their principal amount. Users deposit stETH and potentially win big weekly rewards, determined randomly by Chainlink’s VRF. Your yield could range from 0% to the entire pool’s rewards, with deposits auto-rolled into the next draw. There’s no risk of losing your deposit, and all participants earn ASX tokens, offering a 39.65% APR.

The Asymetrix V2 has introduced several improvements, including esASX tokens to address early user concerns and a boost system to increase the chances of winning for users with lower odds. They’ve also created Mini Pools for smaller depositors, allowing them to pool their stETH together for better odds of winning. These pools distribute rewards proportionally based on each participant’s stETH share.

How Can You Try Out Asymetrix Protocol

  • Head to Asymetrix protocol.
  • Connect your wallet on Ethereum mainnet.
  • Deposit stETH.
  • Wait for the draw (currently once a week).
  • Earn 39.65% APR in ASX regardless of the draw’s outcome.
  • Provide ASX in ASX/ETH liquidity pool on Uniswap or Balancer to get LP tokens.
  • Lock LP tokens to get esASX tokens.
  • Use esASX to boost your winning chance in the draw.

4. Maverick Protocol

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Maverick Protocol is live on Ethereum and zkSync

This list wouldn’t be completed without an innovative decentralized exchange.

Meet Maverick Protocol, a unique DEX offering the Maverick AMM DEX, with a Dynamic Distribution AMM design. This design aims to optimize capital efficiency for users, liquidity providers (LPs), DAOs, treasuries, and developers. Operating on the zkSync and Ethereum networks, Maverick AMM’s main features include Swaps, Pools and Boosted Positions.

  • Swap: Users can trade tokens on Ethereum and zkSync networks to meet their needs.
  • Pools: Maverick AMM allows LPs to stake assets within a selected price range and manage liquidity movement with price fluctuations, earning transaction fees within their liquidity range.
  • Boosted Positions: Enable LPs to earn higher profits. Other LPs can add liquidity to these positions and share the profits. Additionally, these positions receive bonus tokens, attracting more liquidity to the project.

The Maverick Protocol naturally supports liquid staking tokens, ensuring liquidity remains close to the price throughout the LSD yield cycle. This makes Maverick Protocol an efficient LSDfi protocol amid the intense market competition, allowing LPs to provide effective liquidity and protocols to encourage desired liquidity distribution.

Maverick Protocol has successfully raised a total of $17 million in funding, with $8 million in February 2022 and $9 million in June 2023, backed by investors like Founders Fund, Jump Crypto, Binance Labs, Coinbase Ventures, and Pantera Capital.

How to use Maverick Protocol

Watch the video for step-by-step guide on how to provide liquidity on Maverick.

Responsive YouTube Embed

5. Eigen Layer

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The pioneer restaking protocol – EigenLayer

EigenLayer is an innovative Ethereum LSDfi protocol introducing Restaking, a new approach to enhance cryptoeconomic security. It allows the reuse of staked ETH on the consensus layer of Ethereum.

This protocol allows staked ETH to continue earning interest. ETH stakers participate by allowing EigenLayer’s smart contract to impose additional slashing conditions on their staked ETH. In return, stakers earn revenue from the services they choose to provide.

You can restake staked ETH or Ether LSDs to restake on EigenLayer for additional rewards. Currently, EigenLayer supports Rocket Pool Ether (rETH), Lido Staked Ether (stETH), and Beacon Chain Ether (ETH). It’s now in its testnet phase 2 on the Ethereum mainnet.

EigenLayer offers various ReStaking options, including native staking and restaking of assets through LSDs or LP tokens. Users can participate either by solo staking or using a trust model with a chosen operator.

The main advantage of EigenLayer is leveraging Ethereum’s security features without needing separate security systems. However, it also poses risks, as significant staking through EigenLayer, if compromised, could impact the Ethereum network.

How to test EigenLayer on Testnet

  • Access EigenLayer app.
  • Connect your wallet with Ethereum network.
  • Choose to restake rETH, cbETH, stETH or staked ETH on Beacon chain.
  • If you want to withdraw your assets, there will be a 7-day delay.

There are 2 ways to restake on EigenLayer:

  • Solo Staking: Restakers can choose to provide validation services for protocols or delegate operations to other operators while continuing as validators on the Ethereum network.
  • Trust Model: Restakers select a trusted operator to delegate authority. If the chosen operator fails to comply with the agreement, they face certain penalties.

