Binance Research (JieXuan Chua, CFA)
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LSDfi refers to DeFi protocols that are built on top of liquid staking derivatives (“LSDs”). By offering additional yield-generating opportunities, LSDfi protocols allow LSD holders to put their assets to work and maximize yield.
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LSDfi protocols have experienced a rapid increase in total value locked (“TVL”) over the past few months, benefiting from the adoption of liquid staking. Cumulative TVL in top LSDfi protocols has crossed the US$400M mark, having more than doubled since a month ago.
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Tailwinds for LSDfi growth include the growth of staked ETH, as well as the current low penetration of LSDfi. TVL in LSDfi protocols currently represents less than 3% of the total addressable market.
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While LSDfi presents attractive opportunities for LSD holders, users should be aware of the associated risks, which include but are not limited to slashing risks, LSD price risks, smart contract risks, and third-party risks.
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