In-depth Analysis of Restaking Sector Projects: Exploring Future Trends and Opportunities

2024.01.12

In-depth Analysis of Restaking Sector Projects: Exploring Future Trends and Opportunities

Currently, the TVL of LSDFi is relatively low at only $1.63 billion, indicating that it still has growth potential.

2024.01.12 - 05:13:51

Restaking

Navigating Web3 tides with focused insights

Currently, the TVL of LSDFi is relatively low at only $1.63 billion, indicating that it still has growth potential.

Author: Greythorn

Since the Shanghai upgrade, the Ethereum staking market has grown significantly, with the current ETH staking ratio reaching 24%. According to Nansen data, the amount of staked ETH has hit a high of 29 million, valued at approximately $65.67 billion. This upward trend is also reflected in the total value locked (TVL) of the liquid staking market, which, according to Defillama, has reached $31.43 billion, making it the leader in the DeFi sector.

Source: Nansen

In 2024, TVL in LSDFi protocols surged to $1.8 billion, with liquid staking accounting for about 40% of all Ethereum staking.

LSDFi (Liquid Staking Derivatives Finance) emerged in response to the growing popularity of liquid staking derivatives (LSD), aiming to maximize returns for LSD holders through additional yield opportunities. However, according to Dune Analytics, the current TVL of LSDFi remains relatively low at only $1.63 billion, indicating significant room for growth.

Next, Greythorn Asset Management will present three specific projects worth exploring.

Prisma Analysis

Project Name: Prisma Finance

Project Type: LSDFi

Token Name: PRISMA

Crypto Rank #: 1005

TVL: $414.39m

Market Cap: $16.48m

Fully Diluted Valuation: $326.85m

Prisma Finance is a DeFi platform focused on unlocking the potential of Ethereum’s liquid staking derivatives. Through Prisma, users can use liquid staking derivatives (LSDs) such as wstETH, rETH, cbETH, and sfrxETH as fully collateralized assets to mint a stablecoin (mkUSD).

Benefits of using Prisma Finance include:

● Support for multiple types of LSD as collateral: Currently, Prisma allows users to mint mkUSD using wstETH, rETH, cbETH, and sfrxETH.

● Multiple yields: In addition to the returns from LSDs themselves, users can earn higher yields by minting mkUSD. Depositing the stablecoin into the stability pool can yield up to 26.36% annual percentage rate (APR). Additionally, maintaining active mkUSD debt earns users weekly PRISMA token rewards.

● Value storage: Due to its fully collateralized nature, mkUSD is a relatively stable-value asset that also generates substantial additional income for users.

Competitors:

Tokenomics:

PRISMA is the governance token of the Prisma protocol, with a maximum total supply of 300 million. Users can earn PRISMA by performing the following actions:

● Depositing into the Stability Pool

● Minting new mkUSD

● Maintaining active mkUSD debt

● Staking Curve/Convex LP tokens

PRISMA can be locked to earn protocol fees (minting/redemption fees and borrowing interest fees) and boost yields, while also gaining voting weight used to decide PRISMA emission allocations and vote on key protocol decisions. The maximum lock-up period is 52 weeks.

Source: DeFi Llama

Investors Overview:

Restake Finance Analysis

Project Name: Restake Finance

Project Type: LSDFi

Token Name: RSTK

Crypto Rank: N/A

TVL: $4.7m

Market Cap: $36.7m

Fully Diluted Valuation: $192.5m

Project Overview

Restake Finance is a decentralized finance protocol that revolutionizes the staking landscape by providing modular liquid staking solutions for EigenLayer. This innovative approach enables users to harvest staking rewards from both Ethereum and EigenLayer without locking up assets or managing complex infrastructure. Governed by a decentralized autonomous organization (DAO), Restake Finance utilizes the RSTK token for governance and utility, focusing primarily on yield-generating strategies.

A key feature of Restake Finance is its ability to facilitate liquidity restaking of LSTs (such as stETH) within EigenLayer through its newly launched restaked Ether token (rstETH).

The process is straightforward: users deposit their LSTs into the protocol and receive rstETH in return. This rstETH represents a tokenized form of restaked Ether and effectively functions as a Liquid Restaking Token (LRT). Holding rstETH allows seamless accrual of Ethereum staking rewards (estimated between 3%-5%) along with additional rewards from upper layers on EigenLayer (estimated above 10%).

