PENDLE is an LSD that has pumped by over 2000% since the start of the year, and it’s not showing any signs of slowing down. 

So the question now is: Could LSDs (Liquid Staking Derivatives) be the secret sauce that will drive the next bull season? 

In this post, I’ll explain what LSDs are, how they work, and why they could be the next big thing in crypto.

Brief Explanation of LSDs

LSDs, short for Liquid Staking Derivatives, are tokens that represent staked ETH and rewards earned by ETH holders that participate in Ethereum’s PoS consensus mechanism.

You stake your tokens, earn rewards on them, and still use them while they are still staked to earn more rewards. 

To understand how this works, let’s start with Traditional Ethereum Staking.

You would need at least 32 ETH to stake directly on the Ethereum network.

Not everyone has access to such a large sum of ETH or the have the required expertise to do that. 

That’s where liquid staking protocols come in.

They lower the entry requirements for staking ETH, allowing anyone to participate with any amount of ETH, regardless of their technical know-how.

Not only that; you also receive ERC-20-compliant liquidity tokens that represent your staked Ether.

In simple terms, this token is a receipt to show that you staked ETH. If you want your ETH back, you have to submit this token receipt. 

Now here’s where it gets interesting.

These tokens can be utilized in a variety of DeFi applications.

For example, you can use them as collateral to borrow funds, participate in yield farming strategies, or even provide liquidity on decentralized exchanges.

That way, you can earn additional interest on top of your staking rewards.

In other words, you’re multiplying your gains. It’s a win-win situation for Ethereum holders.

Read more: Ethereum LSDs Explained – Is That The Next Big Thing in Crypto?

How LSDs Work

Let’s look at Lido Finance to better understand how LSDs work.

Lido Finance was the first DeFi protocol to create the first and biggest LSD called stETH.

When users stake any amount of ETH on the platform, they receive the stETH in exchange at a rate of 1:1. 

Then they can trade stETH on various decentralized exchanges like Uniswap and SushiSwap.

Also, it has a native utility token, LDO, which is used for governance.

And because of how LSD is gaining momentum, LDO is up over 230% since the beginning of 2023.

Another impressive protocol that was even the inspiration behind this post is Pendle which has done over 2000% this year

But before I talk about Pendle, there is an ongoing Bybit 30days trading challenge.

For 30 days, trade signals will be posted daily, and live lessons on how to trade will be held 3 times a week.

To join, create a Bybit account and join our community on Telegram. 

Now, back to Pendle Finance. Read about it in the next section.

Pendle Finance

Pendle Finance is a yield trading protocol that enables users to buy LSD tokens at a discount rate.

You also earn up to 27% APY for holding these LSD tokens.

Pendle is not for staking ETH like Lido rather, it is in the Yield category.

It ranks #4 under the Yield TVL Rankings with a TVL of $153.16m and it is already available in 4 chains – Ethereum, BSC, Arbitrum, and Avalanche.

Additionally, Pendle separates the yield from the principal asset to enable the users to leverage the yield for more gains. 

It has a governance token – PENDLE, which doubles the APY holders receive from their staked assets.

It also allows the holder to make decisions on what happens on the platform.

Now, here’s the sweet part:

PENDLE has done an incredible 4000% since launch and this year alone, it has done 2000%.

This parabolic climb is also a result of its listing on big exchanges link Bybit, Gate.io, Kucoin, and Binance. 

Pendle is not the only LSD protocol with record-breaking figures.

Others are Lybra, unshETH, Frax, Rocket Pool, and others. You can see the list on Defillama. 

LSDs are growing much faster than Defi this year.

So opportunities seem to be looming there.

As of press time, the TVL for LSDs is sitting at a whopping 10.61m ETH or $19.8 billion.

When compared to the growth of DeFi in 2020/21, LSDs are moving 10x faster.

The surprising thing is that this is happening during the bear market, what will it do in the bull market?

Conclusion 

Here are my thoughts:

Many crypto whales are diving into LSDs because it is a great way to play it safe and earn more.

LSDs are scaling very fast which looks promising for potential investment.

Especially since LSDs are not widely utilized yet.

Although I am not sure what will drive the next bull market but it will surely contribute.

But then, the information I have given so far is not to be seen as financial advice.

I have no affiliation with any of the LSD platforms I have mentioned thus far.

Always do your own research.  

That said, see you in my next post. Do help to give this post a share using the social media links below.