LSDfi is a growing trend that's been happening in great over the last few months. With the introduction of liquid staking tokens it's paved a new way for many new things happening in DeFi. LSDfi seems to be that new trend that's picking up a lot of steam.
LSDfi is not some crazy acid you take. But it is a bit trippy in how it works. LSDfi stands for Liquid Staking Derivatives and uses what are know as LSTs Liquid Staking Tokens. We saw a big push of this when Ethereum with to a proof of stake system over a proof of work blockchain.
How Does It Work?
LSDfi uses tokenized staked assets (Like that of Ethereum or other stake based tokens) and makes them tradable through was is known as LSTs. These LSTs are locked up to still produce APR from staking rewards for that platform but in exchange the user gets a 1:1 pairing of a liquid staking token which can be traded or added into other defi type pools.
The big takeaway from this is that users still earn staking rewards while their assets can still be used in DeFi applications. No longer do you have to stake Etheruem on a single node, lock it up and not be able to do anything else with it.
Use Cases
A big use case for this is through p2e games and the gaming space. Gamefi does and will continue to play a major part in this. The primary reason is games can now have liquid pairs they wouldn't of had otherwise allowing for more on and off ramps for their assets.
By staking these tokens within the game it offers up gamefi or defi rewards along with their paired token. However the main asset owner of the staking token still gets to earn staking rewards on their token again providing a lot more liquidity then previously was allowed and has become a major issue across blockchains lately especially those that are proof of stake.
NFT
This can also be applied to NFTs and is starting to gain some traction as well. With real world assets represented as NFTs these NFTs can be staked and used as a liquid form of what they physically represent such as hard assets gold and silver.
It's really only a matter of time before these systems really take off. It's going to be important to know however the system that's offering up the NFTs need to really be backing these assets and you're going to have to do your own research and understand that there's high risk.
Get yourself familiar with this because I'm sure it's only going to keep growing in size. It may also start to centralize things in a way causing these proof of stake chains to perhaps develop and alter a new staking system. Time will tell but for now you have the ability to earn more APR on your staking tokens then ever before if you're up for taking on the added risk.
Posted Using InLeo Alpha
