Interpretation of the working principle and V2 of Lybra Finance, the leader of LSDFi

LSD Ecological Background

With the successful upgrade of Ethereum Shanghai to transform the Ethereum network from POW to POS, users can pledge 32 ETH as a verification node, and users can withdraw pledged assets, followed by the continuous growth of LSD. Because the ETH pledge brings a reduction in asset liquidity to users, so LSDfi came into being. LSDfi refers to the DeFi protocol built on liquid pledged derivatives (LSD). By providing additional opportunities to generate yield, the LSDfi protocol allows LSD holders to put their assets to work and maximize yield. Benefiting from the adoption of liquid staking, the LSDfi protocol has seen a rapid increase in total value locked (TVL) over the past few months.

From the chart, we can see that the total pledged amount of ETH has reached 23,245,344 pieces, which is close to 20% of the total amount. The driving factors for the growth of LSDfi include the growth of mortgaged ETH and the current low penetration rate of LSDfi. The TVL in the LSDfi protocol currently accounts for less than 3% of the total addressable market.

LIDO is the leader of LSD, and its pledge volume has reached 31%. The TVL of LIDO has also been rising steadily, surpassing the highest point in May last year. At present, there are about 8M ETH pledged in the LIDO protocol.

So many ETH pledges in the agreement will inevitably reduce the liquidity of ETH, and at the same time, the user's income is relatively simple, so the purpose of LSDfi is to maximize the income of the user's pledge, which is equivalent to you depositing a sum of money in the bank, and then you With this passbook, you can mortgage it to a third-party lending company to continue lending assets, and then continue to deposit the borrowed assets in the bank, and then hold the passbook to mortgage the loan again, and so on, because they are all over-collateralized, so here will also There is a safety line beyond which the possibility of being liquidated increases.

**What is Lybra Finance? **

Lybra Finance As a DeFi protocol, Lybra facilitates the minting of eUSD, an ETH-backed stablecoin, by allowing users to borrow and borrow with their deposited ETH and stETH. A notable feature of the Lybra protocol is that users can earn regular and stable income by holding minted (borrowed) eUSD, while eUSD is powered by the LSD (Liquid Staking Derivatives) income generated by depositing ETH and stETH. In other words, when users deposit ETH or stETH and mint eUSD, they receive a stable income of about 5% of stETH, which is converted to eUSD by the protocol and distributed to them. eUSD is an interest-bearing, over-collateralized stablecoin that ensures security and stability.

How Lybra works

Step 1: Deposit ETH/stETH as collateral;

Step 2: Mint eUSD;

Step 3: You can earn interest by holding eUSD, and the APY is about 7.2%.

**What is the difference between Lybra and other LSD protocols? **

1. Most loans are over-collateralized. For example, using your assets to borrow may only lend 50 to 60% of the principal, but Lybra can lend 70 to 80% of the principal;

2. Lybra's pure pledge yield may be a little lower than other LSDs, but the eUSD minted by it is a stable currency, and holding eUSD can earn interest;

3.Lybra allows users to deposit ETH as collateral and mint eUSD without any borrowing fees or interest. Users can use minted eUSD to buy more ETH, efficiently leveraged to go long ETH at zero cost. This strategy can be beneficial in a bull market as it allows users to potentially increase returns while maintaining exposure to ETH.

The price trend of LBR has risen to 4.1 US dollars after a wave of gains and then returned to the current price of 1.4 US dollars. With the Cancun upgrade in the second half of the year and the upcoming launch of Lybra V2, we can pay attention to the trend of LBR.

**Where are the points worth paying attention to in Lybra V2? **

While Lybra V1 focused primarily on the use of Lido's stETH, Lybra V2 will expand to a whole range of other LSD/LST as collateral. This includes Rocket Pool's rETH, WBETH, wstETH, and more. V2 will see a large number of different options to make eUSD/OFT-peUSD work. For example, V2 provides options such as DEX, perps, and lending agreements.

Summarize

The upgrade of Cancun in the second half of the year is a relatively certain thing. LSD is expected to usher in a wave of growth, and the LSDfi field is also in its initial stage. You can pay more attention to related tracks.