Exploring the Future of Liquid Staking: A Deep Dive into iLRTs and the 11 Leading LSTs

January 29, 2024

LST Breakdown_Cover.png

The concept of liquid staking has rapidly gained traction, offering flexibility and liquidity to staking assets in the DeFi ecosystem. InceptionLRT, a pioneering protocol in the restaking sector, has incorporated a diverse range of LSTs into its platform to offer an unprecedented range of solutions for its users.

TL;DR:

The integration of iLRTs by InceptionLRT enhances DeFi engagement and liquidity by issuing unique tokens for each restaked LST.
11 leading LSTs, including stETH, rETH, cbETH, among others, are analyzed, highlighting their unique features and contributions.
The inclusion of all 11 LSTs in InceptionLRT's mainnet has been introduced, signifying a milestone that could transform the landscape of liquid staking.

What are Isolated Liquid Restaking Tokens (iLRTs)?

For individuals already acquainted with the concept of LST (Liquid Staking Tokens), understanding the fundamental idea behind LRTs (Liquid Restaking Tokens) is straightforward. However, a significant distinction exists between the two: their underlying assets.

All LSTs are based on Ethereum (ETH), whereas LRTs can utilize a variety of different assets (the different LSTs). This diversity in potential underlying assets for LRTs adds complexity, especially considering the multitude of LST solutions onboarded on EigenLayer. Each LST is a unique token with its own set of mechanisms and specific risks, and this variety must be taken into account when developing LRT protocols.

As the LRT market evolves, we recognize three potential models for implementing LRTs:

Native LRTs: Users directly deposit their Proof of Stake (PoS) tokens and receive the corresponding native LRT.
Basket-based LRTs: Multiple LSTs are combined into a single LRT, effectively creating a 'basket' of assets.
Isolated LRTs (iLRTs): Each LST is paired with a corresponding, separate LRT.

After careful consideration of the advantages and challenges associated with each model, InceptionLRT has determined that Isolated LRTs (iLRTs) represent the most secure and sustainable approach for long-term viability. While recognizing the merits of Native and Basket-based LRTs, there are critical issues to consider, such as the management of native validators and the varying weights of different LSTs within a basket, which could pose future challenges.

By issuing unique tokens for each restaked LST, iLRTs maintain the distinct identity of underlying assets while providing enhanced liquidity. This separation mitigates risks associated with basket-based LRTs and allows seamless DeFi integration, enabling users to maximize their staking rewards and maintain active participation in the broader DeFi ecosystem.

Breakdown of the 11 LSTs Onboarded on EigenLayer

Considering that at InceptionLRT we have onboarded 11 out of the 12 LSTs framed within the EigenLayer framework, we’ve prepared a rundown of each of the protocols' main KPIs so users can invest more confidently.

Lido Finance LST - stETH

When discussing LSTs, it's imperative to acknowledge Lido Finance. As the leading liquid-staked token provider, Lido Finance boasts a Total Value Locked (TVL) of approximately $20.9 billion, a figure that has been steadily climbing over the past year.

Lido entered the market in late 2020 and notably maintained a positive growth trajectory despite significant industry challenges faced in the meantime.

stETH’s LRT counterpart on the InceptionLRT ecosystem will be instETH.

LST Breakdown_1.png Total Value Locked per Month on Lido Finance. Source

Rocket Pool LST - rETH

Launched in 2021, Rocket Pool caters to two main user groups: those who participate in tokenized staking with rETH and those who wish to stake ETH and operate nodes within the network.

While its TVL, at around $2.7 billion, is substantially lower than Lido Finance's, Rocket Pool stands as the second-largest LST provider. It has demonstrated remarkable resilience in the face of adverse market conditions observed over the past year.

rETH’s LRT counterpart on the InceptionLRT ecosystem will be inrETH.

LST Breakdown_2.png Total Value Locked per Month on Rocket Pool. Source

Binance LST - WBETH

Binance stands out as the main centralized exchange (CEX) on the market. WBETH (Wrapped Beacon ETH) is its own LST, introduced to enhance its ETH Staking service. WBETH allows users to participate in DeFi projects outside Binance while earning ETH Staking rewards.

Opposite to both previous options shown, the Binance liquid staking solution only started to gain more traction in September 2023. Currently, its TVL is at $1.76 billion, showing that despite its late boom, users do trust the company’s products.

WBETH’s LRT counterpart on the InceptionLRT ecosystem will be inWBETH.

