From 32 to 4 ETH: The Potential of Liquid Staking Derivatives Platforms and the Top Protocols to Watch Out For

Over $27 billion in Ethereum (ETH) will be unlocked with the upcoming Shanghai upgrade, which marks the first major upgrade to Ethereum after Proof-of-Stake (PoS) in March. This upgrade will release all the staked ETH currently locked, helping validate and secure the Ethereum network. These validators have been staking their ETH since 2020 with no rewards, until the Shanghai upgrade.

To be an ETH validator, one needs a whopping 32 ETH. In simple terms, liquid staking derivatives (LSD) platforms allow any amount of ETH to be staked, for a fee of course. With rewards finally being active, the incentive for everyday ETH holders to stake will skyrocket. The gold rush for LSD platforms is on, and the platform that can consistently provide the highest annual percentage rate (APR) will win.

Here are five LSD protocols that may have a chance to win the competition:

$PENDLE$: Their total value locked (TVL) is almost double their market cap, seeing massive inflows after their V2 release. Pendle tokenizes yield, creating unique principal token (PT) and yield token (YT) strategies. Pendle is now also live on Arbitrum thanks to CamelotDEX, and their strategic partnerships with others in the niche, like AuraFinance, give confidence in their team’s legitimacy and desire to provide a real, competitive product.

$SD$: ETHx will be released, which will reduce the requirements for an ETH node by a factor of eight (32 > 4). Importantly, they'll need 0.4 ETH in SD as well, which means there will be a supply squeeze and a great opportunity. SD is still 60% down from its public sale price, and with a solid market cap to TVL ratio, it would be natural to see a $5+ SD.

$HORD$: Part of Dcentralab, Hord is finalizing their audit with Zokyo on their hETH. Their claimed 'higher APR' is accrued through multiple avenues: ETH staking, MEV rewards, and additional HORD rewards. The price of hETH is not pegged to ETH due to extra rewards. It's an ambitious goal by the Hord team, but their spot in Dcentralab means they have more dev power than assumed by their market cap. HORD has already seen substantial growth, but its fully diluted valuation (FDV) remains below $20M with a circulating cap of 6M.

$FXS$: Their LSD variant frxETH boasts $170 million in TVL. The TVL of frxETH has grown 100-fold since November, mainly due to their impressive yield. In an LSD index, this is the safe bet.

$BNC$: They have a FDV of $7M, with 18,000 ETH staked and a TVL/MC ratio of 4x. An OG team from the Polkadot eco, Bifrost is rife for gains.

There are many other protocols that have potential but weren't included, such as $YFI$, $FIS$, and $RPL$, among many others that will be competing for market share. It's important to remember that anyone can put a tag of 'building an LSD protocol,' so one must be careful.

It's worth noting that $LDO$ completely dominates the LSD space right now, but with more competition coming, that is likely to change. The competition for the highest APR in the LSD market is on, and it's only a matter of time before we see who comes out on top.