From a user perspective, LSDFi offers a unique opportunity to reinvest earnings, allowing them not only to continue accumulating native Ethereum interest but also to participate in other active validation systems. The capabilities offered by EigenLayer bring additional risk-adjusted returns—an extra benefit.

Tokenomics

1) $RSTK → Utility and governance token of the Restake Finance ecosystem

The maximum supply of RSTK is 100 million tokens.

The value of RSTK will reflect the success of EigenLayer and is directly tied to EigenLayer's revenue. As EigenLayer's yields increase and its modules expand and gain broader adoption, RSTK holders will benefit from greater revenue accumulation on the Restake Finance platform.

Regarding the fee structure, Restake Finance implements a fixed 10% fee on EigenLayer rewards generated on its platform. This fee is split into two parts: half, or 5% of total EigenLayer rewards, goes to stakers as an incentive for their participation. The other half, another 5% of total rewards, is allocated to the platform treasury. This distribution is crucial for covering operational costs, thus sustaining and promoting platform growth.

Use Cases

In version V1.0, users can:

Hold RSTK to participate in governance of Restake Finance;

Stake RSTK to earn a share of protocol income;

Stake RSTK to boost native EigenLayer yields;

Provide RSTK liquidity to gain additional yield boosts.

2) sRSTK → Tokenized form of staked RSTK

It can be obtained by staking RSTK tokens or through liquidity incentives. It maintains the same value and supply cap as RSTK, but differs in that it cannot be traded or transferred. However, sRSTK holders have rights to governance within the DAO and revenue sharing.

To ensure alignment with long-term goals, sRSTK comes with a mandatory 45-day unlocking period. This period strengthens holders’ commitment to protocol governance and shared revenue generation.

Distribution ($RSTK)

Competitors

Restake Finance leads in EigenLayer’s modular liquid staking space, particularly having no direct competitors in token-based competition. EigenLayer’s role in this domain allows us to assess the total addressable market (TAM). The focus here is on Layer 1 (L1) blockchains beyond Ethereum, especially through Active Validation Services (AVSs).

From Q1 2020 to Q4 2022, staking rewards across top Proof-of-Stake (PoS) networks outside Ethereum showed a remarkable 140% compound annual growth rate (CAGR). Despite major market downturns in 2022, the three-year CAGR remained impressive at 37%, highlighting the growth potential of this nascent field.

By the end of 2022, staking rewards on the top 25 PoS chains reached approximately $3 billion, projected to exceed $25 billion by 2030 assuming a 37% CAGR. If EigenLayer captures 10% of these rewards, it would face a potential market of $2.5 billion by 2030. The growth prospects for both existing and new PoS systems are strong, signaling a bright future for EigenLayer and Restake Finance in the dynamic blockchain and staking landscape.

Bullish Fundamentals:

● First-mover advantage: Restake Finance was the first protocol to launch modular liquid staking for EigenLayer. As a pioneer in modular liquid staking, especially in applying EigenLayer’s unique methodology, Restake Finance benefits from early entry into this niche market. This position allows them to build strong branding, attract early adopters, and set industry standards.

● Innovative technology: The supported restaking and modular staking solutions represent a significant advancement in the staking ecosystem. This innovation may attract users seeking greater flexibility and efficiency in their staking operations.

● Potential market size: The staking market, particularly beyond Ethereum, is growing rapidly. With generous staking rewards and increasing interest in Proof-of-Stake (PoS) networks, the total addressable market for services provided by EigenLayer and Restake Finance continues to expand.

● Strong revenue model: Restake has a model that potentially allows it to capture a percentage of staking rewards, providing a clear path to revenue generation—critical for long-term sustainability.

Bearish Fundamentals:

● Market volatility: The cryptocurrency market is known for its high volatility. Significant price fluctuations may impact staking rewards and overall interest in staking platforms.

● Regulatory risks: The regulatory environment for cryptocurrencies and blockchain technology is still evolving. Potential regulatory crackdowns or unfavorable policies could negatively affect platforms like EigenLayer and Restake Finance.

● Technical challenges: As pioneers in a complex technical field, EigenLayer and Restake Finance may face unforeseen technical hurdles.

