Liquid staking and the threat of Ethereum centralization have dominated the conversation on Crypto Twitter over the last few weeks.
As we work towards creating a healthier liquid staking market, we were joined by members of the Swell Diving Club — some of our closest allies in the liquid staking ecosystem — to discuss this hot topic, along with the rise of LSDfi.
Dive into this blog for selected soundbites from the event, or tune into the recording to listen from start to finish.
What is your take on the centralization of the liquid staking market, and do you think that it is a threat to Ethereum?
“There is a threat of centralization within Ethereum at the governance layer, and liquid staking is the vector. At the moment there is a lot of talk at the social layer that is raising awareness to the masses about this issue. However, we need to move one step above social awareness and build products that will naturally drive diversity and differentiation.” – Daniel Dizon, Swell
“It’s incredible to see more LST protocols build themselves up in the liquid staking space and begin to work towards democratizing access to Ethereum security. This is positive because the longer we wait, the more concentrated into specific key players the market will get.” — Dan Anthony, Pendle Finance
“As we continue to build applications with staked ETH as the native asset, the tokens will begin to proliferate more and we will begin to see smaller protocols continue to take market share and become the dominant players in the market.” – Wagmi, unshETH
How is your protocol responding to the rise of LSDfi, and how is it shaping the direction of the LSDfi market?
“At Alchemix, we believe that staking is a way to underpin a new financial system. With protocols such as Swell, and liquidity engines such as Timeless and Tokemak, staking is becoming more accessible and functional for users. When you then have protocols such as Alchemix and Pendle building on top of that, you are adding new use cases and building full functionality that ultimately ties together to create a new financial system.” – OverKoalified, Alchemix
“At Pendle, we are building a liquidity curve for LSDfi by enabling speculation on the yield of ETH staking, and increasing the utility that users get with LSTs.” – Dan Anthony, Pendle Finance
“OlympusDAO is at the center of the shift towards LSDfi, which is reinventing DeFi with LSTs as a base layer and collateral asset for everything.” – John, OlympusDAO
Do you think staked ETH yield is risk free yet?
“Liquid staking protocols currently sit at varying levels of decentralization and risk, but being able to unlock your ETH now brings it closer to being a risk free rate.” - OverKoalified, Alchemix
“It is not risk free, but there is a risk premium associated with staked ETH. Right now we are seeing an increase in the number of users staking. When you stake your ETH and hold an LST that is earning yield, you are creating a layer of leverage, and there is more liquidity flowing into the system.” - Wagmi, unshETH
“The majority of participants in the space are not yet denominating in ETH. In the future we will see people move away from USDC, which will allow us to move towards a risk free rate.” John, OlympusDAO
How do you see the liquid staking market developing over the next year?
“We will see stable coins backed by LSTs, and there will be a shift where LSDfi will just be coined as DeFi.” – Archer, Tokemak
“There will be growth in DeFi protocols chasing the LST expansion, which is a great financial primitive to build on.” – Scoopy Trooples, Alchemix
“There will be development on the composability side of the market, with LSTs to be used as collateral in the future.” – Dakotah, Timeless
To hear more from the Swell Diving Club members that joined the Twitter Space, Follow them on Twitter:
Alchemix: @AlchemixFi
Pendle:@Pendle_fi
Tokemak: @Tokenreactor
Timeless: Timeless_fi
Yearn: @iearnfinance
unshETH: @unsheth_xyz
EVMavericks: @EVMavericks
Olympus DAO: @OlympusDAO
You can also stay up-to-date with Swell by following us on Twitter and joining the conversation in Discord.
