Davos Protocol — Pioneering in LRTFi
In decentralized finance (DeFi), staying still is not an option — adaptation and innovation are key. Davos Protocol has always aimed to be more than just a participant in this ecosystem, our goal is to be at its forefront, riding the wave of innovation and bringing the latest and most effective DeFi solutions to our users. Now, we’re excited to announce a new milestone in this journey: the launch of Liquid Restaking Tokens Finance (LRTFi).
TL;DR:
- Davos Protocol will start offering LRTFi services.
- Liquid restaking tokens are a new vertical stemming from the restaking primitive, introduced by EigenLayer.
- Davos users will be able to use LRTs as collateral on the Davos Platform to borrow DUSD while maintaining all the rewards associated with the restake.
How Davos looks at the Liquid Restaking Narrative
Davos Protocol was born during one of the most volatile periods in DeFi’s history. Since our very first day, our focus has been on creating a platform that is not just technologically advanced but also thoroughly reliable, thus every aspect of our platform was subject to rigorous testing, ensuring that we earn and maintain the trust of our stakeholders.
Our latest endeavor, LRTFi, represents a natural progression in our commitment to enhance the DeFi experience. Liquid Restaking Tokens (LRTs) are a burgeoning sector in the industry, and we couldn’t miss the opportunity to further enhance our offerings, and provide our users with another layer of opportunities for them to leverage.
By enabling the restaking of ETH and ETH LSTs (Liquid Staking Tokens), EigenLayer broadens the horizons for Ethereum stakers, allowing them to provide security to a new set of protocols, and thereby, being rewarded accordingly. Just as the restaking narrative is gaining traction, the liquid restaking opportunities are surging, unlocking yet another layer of composability for users’ assets, with protocols such as InceptionLRT, Rio Network, Restake Fi, Renzo Protocol, GenesisLRT, Kelp DAO, YieldNest, Swell Network and Puffer Finance building solutions.
With the rise of LRTs, LRTFi is transforming from a concept into a tangible reality, where users can leverage their holdings, to unlock more layers of yield. By becoming the first protocol to build a sustainable solution for this class of tokens we reaffirm our ethos — to provide practical, robust, and user-centric solutions in the world of DeFi.
Unpacking LRTFi: A New Era in DeFi
EigenLayer, a middleware built on the Ethereum network, enables protocols to leverage Ethereum’s secure trust network without establishing their own validator set, which is identified as one of the largest sector permissionless innovation limitations.
At its core, restaking allows staked ETH to be used on other protocols, in exchange for protocol fees and rewards. This rehypothecation (stake the same token twice) of staked ETH means that users can stake their ETH to secure Ethereum and simultaneously stake it elsewhere, without the need to unstake.
This dual utility not only benefits protocols by enhancing the security of the Ethereum blockchain but also provides users with additional avenues to earn rewards.
Breaking down the EigenLayer framework, users pledge their tokens (restake) to operators that afterward power the Actively Validated Services (AVSs). In their turn, AVSs will be validators of off-chain transactions, therefore eliminating the requirement for protocols to build their own validator network. At the moment, AVSs are still under development, with the only solution available being EigenDA, EigenLayer AVS, which is on testnet.
Stage 3 testnet, is expected to launch mid-2024 and will encompass the onboarding of more AVSs.
Circling back to the overall EigenLayer framework, a primary limitation of native restaking on EigenLayer is that it locks users’ funds. To address this, several protocols are developing Liquid Restaking Tokens (LRTs) solutions. These LRT solutions aim to unlock new LRTFi strategies by providing liquidity to restaked assets. LRTFi, therefore, stands to open up new investment and growth opportunities in the DeFi space by enabling more fluid and efficient asset utilization.
Davos Protocol: Pioneering LRTFi
To onboard this new sector into the Davos Protocol platform, users will have the opportunity to use their LRT tokens as collateral to borrow DUSD, the platform’s decentralized stablecoin.
By doing so, users will have the flexibility to leverage their tokens while maintaining ownership of their rewards and the underlying assets. The key to this system is the users’ ability to retain the full benefits of their LRTs, with the only requirement being the repayment of the borrowed DUSD amount.
The utility of DUSD within this framework extends beyond mere borrowing. Users have the option to engage in staking strategies directly on the Davos platform, which already encompasses a quite attractive annual percentage yield (APY) and has room to become even more appealing by expanding to other networks through LRTs; or for those seeking higher returns — and we would like to highlight, that the higher the APR, the higher the inherent risk — Davos offers yield farming strategies, where the rewards may reach double digits in yield, depending on the specific farming pool chosen.
On top of this, as a stablecoin, DUSD can be used on several other protocols and allow users to continue their DeFi endeavors all while their LRTs are generating yield.
Furthermore, with the impending release of DGT, Davos Protocol users will start earning a piece of the platform’s revenue, by earning part of the added incentives from DGT emissions from borrowing DUSD. This will enable users to benefit from the Davos triple-layered yield structure: the yield on collateral (whether it is LSTs or LRTs), incentives from DGT emissions, and the yield from the DeFi activities undergone with DUSD.
This flexibility and range of options underscore Davos Protocol’s commitment to providing robust, user-centric solutions in DeFi, as we expect it to foster our position as a leading platform in the industry, by being on top of the latest trends.
Ready to take the plunge into the future of finance? Test the Davos Platform today and be a part of the LRTFi revolution!