LST Breakdown_3.png Total Value Locked per Month on Binance. Source

Mantle LST - mETH

Mantle Liquid Staking Protocol (LSP) offers mETH, a non-custodial ETH liquid staking protocol deployed on Ethereum L1 and governed by Mantle. It aims to provide the highest sustainable core yield through MEV and Treasury yield sharing.

At the time of writing, Mantle LSP recorded a TVL of $759.28 million, which is quite impressive since it was only launched in December 2023.

mETH’s LRT counterpart on the InceptionLRT ecosystem will be inmETH.

LST Breakdown_4.png Total Value Locked per Month on Mantle. Source

Frax Finance LST - sfrxETH

sfrxETH is part of the Frax Finance protocol, which includes frxETH and the Frax ETH Minter. It is designed as a liquid ETH staking token and stablecoin system. sfrxETH acts as an ERC-4626 vault that accumulates the staking yield of the Frax ETH validators.

Launched in late 2022, sfrxETH has recorded a positive user acquisition trend during 2023, recording around $696 million in TVL.

sfrxETH’s LRT counterpart on the InceptionLRT ecosystem will be insfrxETH.

LST Breakdown_5.png Total Value Locked per Month on Frax Finance. Source

Coinbase LST - cbETH

Coinbase ETH LST was one of the first LSTs to be integrated into the EigenLayer ecosystem. cbETH, or Coinbase Wrapped Staked ETH, is a utility token launched in June 2022.

Coinbase allows its user to wrap the staked ETH on the platform to cbETH, and then use it across all the supported DeFi and DEXs protocols.

Currently, cbETH shows a TVL of $452.84 million.

cbETH’s LRT counterpart on the InceptionLRT ecosystem will be incbETH.

LST Breakdown_6.png Total Value Locked per Month on Coinbase Wrapped Ethereum. Source

Swell Network LST - swETH

Swell Network LST is currently recording a total of $401 million in TVL. Swell's swETH is a reward-bearing token, which means its value increases to reflect the accumulated staking yield. This model avoids creating potentially taxable transactions associated with rebasing tokens.

The token TVL has recorded an impressive surge after EigenLayer’s integration announcement in December 2023.

swETH’s LRT’s counterpart on the InceptionLRT ecosystem will be inswETH.

LST Breakdown_7.png Total Value Locked per Month on Swell Network. Source

Stader Labs LST - ETHx

ETHx, developed by Stader Labs, is an LST designed to enhance the Ethereum staking experience. Its key features include offering rewards, scalability, security, and a multi-pool architecture to promote decentralization.

ETHx allows users to stake ETH across various node operators, providing both flexibility and scalability. Just as with the previous option from Swell, Stader Network LST has also seen a huge surge in demand upon EigenLayer’s integration announcement.

ETHx’ LRT counterpart on the InceptionLRT ecosystem will be inETHx.

LST Breakdown_8.png Total Value Locked per Month on Stader Ethereum. Source

StakeWise LST - osETH

osETH, StakeWise’s LST, enables the use of staked ETH in DeFi. It represents staked ETH in Vaults and earns ETH rewards from their validators.

This ERC-20 token provides slashing protection by having excess staked ETH to cover performance shortfalls and slashing losses, protecting osETH holders from node-specific risks.

osETH’s LRT counterpart on the InceptionLRT ecosystem will be inosETH.

LST Breakdown_9.png Total Value Locked per Month on StakeWise. Source

Origin Protocol LST - oETH

oETH is a yield aggregator offered by Origin Protocol, aiming to optimize ETH yield between LSTs and DeFi. It employs a strategy of diversifying ETH staking across various protocols, enhancing yield potential while limiting exposure to any single LST.

oETH’s LRT counterpart on the InceptionLRT ecosystem will be inoETH.

LST Breakdown_10.png Total Value Locked per Month on Origin Protocol. Source

Ankr LST - ankrETH

Ankr's liquid staking solution, initially introduced as aETHb/c and now known as ankrETH, was the first liquid staking Ethereum product in the market.

It allows users to stake Ethereum while accruing one of the highest APYs in the market. Currently, its LST TVL is over the $54 million mark.

ankrETH’s LRT counterpart on the InceptionLRT ecosystem will be inankrETH.

LST Breakdown_11.png Total Value Locked per Month on Ankr Protocol. Source

Looking Ahead

InceptionLRT's mainnet launch is filled with promise. The potential inclusion of all 11 LSTs not only diversifies staking options but also paves the way for a more robust and versatile staking ecosystem.

This expansion is anticipated to offer unparalleled flexibility, liquidity, and reward mechanisms to users, contributing significantly to the growth and maturity of the DeFi and staking landscapes.