From LST, LSDFi to LRT, Exploring the Concept of Restaking and the Narrative of the LRT Project in 2024

Since Ethereum transitioned to POS, staking protocols like Lido issuing wETH (wrapped ETH) have brought risk-free yields to the Ethereum ecosystem, resulting in continuous growth in Ethereum staking. Currently, the total staked ETH exceeds 28.82 million, as shown in the graph below.

Currently, the liquidity staking landscape can be roughly divided into three main categories:

1. Liquid Staking Derivatives (LSD) and LST (Liquid Staking Tokens): Protocols (projects) providing liquidity staking services also offer derivative liquidity staking tokens (LST). Some well-known LS protocols and LST examples include stETH/wstETH from Lido, sfrxETH from Frax, and rETH from Rocket.

2.LSDFi: A combination of LSD and DeFi, an advanced strategy built on LSD staking. For example, by depositing stETH in the Pendle protocol, you can receive PT (principal tokens) and YT (yield tokens), allowing for different income and risk strategies.

1. Restaking and LRT: Due to concerns about the potential “centralization” trend and risks associated with the rapid development of liquidity staking protocols, the market has introduced two mainstream solutions to ensure blockchain network security and decentralization. One is based on DVT (Distributed Validator Technology), and the other is Re-staking. EigenLayer represents the concept of Re-staking, while LRT (Liquid Restaked Tokens) primarily focuses on releasing liquidity and adding a leverage layer to increase yield.

Currently, the TVL (Total Value Locked) of LS protocols has surged to approximately $3.14 billion, as shown in the graph below.

Taking ETH as an example, about 24% of ETH is currently staked directly through smart contracts, and this number appears to be growing, as illustrated below.

Some predictions suggest that by the second quarter of next year (2025), the amount of staked ETH could reach 31% to 45% of Ethereum’s total supply, further boosting the market value of LSD. However, over time, this may also impact staking yields, making the role that LS protocols can play in such a scenario crucial.

In today’s article, we will mainly focus on the concept of Restaking and provide a brief overview of which LRT projects are worth paying attention to shortly (projects are not ranked in any particular order).

The first project is EigenLayer (currently no token, possible airdrop)

In previous articles, we have introduced EigenLayer several times. Its “re-staking” model is considered an innovative concept by many. In June of last year, EigenLayer introduced the concept of “re-staking” on Ethereum, allowing users to re-stake already staked Ethereum or Liquidity Staking Tokens (LST) for additional security and additional rewards when using various decentralized services on Ethereum.

Currently, users can earn additional points (farm points) by staking ETH in their pools, which are likely being prepared for this year’s EigenLayer token airdrop.

EigenLayer’s airdrop was widely discussed last year, and many believe it could potentially ignite the airdrop season in the LSD (Liquidity Staking DeFi) space, further fueling the popularity of LRT (Liquidity Reward Tokens).

Many prominent figures in the space have high hopes for this trend. For example, Twitter influencer DefiIgnas has expressed his views: he believes LRT has the potential to significantly enhance ETH yield and that the sector is still in its early stages of development.

Following the concept of EigenLayer, there have been several LRT projects in the market, and even some older projects have joined the LRT ecosystem.

The second project is Swell (currently no token, possible airdrop)

Swell is a non-custodial liquidity staking protocol. Users can earn passive income by staking ETH and can also use the staked swETH on various DeFi platforms to earn additional rewards.

Since the end of last year until now, the protocol’s Total Value Locked (TVL) has seen significant growth, currently surpassing $330 million, as shown in the chart below.

This growth can be attributed, in large part, to the Super swETH product they launched at the end of last year. This vault allows users to deposit ETH or stETH and earn up to 18% in returns, as shown in the chart below.

This growth can be attributed, in large part, to the Super swETH product they launched at the end of last year. This vault allows users to deposit ETH or stETH and earn up to 18% in returns, as shown in the chart below.

In essence, the main innovation of the Super swETH product is that it not only provides staking rewards but also offers additional rewards through redirected DAO income and the cultivation of Pearls. Pearls can be understood as a special reward points program, and they can be further redeemed for SWELL tokens in a TGE (Token Generation Event), which is essentially a form of ICO. As of the time of writing this article, the vault has accumulated over 5,821 ETH, as shown in the chart below.

The SWELL token has not been officially released yet. Based on the current development, it is likely that there will be an airdrop after the Token Generation Event (TGE), and the Pearls earned through activities like staking can be directly exchanged for tokens at that time. According to official announcements, this is expected to happen in the first quarter of this year, as shown in the chart below.

The third project is Origin DeFi (OGV)

The addition of OETH to the EigenLayer ecosystem at the end of last year signifies that Origin has officially joined the Restake project series. Now, you can directly include OGV in the LRT narrative, as shown in the figure below.

However, in the LRT field, OGV’s current market capitalization is relatively low, at just under $6.5 million, as shown in the figure below.

