Thread by @Chromff9

Liquid Staking Derivatives (#LSD), the narrative and,

in today's menu - @0xAcidDAO🧪

A Long Thread: 0/x🧵

An overview⏳

DeFi is all about staking, but have you heard of liquid staking?💧

It's a game-changing concept that often gets overlooked due to its simplicity but is nevertheless the hottest🔥 narrative right now.

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So, what is Liquid Staking?🤔

Essentially, LS involves staking your tokens with a protocol to receive a derivative of the staked token in return.

But here's the kicker🛴

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This derivative token is just as valuable as the original, yet it's liquid💧

That means you can use it however you want - trade it, farm yields, transfer it - without sacrificing the original token's staking rewards.

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Let's ''paint'' a picture with an example🖼️

Imagine you have token X, which is the native token of a particular blockchain (like $ETH).

If you stake token X with a liquid staking protocol, you'll receive token Y in return.

So far so good?

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Token Y is essentially a wrapped🎁 version of token X, but it's also liquid.

So you can use it for all sorts of strategies in DeFi landscape while token X keeps earning staking rewards.

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What about the so-called ''LSD narrative''?🤔

The Shanghai Upgrade is finally set to happen in early April. Yes, so...?

TL;DR;✍️

The Shanghai upgrade is the next major milestone in Ethereum's roadmap, allowing withdrawals from ETH Validators on the Beacon Chain.

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This will give stakers who staked their 32 ETH per validator the ability to gain liquidity after almost 2.5 years💰

However, not all ETH will be immediately withdrawable once the upgrade goes live, as validators have to go through two stages, including the exit queue.

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This will limit the number of maximum validators that can exit the set every epoch.

Currently, only ~15% of $ETH is staked. The $ETH staking ratio indicates that there is still a lot of room for growth.

dune.com/obol_labs/eth-…

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The Shanghai upgrade unlocks the ability for LSDs to become redeemable 1:1 with $ETH, mitigating peg risk.

With this kind of freedom to enter and exit staked positions, the competition between LSDs will certainly heat up!🔥

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If you are following the trend, you probably know @LidoFinance - @Rocket_Pool - @fraxfinance + many more great projects which we'll cover soon!🙏

This is the bullish case for @0xAcidDAO though that entered the stage recently and raised 4k $ETH in its fair launch.

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It is a protocol that maximizes returns on LSD assets and provides higher yields than typical LSD assets.💧🧪

It also aims to have a significant impact on Ethereum L1 and L2, holding LSD-related assets and continuously earning real yield income from Ethereum nodes.

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How it works?🤔

Users can stake and lock $ACID (the native token), to earn ETH node returns (esACID) and receive a stable cash flow using their assets.

At the time of writing, the returns range from:

10% to 30%.

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In addition to esACID returns, the ACID protocol is designed to manage multiple LSD assets efficiently and,

earn consistent ETH node rewards through their treasury diversifications.😎

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One of its unique features is its treasury strategy, which aims to achieve the highest return rate while ensuring asset security.

While being fairly simple, here is the current flywheel👇

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Users can earn esACID rewards by staking $ACID tokens, with the option to vest them (over 30 days), into ACID.

Staking and locking up ACID tokens can generate both esACID rewards and protocol ETH bonuses🌟

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Users can also lock🔒 $ACID to earn bonus incentives by locking up their tokens after staking.

💡Tip: Keep in mind that the bonus rewards decrease with each reward you claim. To preserve the locked bonus, you need to claim and relock the rewards.

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So, the longer you lock up $ACID, the higher bonus rewards, with a max bonus of 100% for esACID and wstETH.

💡Tip: the $ACID that is locked up for the purpose of unlocking esACID cannot be unstaked.

The locked-up ACID and the esACID will be unlocked in a linear manner.

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There is also a Controlled Liquidity Mechanism (PCL).

Essentially, it allows the treasury to receive the majority of swap incentives, leading to extra LP incentives!🤑

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But how the protocol generates income anon?🤔

By holding LSD assets, lending returns, DeFi returns, LP returns, and ETH appreciation returns.

Current treasury balance👇 debank.com/profile/0x5f41…

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Right now the diversification of the farming/staking strategies include the following projects/protocols:

@fraxfinance - @AuraFinance - @LidoFinance - @pendle_fi & @CamelotDEX

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Few things I am waiting for,🤗

1/ Fully structured DAO - holders will be able to vote on protocol upgrades, fee adjustments, and treasury management.

2/ Lending Mechanism - $ACID will be utilized as collateral, enabling users to borrow wstETH.

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3/ PSM (Peg Stability Module) - implement this mechanism based on the token's floor price, to facilitate asset exchange among users (similar to $DAI).

You can read more here - docs.0xacid.com

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Overall, 0xACID offers a solution for those looking to earn higher incentives on their LSD assets.

Its unique features, such as their treasury strategy, make it an attractive option for those looking for a more efficient and adaptable way to manage their $ETH assets.

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Shout out to the hard working teams of the protocols we mentioned!💚

Big thanks to: @ObolNetwork - @thedefiedge - Samuel Shadrach | HackMD - @crypthoem

Shout out to you ANON for reading this thread!🎀

Competition brings innovation, it's the only way forward!💪

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As the Ethereum network continues to grow and evolve, it's clear that liquid staking derivatives will play an increasingly important role in the DeFi landscape!

Move away from the ''dark'' side, haha!😂

#acidthreadchallenge #DeFi #LSD #ETH #Arbitrum #staking