Unleashing the Power of LSTs
Overview of Liquid Staking Tokens (LSTs)
Liquid Staking Tokens (LSTs) offer a solution to the liquidity problem associated with staked ETH, allowing holders to earn staking rewards while maintaining liquidity to participate in DeFi activities. LSTs come in two types:
Market Dominance
The LST market is currently dominated by three key players:
- Lido: Holds 28.68% of the market, with stETH representing 9,526,205 staked ETH. Lido was the first protocol to offer LST and has become the largest DeFi protocol with a Total Value Locked (TVL) of $34.10 billion. Liquid staking has emerged as the largest DeFi category with $53.3 billion TVL. It has 36 node validators with active keys managing 8,000 validators on average (as of May 10, 2024)
- Coinbase: Accounts for 13.0% of the market.
- Rocket Pool: Holds a 2.3% market share.
Governance Models
LSTs can be categorised by their governance structures:
The percentage of total ETH supply that is staked has increased to 27.6%. This marks significant growth from previous years, reflecting growing confidence and participation in Ethereum staking.
Chi Protocol’s Approach
The Chi Protocol aims to tap into this potential with USC, a stablecoin backed by both rebase and non-rebase non-custodial LSTs, offering scalable and enhanced yield opportunities. We are also expecting that Chi Protocol will accept Liquid Restaking Tokens (LRTs) as collateral in the future.
Emphasis on stETH
Chi Protocol excels in utilising stETH through several mechanisms:
Conclusion
Liquid Staking Tokens (LSTs) have revolutionised the staking landscape by providing liquidity while earning staking rewards. As the market grows, with significant players like Lido, Coinbase, and Rocket Pool leading the way, the potential for further innovation is immense. Chi Protocol should stand out with its strategic use of stETH, offering scalable yield opportunities and some robust stability mechanisms, positioning itself potentially as a key player in the future of DeFi.
For more details on the growth of LSTs and the potential of LRTs, check out Chandan’s analysis and this comprehensive study.
We believe that by delving into the domain of LSTs, the audience can better understand the novel approaches transforming the DeFi landscape. Thus, with these emphases, Chi is positioning itself as a significant means of creating a more robust and scalable DeFi ecosystem.