In comparison to the continuous growth of OGV-staked tokens, the protocol’s current market value performance still appears to be on the lower side. It is expected that with the rise of the LRT narrative, its corresponding market value may also see further improvement, as shown in the figure below.

Additionally, there is a favorable factor for OGV’s price, which is the buyback program. They will execute the buyback plan according to a predefined schedule (i.e., every two weeks), as shown in the figure below.

The fourth project is the SSV Network (SSV)

SSV Network is an LSD project itself, but a few days ago (January 4th), they also announced their participation in restaking, as shown in the figure below.

Although this is a positive development for SSV, it seems that this positive impact has not been reflected in the token price promptly. The recent price increase has not been very significant, and it may take some more time for it to gain momentum, as shown in the figure below.

The fifth project is Restake Finance (RSTK)

RSTK is the first modular liquidity restaking protocol on EigenLayer. This project is quite targeted because they are currently focused on EigenLayer-related restaking businesses.

When users stake liquidity and generate LST tokens, they can deposit them into the Restake Finance protocol. The protocol will help users stake LST into EigenLayer and allow users to generate rstETH as restaking vouchers. Users can then use rstETH to earn rewards in various DeFi platforms while also receiving EigenLayer reward points (as mentioned earlier, these points may be in preparation for EigenLayer airdrops).

Of course, the RSTK token itself can also be used for staking, governance, and other purposes to increase earnings.

At first glance, this project may not seem very innovative, but because it is tied to EigenLayer, if EigenLayer’s expectations and the rise of the LRT concept continue, the RSTK token is likely to experience significant growth.

The sixth project is KelpDAO

KelpDAO’s business model is similar to Restake Finance, as mentioned earlier.

Users can deposit stETH or other LST tokens into the Kelp protocol in exchange for rsETH tokens. These rsETH tokens can then be used to generate more earnings. Users can also earn EigenLayer points through restaking.

Although KelpDAO currently does not have its token, it is supported by Stader Labs, which has its corresponding token (SD). Therefore, KelpDAO’s development to some extent depends on Stader, and if KelpDAO gains momentum with the LRT concept, it may in turn boost the value of the SD token. So, if KelpDAO eventually issues its token and conducts airdrops, SD token holders may benefit.

The seventh project is Puffer Finance (PUFI)

Puffer’s main feature is that it lowers the restaking threshold.

EigenLayer requires Ethereum restaking, which mandates a 32 ETH threshold for nodes to run Actively Validated Services (AVS), which are integrated security service agreements on EigenLayer. Puffer’s restaking function reduces this threshold to below 2 ETH, aiming to attract participation from smaller nodes.

Puffer’s staking is not yet officially launched, but based on today’s official announcement, it should be coming soon, as shown in the figure below.

PUFI tokens are primarily used for protocol management through voting in Puffer DAO, including approving which AVS nodes can be used and allocating Ethereum from the protocol treasury to specific AVS, as shown in the figure below.

The eighth project is Renzo (currently no token)

Renzo is also a restaking protocol based on EigenLayer. Users can stake ETH to receive restaking tokens called ezETH and earn staking rewards. Additionally, ezETH allows users to participate in other DeFi activities.

Specifically, users can earn three sources of income through this protocol: ETH staking yield, Renzo liquidity incentives, and EigenLayer restaking incentives.

Furthermore, the protocol recently introduced a points system called Renzo ezPoints, and currently, the primary way to earn points is by minting ezETH.

Apart from the mentioned projects, there are several other projects worth keeping an eye on if you are interested in the LRT space. These include:

Rio Network (currently 3,400 followers)

Rest Finance (currently 900 followers)

Inception (currently 2,100 followers)

Genesis (currently 1,200 followers)

Restaking Cloud (currently 600 followers)

Supermeta (currently 4,800 followers)

StakeStone (currently 34,000 followers)

Agilely (currently 16,000 followers)

Ion Protocol (currently 2,900 followers)

Sanctum (currently 2,500 followers)

Davos (currently 31,000 followers)

In summary, restaking offers the benefit of multiple income streams, but it also exposes the staked ETH assets to multiple networks, increasing investment risk. However, it is this higher potential for returns that motivates restakers to accept this risk.

In essence, restaking is like a nesting doll game, using an original asset to continuously nest and obtain multiple derivative certificates to increase earnings. Sometimes, the market itself is speculative, and as long as it aligns with a bull market trend (where the overall market is on the rise), this nesting doll strategy can greatly boost market liquidity, which, in turn, can further stimulate market activity.

Therefore, whether it’s a nesting doll strategy or risk, I believe the LRT narrative is likely to gain momentum with the anticipation of a bull market, and we are currently in the early stages of this narrative.

That’s all for today’s content. We will continue to bring you more related information in the future. Interested readers can continue to check and learn more through additional sources.

Note: The above content is provided from a personal perspective and for educational and informational purposes only. It should not be considered as investment advice. The cryptocurrency market is highly risky, and individuals should exercise caution, be aware of the risks involved, and comply with relevant laws and regulations in their respective countries and regions.

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