Passive Income Strategies and Joining Pre-Listed Projects in Bull Markets

In previous articles, we have already sorted out some ways to make money in this field, but many methods not only require capital investment but also significant time and effort. So, in this high-risk area, is there a way to earn passive income without investing too much time and effort, without doing too much data analysis and research, and without taking on too much risk?

Indeed, there is, such as what we are discussing today: liquidity staking and liquid re-staking.

1. What is Liquidity Staking?

In traditional staking models, users can only pledge their assets to a certain platform (pool) and then earn a certain annual yield, which is essentially a kind of deposit investment. However, with this approach, once users’ tokens are staked, these tokens usually become illiquid (for the stakers themselves), meaning the stakers cannot directly access or sell these tokens (unless you unstake).

Currently, during the bull market, the annual yields on some CEX platforms are also quite high. For example, let’s take OKX as an instance, where the annual yield for USDC can reach around 38%, as shown in the following image.

Some DEX platforms exhibit even more exaggerated yields, with stablecoin annual returns exceeding 1000%, as shown in the figure below. Of course, the risks involved are also relatively high, especially on platforms with smaller pools.

Liquidity staking is a development on this traditional staking model, allowing token holders to extract staking certificates (which are also a form of token) from their staked assets, and use them for new stakes or other various investment activities. In this way, stakers not only earn a certain annual return by providing liquidity (LS), but the certificates obtained from token staking (LST, or Liquidity Staking Tokens) are also liquid.

The main advantages of liquidity staking include:

Enhancing capital efficiency. Users can earn annual returns while also gaining LST tokens with new liquidity, opening up more opportunities for profit.

Increasing flexibility. Users can directly exit the market by selling LST tokens, without waiting for the unlocking of the underlying staked tokens.

The main risks of liquidity staking include:

Protocol risks. For example, the staking protocol (platform) you participate in may abscond or be attacked by hackers.

Price differential issues. Since the market itself is volatile, the value of LST tokens may sometimes diverge significantly from the prices of the corresponding collateralized assets.

Overall, the emergence of liquidity staking has greatly promoted the development and innovation of DeFi. Currently, the Total Value Locked (TVL) in liquidity staking has exceeded $57 billion and continues to grow rapidly, as shown in the figure below.

2. What is Re-staking Liquidity?

Having understood the above concept of liquidity staking, re-staking becomes quite straightforward. Simply put, you can re-stake the staking certificates (LST) obtained from your base asset, investing them again to gain new returns. This might sound a bit like a Russian nesting doll pattern, where one asset, through staking and re-staking, can yield multiple returns.

For example, you could stake your ETH and earn an annual return plus eETH (a type of LST token), and then continue to stake eETH to gain new annual returns and other rewards (which may vary by protocol), as shown in the figure below.

Currently, the TVL in liquidity re-staking has exceeded $12 billion and continues to grow rapidly, as shown in the figure below.

3. Liquidity Staking/Restaking Protocols

Currently, in the cryptocurrency field, there are numerous protocols providing liquidity staking and restaking, such as the well-known Lido (where you stake 1 ETH and receive 1 stETH) and EigenLayer (where you can stake stETH).

Next, let’s briefly list some relevant protocols (projects) to further facilitate learning and understanding.

The first project is Lido

Lido is a Liquid Staking Derivatives (LSD) protocol, currently supporting staking on Ethereum and Polygon. For instance, when users stake ETH, they receive stETH at a 1:1 ratio (they can also exchange stETH back to ETH), and while enjoying a 3.2% APR, users can also use stETH to pursue additional earnings opportunities on other platforms.

As of the time of writing this article, the total ETH staked on the Ethereum beacon chain (ETH2.0) has reached 31,955,654 ETH, accounting for 26.64% of the total supply. Lido holds the largest market share, accounting for 31.1%. See the following diagram.

The second project is Pendle

Pendle is a Liquid Staking Derivatives Finance (LSDFI) protocol and a permissionless yield trading protocol. It enables the tokenization and trading of future yields through an innovative AMM, allowing users to execute various yield management strategies. Pendle might be relatively complex for new users, who may need to spend some time researching. As the official website has detailed documentation, we will not elaborate further here. See the following diagram.

Simply put, Pendle can be understood as a market for interest rate swaps. For example, by depositing 1 stETH, you can mint 1 PT-stETH and 1 YT-stETH, where 1 PT-stETH can redeem 1 stETH, and 1 YT-stETH allows you to earn all the yields from the 1 ETH (stETH) staked in Lido. If you are an investor seeking stable, low-risk investments, you could buy PT to earn a fixed return. If you are a rate trader and believe an asset might appreciate, consider buying YT.

Currently, Pendle supports numerous assets for yield strategies. They also have a Points section, enabling “one fish, many eats” strategies with multiple project earnings, such as using Pendle to earn tenfold EigenLayer points, aiming for greater EigenLayer airdrop opportunities.

The third project is EigenLayer

EigenLayer is a Restaking protocol (also known as an LSTFI protocol) and pioneered the restaking concept.

If you find Pendle complex, you might consider continuing with EigenLayer, where you can restake your stETH obtained from Lido to receive eLST (a derivative token representing your stETH plus rewards from EigenLayer), and then use eLST to engage in other DeFi operations such as lending and swapping for more earnings opportunities.

According to blockchain data, as of today (April 2), EigenLayer’s total TVL has exceeded 18 billion USD, with the top three assets in its vault being WETH (52.81%), STETH (26.27%), and SWETH (5.6%). See the following diagram.

Additionally, EigenLayer is currently a popular project for airdrops. A while ago (January 28), there was an article specifically discussing strategies to double-dip and earn EigenLayer airdrop points using protocols like KelpDAO, Renzo, and Etherfi, which interested parties can refer to in the corresponding historical article.

