LSD Ecological Pattern Analysis and Development Trend Outlook

With the completion of the Ethereum Shanghai upgrade, the liquidity staking derivative (LSD) ecosystem has initially formed a pattern. This article will sort out the current situation of the LSD ecosystem and make predictions about future development trends.

Ecological Pattern

The LSD ecosystem can be roughly divided into the following levels:

L0: Including SSV Network, Obol Labs and other DVT technology service providers, offering validators more stable and secure signature services.

L1: The main LST issuers are Lido, Ankr, Coinbase, etc. Currently, Lido accounts for 74.45% of the liquid staking share, combined with Rocket Pool, it accounts for about 82.5%. The proportion of LST issued by centralized exchanges exceeds 12%.

L2: Fixed income products, stablecoins, yield aggregators and other LSDFi projects based on LST design. Among them, the number of stablecoins based on LST is the largest, while lending and leveraged projects are relatively few.

L3: Products built on L2, such as StakeDAO, Equilibria and other governance rights contention projects caused by veToken, as well as tools for automatic reinvestment and optimization.

Development Trends

1. The staking rate is steadily rising and is expected to stabilize around 25%. Factors such as the decentralization level, usability, and external scalability of ETH limit the excessive rise of the staking rate.

2. The share of decentralized staking platforms will continue to rise, but the leading position is hard to shake. New entrants need to seek breakthroughs in decentralization, security, and low barriers to entry.

3. LSD projects on Layer 2 will welcome development opportunities. Currently, the number of LSTs on Arbitrum is the highest, but there is still significant room for growth overall.

4. The yield rate will gradually return to rationality, but it will still be a key focus for users. The combination of real returns + application scenarios + sound token economics may become the standard for quality projects.

5. The user base will gradually expand from experienced Web3 users. Different users have varying preferences for factors such as security, yield, and degree of decentralization, so projects need to design products accordingly.

6. Cross-layer products may become a future trend, Layer 2 remains a key focus for project layout.

Overall, while the LSD ecosystem may find it difficult to replicate the grandeur of DeFi Summer, there is still considerable room for growth. As the bull market cycle approaches, the LSD ecosystem is expected to usher in a new round of growth. For investors, it is crucial to choose strategies that align with their risk preferences from the diverse range of products.