Rapture #281: LSDfi is the new Narrative

With regulatory action taking the main headlines of the market, as the SEC filed cases against both CZ/Binance and Coinbase, many participants are missing the budding stages of a new narrative spurring adoption: LSDfi (liquid staking derivatives decentralized finance).

By far, the projects with the fastest growing TVL recently are the ones who who have figured out how to further financialize liquid staking derivatives so that their holders can generate additional yield. I personally have had exposure to one of these projects, Pendle, since the first couple weeks in January this year. Pendle's TVL is up 2.8x since I allocated and price has more than quintupled from my initial buys.

Yet an entire sector around LSDfi is emerging, consisting of new stablecoins backed by LSDs to locking up LSDs to attain further yield to new LSDs backed by a basket of the leading LSDs.

In this Rapture, I will go over the market leaders in each category.

Lybra Finance: fastest growing LSDfi project

Lybra Finance seemingly came out of nowhere (though suspiciously uses the same branding as Lido...) and quickly became the top LSDfi project by TVL. Even though the project officially launched on April 25th, already Lybra finance has attained a TVL of $186.2 million.

Lybra Finance essentially has created a system that allows users to collateralize stETH or ETH (which is converted into stETH) in exchange for a new stablecoin eUSD that currently earns around a 7.2% APY. The project effectively converts the yield earned from staking ETH via stETH into a stablecoin yield.

Owning a stablecoin that constantly accrues interest at a 7.2% APY is an extremely attractive value proposition, especially as more centralized stablecoins come under regulatory pressure form the US.

Unsheth: basket of LSDs

Unsheth is another project that recently launched (February 12th) and quickly garnered a substantial amount of TVL, which currently sits at just over $33 million. Unsheth enables users to deposit stETH, rETH, frexETH, cbETH, ETH, and/or WETH in order to receive unshETH. In addition to earning a staking yield, unshETH also earns swap fees generated from Unsheth's dex, which allows users to seamlessly swap between the leading liquid staking derivatives.

While I am not as interested in this project as some of the others from a trading point of view, the use case here is differentiated.

Adding additional layers to LSDfi

In addition to base LSDfi projects like Pendle, which I have discussed extensively before, there are new projects coming to market building on top of these exisiting primitives. Penpie, whose token is launching shortly, enables users to lock up their PENDLE to obtain governance rights and enhance yield benefits within the Pendle Finance ecosystem, similar to how Convex adds additional layers of tokenomics engineering to the Curve ecosystem.

Penpie will allow users to convert their PENDLE tokens into mPENDLE at a 1:1 ratio. All the PENDLE tokens given to Penpie will then be locked as vePEDLE on Pendle Finance, which enhances Pendle rewards and governance benefits for all converters.

Disclaimer:

The Content on this email is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained on this site constitutes a solicitation, recommendation, endorsement, or offer by Rapture Associates or Mattison Asher or any third party service provider to buy or sell any securities or other financial instruments in this or in in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.

All Content on this site is information of a general nature and does not address the circumstances of any particular individual or entity. Nothing in the Site constitutes professional and/or financial advice, nor does any information on the Site constitute a comprehensive or complete statement of the matters discussed or the law relating thereto. You alone assume the sole responsibility of evaluating the merits and risks associated with the use of any information or other Content on the Site before making any decisions based on such information or other Content. In exchange for using the Site, you agree not to hold Rapture Associates, Mattison Asher, and its affiliates or any third party service provider liable for any possible claim for damages arising from any decision you make based on information or other Content made available to you through the Site.