● User adoption barriers: Convincing users to shift from traditional staking methods or other platforms to EigenLayer and Restake Finance may be challenging, especially if users are cautious about new technologies or platforms.

Libra Finance ($LBR) Research

Project Name: Lybra Finance

Project Type: LSDFi

Token Name: $LBR

Crypto Rank #: 781

TVL: $296m

Market Cap: $27.7m

Fully Diluted Valuation: $54.6m

Lybra, a decentralized platform, focuses on stabilizing the cryptocurrency market through liquid staking derivatives (LSD). It leverages Lido Finance’s Ethereum proof-of-stake and stETH. The platform offers a unique stablecoin, eUSD, backed by ETH assets, generating stable interest for holders. Users earn consistent returns in eUSD from the LSD income generated by their deposited ETH and stETH. When users deposit ETH or stETH and mint eUSD, they receive stETH yield, which is then converted into eUSD and distributed to them.

Lybra Finance opted for an Initial DEX Offering (IDO) instead of traditional venture capital fundraising, successfully raising $480,000 with an 11.89x return on investment (ROI).

Currently, users can enjoy an approximate annual percentage yield (APY) of 6.43%.

Lybra V2

In July/August 2023, Lybra Finance launched peUSD, the omnichain DeFi version of eUSD, enhancing its ecosystem. The V2 update allows a wider range of liquid staking tokens (LSTs), such as rETH and WBETH, to be used as collateral for eUSD and peUSD, increasing flexibility. A notable feature of V2 is the ability to convert eUSD into peUSD while retaining accrued interest, benefiting protocol stability and enabling flash loans.

This update enables esLBR token holders to participate in DAO governance and introduces new revenue streams—including service and repayment fees—that benefit esLBR holders, along with an innovative bounty program and a stabilization fund to maintain eUSD’s peg.

Tokenomics

LBR is an ERC-20 token with a maximum supply of 100 million, supporting staking, governance, and rewards for minting and liquidation.

LBR Price, as of January 9, 2024: $1.10

Circulating Supply: 24,949,715

Total Supply: 49,173,734

Maximum Supply: 100,000,000

Networks: Arbitrum (ARB), Ethereum (ETH)

Token Distribution:

Token Utilities:

● Governance via esLBR: esLBR holders actively shape the direction and development of the Lybra protocol.

● Yield enhancement: esLBR holders receive 100% of protocol revenues, boosting their earning potential.

● Ecosystem incentives: The Lybra ecosystem provides rewards and grants to encourage contributions from various participants.

● Resource management: Strategic handling of treasury and revenue ensures a sustainable and resilient ecosystem.

esLBR is the locked form of LBR, holding the same value and capped by the total LBR supply. It cannot be traded or transferred but grants voting rights and a share of protocol earnings. It is primarily earned through mining rewards:

esLBR holders can convert their tokens into LBR over a 90-day linear unlock period. Locking LBR or esLBR increases emissions of esLBR from the incentive pool by up to 1.5x.

Roadmap

● Expansion to L2s, targeting development and scaling of perpetual exchanges.

● Phase Two of Lybra War.

● New Lybra Grants.

● Expand LSTs accepted as collateral.

● Forge new partnerships.

● DAO – proposal-driven governance.

● Automated loan repayment functionality.

Competitors

According to current data, Lybra Finance (LBR) holds a significant position in the liquid staking total value locked (LSD TVL) market, capturing a market share of $294.81 million, or 18.087%. Additionally, the ecosystem holds a substantial amount of stETH deposits totaling $16,538,780.

Since launching its 2.0 update, Lybra has become a leading protocol in the LSDfi space, particularly in lending. Therefore, let’s compare various current protocols in this domain, including Lybra, Prisma, and Raft.

Stablecoin Usage

Bullish Fundamental Factors

● The LSDfi sector remains emerging and growing.

● Lybra stands out due to its cross-chain functionality, enabling access to a larger market.

● Lybra’s profit-sharing model helps align holder and user interests with the protocol’s success.

● Lybra appears more appealing to a broader audience, with its concept of simple interest-bearing stablecoin borrowing and lower leverage options being easier to understand.

Bearish Fundamental Factors

● Its bug bounty program is relatively small compared to its TVL size.

● The youthfulness of the sector also poses risks. If stronger competitors emerge offering better rates, more features, or enhanced security, Lybra Finance could lose market share.