Written by: Delphi Digital

Compiled by: TechFlow

LSD finance, or LSDfi, refers to DeFi protocols related to LSDs. This includes established DeFi protocols such as Aave, Balancer, and Curve, as well as newer and upcoming protocols that help enhance the utility of LSDs.

LSDfi can be categorized into five distinct use cases:

Interest Rate Swaps

Interest rate swap protocols like Flashstake and Pendle allow LSD holders to trade their yield. Additionally, they can earn incentive rewards by providing liquidity.

LSD-Secured CDP Stablecoins

Agility, Lybra, and Raft are all collateralized debt position (CDP) stablecoin protocols that allow users to mint stablecoins using LSDs as collateral. Notably, Lybra leverages LSD yield to create an interest-bearing stablecoin.

Diversified LSD Baskets

LSDx Finance, unshETH, Asymmetry Finance, and Index Coop offer diversified baskets of LSDs. Moreover, protocols such as LSDx and unshETH integrate swap functionality within these baskets, enabling users to earn additional swap fees as yield.

Money Markets

Aave and Silo Finance allow LSDs to be used as collateral for loans, unlocking liquidity and leverage for LSD holders. Notably, Aave has launched leveraged liquidity mining for stETH.

DEXs

Prior to the Shapella upgrade, Curve Finance and Balancer supported ETH/LSD stable pools, enabling low-slippage swaps. Additionally, Gyroscope Protocol recently launched its Elliptic Concentrated Liquidity Pools, which promise higher capital efficiency for stable pairs.

Overall, current LSDfi use cases primarily fall into the above five categories. While these use cases may appear diverse, they share a common goal: increasing returns for LSD holders.