6. Origin Protocol

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Stack ETH faster with Origin Protocol

Launched in late 2020, Origin Protocol helps simplify the process of earning yields on stablecoins by eliminating the complexities of lockups, compounding, and asset swapping. Expanding their offerings, they’ve introduced Origin Ether (OETH), their latest product focusing on ETH LSDs. As the staked ETH on Beacon chain and LSDfi waves are moving quickly, Origin Protocol stands as the fastest way to stack up your ETH.

Origin protocol is a yield aggregator that allows users to seamlessly have access to real yield leveraging OTokens with constant compounding and no lockups. There are two tokens available on Origin:

  • OUSD (Origin Dollar): OUSD is pegged 1:1 to USD and backed by USDT, DAI and USDC
  • OETH (Origin ETH): OETH is pegged 1:1 to ETH and other ETH LSDs like stETH, rETH, and sfrxETH.

Those are all yield-bearing assets, particularly OETH, that offer users an easy way to earn passive income. OETH holders benefit from many proven protocols such as Frax, Convex, Aura and Lido through consolidated yields, distributed via rebasing. OETH has shown significant growth, with a TVL of nearly $80 million, according to DeFiLlama.

Recently, OETH gained a spot in EigenLayer’s voting for the next LSD for restaking, marking a promising step for its future growth and value enhancement.

How to join Origin

  • Go to the OETH app.
  • Swap your ETH, stETH, rETH and sfrxETH for OETH.
  • Simply hold and enjoy roughly 5% APR on OETH.
  • If you want to redeem your original assets, click on Redeem tab and swap OETH back. The increased balance of tokens in your wallet will reflect yields that have been earned from the protocol.

7. Prisma Finance

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Prisma Finance.

Is it the endgame of liquid staking? Not yet without mentioning Prisma Finance, a newly launched but highly competitive rival to Lybra in terms of LSDfi lending protocol.

Similar to Lybra, Prisma Finance is a CDP protocol that lets users mint and borrow the stablecoin mkUSD using from LSTs as collateral. Currently, it supports four types of LSTs: wstETH (Lido), rETH (Rocket Pool), sfrxETH (Frax Finance), and cbETH (Coinbase).

When borrowing mkUSD on Prisma Finance, loans are secured by a Stability Pool containing mkUSD contributed by other borrowers. This pool acts as a primary safeguard, ensuring the solvency of liquidated loans and maintaining full collateralization of the mkUSD supply. Users can stake mkUSD on Curve Finance and Convex Finance to earn transaction fees, CRV, and CVX from these platforms, or stake in the Stability Pool to earn PRISMA emissions.

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Prisma Finance adopts a veToken model similar to Curve Finance, with two tokens: PRISMA and vePRISMA. Here’s how they work:

  • PRISMA is used as an incentive reward (emissions) for activities like minting mkUSD and depositing it into the Stability Pool.
  • Staking PRISMA to mint vePRISMA (lockable for a minimum of one week and up to 52 weeks), granting governance rights over protocol decisions such as:
    • Boosting PRISMA emissions for minting mkUSD and Stability Pool deposits.
    • Voting in DAO to modify parameters for collateral types and the Stability Pool.
    • Earning a share of protocol fees.
    • Voting to decide which collateral types will receive PRISMA token emissions.

How to make use of Prisma Finance:

  • Head to Prisma
  • Connect your wallet on Ethereum mainnet
  • Choose to deposit wstETH, rETH, cbETH, or sfrxETH as collateral to mint mkUSD
  • Stake mkUSD in Stability Pool to earn ~16% APR in PRISMA
  • Lock up PRISMA to boost your earnings in Stability Pool and other pools on Curve and Convex up to 200%

Conclusions

As we wrap up our exploration of the top 7 LSDfi protocols of 2024, it’s clear that these platforms are carving out new paths in the DeFi world. They’re not just about numbers and transactions; they’re about innovation, offering dynamic ways to farm yields, and lending and borrowing strategies that keep pace with the ever-evolving DeFi landscape.

For those who are passionate about DeFi, learn how to utilize those protocols to maximize earnings from your idle assets; they’re gateways to exciting possibilities. As we move forward, staying informed and flexible will be crucial in making the most of what LSDfi has to offer. Let’s keep our eyes on these developments – the journey is just as thrilling as the destination.

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