🧞 Future of LSTs with Lido

Are LSTs Still Relevant?

Sep 23, 2024

Gm and happy Monday frens🖖

First there were Liquid Staking Tokens. Now there are Liquid Restaking Tokens. Naturally, there is a question - do we still need LSTs?

Let's explore it today with Lido!

In today's newsletter:

🌏 Token2049 is over
☝️ Do we need LSTs?
📰 News

🇸🇬 Token2049 was a great success

Last week we had three events at Token, that's a record for us!

Thank you all for coming! We hope Token week was insightful for you with keynotes, panel discussions and networking!

See you soon at Devcon in November😉

Share this newsletter and earn rewards

Click below, share this newsletter with your friends and earn cool rewards!

Click to share

🤿 Deep-dive: Are LSTs Still Relevant? by Jakov Buratović, Lido Restaking & Infra Day, Brussels

The today's role of LSTs and why do we need them.

From Jakov Buratović , Master of DeFi @ Lido. Watch full presentation here.

LSTs are still relevant!

Liquid Staking Tokens are still highly relevant in today’s staking landscape, despite the hype around newer concepts like restaking and Liquid Restaking Tokens.

LSTs provide essential utility, making them as important as ever. While new narratives emerge, the fundamental benefits of LSTs continue to make them indispensable in the ecosystem, particularly for those who want staking to be more accessible, decentralized, and flexible.

Benefits of LSTs

LSTs offer a more approachable form of staking compared to traditional staking methods, which involve running a validator and managing it independently. The key benefits include:

Flexibility and accessibility: LSTs provide a receipt token that is fully transferable and permissionless, allowing users to move, stake, or use it in DeFi protocols without significant barriers. This flexibility is a stark contrast to traditional staking, where assets are locked and less versatile.
Infrastructure abstraction: LSTs abstract away the complex and technical infrastructure required for traditional staking, making it possible for non-technical users to participate without having to run their own nodes.
Lower entry barriers: traditional staking requires a minimum of 32 ETH, while LSTs lower this barrier significantly, making staking accessible even to those with minimal capital. This democratization helps more people participate in the network's security and decentralization.
Broad integration: LSTs are widely integrated into DeFi protocols and centralized exchanges, enhancing their utility beyond just earning staking rewards. Users can engage in other financial activities, such as lending or borrowing, without sacrificing staking benefits.

Challenges and innovations

The staking ecosystem has seen significant changes with the emergence of restaking, a concept where staked assets are reused to provide security for other services such as L2s, oracles, or data availability layers.

LRTs are introduced as risk management tools for restaking, similar to LSTs but with more complex risk parameters and considerations. LRTs involve multiple factors like the choice of collateral, operators, and the governance of these parameters, adding layers of risk that need careful management.

Importance of staking

The foundation of restaking is still traditional staking, without a solid staking layer, restaking cannot exist. The quality of the staking product directly impacts the effectiveness of restaking.

As most of the current value in restaking comes from the staking layer, ensuring that staking is robust and reliable is critical for the success of restaking.

Risks and the future

With many moving parts, from collateral choices to operator selection, the risk landscape is far more complex than traditional staking.

While LRTs present opportunities, they also introduce potential pitfalls, particularly in how returns are generated and the transparency of these mechanisms. It's important to do careful due diligence and understand the smart contract risks involved in restaking protocols.

Conclusion

Lido’s battle-tested infrastructure and its deep integrations into DeFi and institutional networks make it an optimal choice for staking, not necessarily for restaking.

Staking remains the core service that underpins the broader staking and restaking ecosystem, and that robust staking products will continue to play a critical role as the space evolves.