Of course, these are just three representative projects mentioned. In the fields of LSD, LSDFi, and LSTFI, there are actually hundreds of projects you can choose from, as shown in the diagram below.

Which projects to participate in depends on your choice, but my advice remains the same: prioritize safety when participating in liquidity staking/restaking, rather than just aiming for high yields, and prefer well-known protocols or those with larger pools.

Recently, I also saw news that last month (March 18), Fidelity Investments made significant revisions to its Ethereum ETF application. This revision redefines how investors interact with cryptocurrencies through Fidelity, namely, investors can potentially earn income based on ETH staking rewards. In short, Fidelity is moving into ETH staking.

If Ethereum ETH gets formally approved this year, with major institutions getting involved, then the staking track will likely see significant changes.

4. Participating in Initial Offerings of New/Unlisted Projects

Originally, I planned to conclude the article here, but during a break while reading the comments, I noticed a question about “initial offerings” which seems quite relevant to today’s topic as participating in such activities can essentially also generate passive income. Thus, I decided to add some content here.

Participating in Initial Offerings:

Simply put, “initial offerings” involve using platforms like IDOs, IEOs (as previously explained in other articles) to “low-price grab” tokens of new projects at the earliest opportunity. Once these tokens are officially listed on the exchange’s spot list, they are likely to continue to appreciate, thereby providing a chance for profit.

Here, we’ll use the most common example of Binance Launchpad, which currently has two main methods: Launchpad and Launchpool.

The primary difference between the two methods is that Launchpool is about new coin mining, which means “mining coins with coins,” where you stake BNB or FDUSD, and after the mining period ends, you can reclaim your staked tokens and receive new coin rewards. Launchpad, on the other hand, is about subscribing to new coins, which means “buying coins with coins,” where you use BNB to have a chance to purchase newly launched tokens at a low price.

The last project on Binance Launchpad was ARKM, where the subscription price for 1 ARKM token was $0.05. When this token was officially listed and started trading on the spot market, the price on the first day rose to a high of $0.89 (currently, the spot price of ARKM is $2.6).

The last project on Binance Launchpool was ETHFI, which lasted for 4 days. Depositing 1 BNB approximately garnered 1 ETHFI token (the deposited BNB was returned in full). Once the token was officially listed (typically at 16:00 on the day the mining period ends), it started trading on the spot market, and the price on the first day rose to a high of $5.32 (currently, the spot price of ETHFI is $5.5). Thus, with 1 BNB and 4 days of time, you could earn at least a passive income of $5.

Therefore, if you already hold BNB, directly participating in these two methods is basically 100% likely to generate passive income. However, if you plan to buy BNB to participate, you would also need to consider the volatility of BNB (although FDUSD is a stablecoin, it also has certain volatility).

Participating in Unlisted New Projects:

A few days ago, a friend asked me a rather interesting question. He mentioned that he had joined a blogger’s group, where the blogger claimed he could secure the initial token allocation of LayerZero and Eigenlayer, a prime project launch opportunity. However, this required transferring money to the blogger in advance. Once the project officially issued the tokens, the blogger would then acquire the initial shares from the project and transfer them to him.

This claim even made me chuckle a bit—the audacity! It’s as if LayerZero and Eigenlayer were owned by this blogger, which is obviously not the case. Anybody with a bit of sense would realize that such renowned projects wouldn’t reserve their initial token shares for a blogger.

As for how this blogger operates, I’m not sure, but my guess is that he might also be engaging in these projects’ airdrop interactions. If he eventually receives airdropped tokens, he could simply hand them over and claim they were initial shares provided by the project. If he doesn’t receive any tokens or if the token value is high by then, he could always just refund the money (unless he decides to disappear with it).

Since the above isn’t reliable, what are the more trustworthy methods to purchase “tokens” from a project before they are officially issued or listed?

There are indeed methods! Let me introduce a currently popular platform: Whales Market.

Whales Market is a popular decentralized over-the-counter exchange (OTC DEX) that supports three main market types: Pre-Market, OTC Market, and Points Market.

Pre-Market allows the purchase of token allocations before the Token Generation Event (TGE), which is essentially buying tokens of projects that are yet to be officially listed. This method is certainly safer, as Whales Market utilizes smart contracts to facilitate these transactions, ensuring on-chain trades agreed upon by both buyers and sellers, thus preventing fraudulent activities. Here’s how it works: users with airdrop shares can place sell orders by staking USDC, and buyers can also stake USDC to take orders. Once the airdropped tokens are officially distributed, the seller’s collateral ensures they deliver the tokens to the buyer. If the seller fails to complete the transaction by the deadline, their collateral is forfeited to the buyer as compensation.

OTC Market is easier to understand. Previously, many conducted private trades through messaging apps. Now, you can trade through this market, and the process is also based on smart contracts, significantly reducing financial losses due to fraudulent activities.

Points Market is even more intriguing, as it allows trading of project points and future airdrop quotas. For instance, if you participated in the EigenLayer project and earned some points, but can’t wait for the project to issue tokens and you urgently need money, you could consider selling your points on this market, as demonstrated in the following diagram.

For example, as we can see in the image above, the current floor price for EigenLayer points is $0.24. If you believe that the airdrop tokens you receive based on your points will exceed this price once EigenLayer officially launches its token, then you might consider stocking up on these points in advance. Conversely, if you think the airdrop tokens you’ll receive in the future will be worth less than this price, or if you can’t wait for the project’s airdrop and want to cash out sooner, then you might consider selling your points directly on this platform.

Detailed instructions on how to use the platform can be found on the official website, which I will not elaborate on here. Interested parties can explore this information on their own as shown in the image below.

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