Are LST Still Relevant? - TOKEN2049 Singapore 2024

all right hello everybody I'm very happy to be here and um today we'll try to answer one simple question are lsts still relevant yes they are thank you very much any questions this is very short answer I'll go more in depth of course but they are really relevant and there's a lot to explain not only why is it like that now but also why they're going to be even more relevant in the future so just let's stick with the regular flow um my name is Yakov I'm contributor to the LI doll uh the name of the role is master of defi which is a fancy name of uh saying that my my role is to make the most utility as possible for the Lio State asset holders so St it and repb St it and also make it accessible to everybody which means Integrations into different wallets portfolio applications any exess access points to web tree at the same time also expanding it to many different networks where users can maybe spend less on the gas prices so maybe it's more appropriate for some some users and they can also utilize different uh defi opportunities uh this is my social defo both on Telegram and on X so I know it's very chaotic outside you might not be able to catch me but you can always reach out to me and I'm pretty responsive um so here is the agenda we're just going to go through a quick reminder for everybody don't want to spend too much time there I'm going to explain what has changed now that we are asking this question because for a long time uh nobody was debating this it was lsts lsts lsts across the Defi and then I'm going to actually explain you why still lsds and we're going to go in depth so why why uh why lsts in general so the purpose of lsts is to make uh staking simple secure and decentralized that should be the the top top mission of all lsds not just Lio Lio lstd um there are four pillars behind that first one just remind ourselves when you want a stake um or run a validator for ethereum there's a lot of things you have to do and you have to ensure um and the most important thing is that uh doing a native staking doing traditional staking basically running a validator you're choosing if you want to support the security decentralization of the ecosystem or you want to utilize your eat inside the defi ecosystem and get more rewards in some way um with this you get both because you get transferability and permissionless you get a receipt token with which you can do whatever he want so it's very flexible um second thing is abstracting the infrastructure as I said the there's a lot of things you have to do uh one of the things is that you have to run a validator which is not something that everybody can do though there are very good efforts of multiple different projects to make it easier for people but again it's not for everybody um and the infrastructure behind Lio um Stak e is constantly evolving it's very robust and it's constantly pursuing decentralization with very cool things like uh DVT technology Community staking module and stuff like that um it's lowering the barrier to entry um you don't need to have 302 eat actually there is no uh minimum amount it's one way which is the minimum minimal denomination of it so it's very very accessible to everybody and as I said um going to some layer TOS with cheaper gas transactions it's even easier to get it uh plus as I mentioned already there's very broad ecosystem of integration so there is something for everybody um just to make sure that the current state correlates to what I'm saying yes they're still relevant with lios state it there is 24 billion of Us doll stake uh around 390 million of US dollars in liquidity 190k of rep stake on l2s it's rep stake the one that is non rebas so it's composable with defi 300,000 unique stakers 10 official Network expansions L2 and l1s one officially already proposed on the LI the research forums that is starnet but there will be more upcoming some things are cooking in the background and you should be checking out Lio research forums regularly if you want to see uh which are the new opportunities and where Lio rep State dat will probably expend so what has changed now uh points uh a lot of points points for uh uh l2s points for lrts points for reaking so basically two main things reaking middleware and lrts very comparable to staking and liquid staking so it makes a lot of sense in short reaking is either reaking conative eat or lsds I'm going to explain what's the difference um basically it's reusing the value of uh already uh staked e to secure some other services which are part of the ethereum ecosystem or maybe some other ecosystems and it's basically supporting the the idea of a modular ethereum future with a huge inflow of services like data availability layers oracles l2s and stuff like that and then lrts are just received on top on top of that but that's that's correct at the moment because this is Phase One this is Phase where there is no slashing um in the future they will act more like a risk management layers because there are many different moving parts that these lrts will actually have to decide on on there will probably be different mechanisms that different lrts will choose how to decide these specific uh variables or uh services that they want to secure and stuff like that but yeah there's a there's a bunch of bunch of moving parts so why LST still what what's the difference why wouldn't I just opt for some LRT that is going to give me bigger rewards in the end uh going into LST or LRT means that that I'm longing it uh well yes that's true at the moment but I always want to say there is no reaking without staking so if you want to get reaking there will be staking and uh you don't really want to build as I wrote here a city on a mud um because it's it's either going to be very bad or it's either going to be very costly what you what I'm meaning when I'm saying that is that you you really want to use really robust infrastructure if you're building a reaking business why would you build staking as well it doesn't make a lot of sense focus on your expertise focus on your Niche and utilize something that's already developed I mean for example Lio has around 150 contributors that are working full-time uh contributing to Lio da along with all of the externals um just to make a very simple product which is taking middleware so it probably makes more sense to use something like that um and then I really want to dive into what it means aside from the infrastructure Point what it means when it comes to the utility in defi currently as I said it's it's very comparable to lsts you take an LRT it's a very good collateral it's pretty much uh ethereum staking validator rewards plus points and the promises of future airdrop which is very exciting especially because nobody really knows what will be the size of these airdrops so you just want to like compete and get as many points as possible and it's it's very stable it's very predictable aside of obviously additional smart contract risk that that goes without saying but you have that with with everything whatever you want to do this is phase one phase two is when slashing gets introduced and phase two is when we see those points actually replaced with uh with tokens with uh with the regular inflation with regular uh productiveness of these underlying services and what we are seeing currently for example is that there is so much Supply in the reaking layer and we don't really see these Services being productive we don't really see these Services utilized enough so they produce uh any meaningful amount of rewards to satisfy such a huge supply so that's a very tricky situation and I I think it's going to take quite some time unfortunately what I'm also seeing is that uh we are kind of moving a lot of different things that were not necessarily meant to be services to become Services uh of uh and borrow security from raking just because of the hype narrative uh I don't like that approach I don't think that's a long-term approach but some some of these Services might succeed with this pivot and uh I'm really excited to see what's up what what's going to be happening with that uh when it comes tricky when it when it actually come becomes tricky is with slashing with slashing this asset becomes completely different from the risk management perspective this is not the same collateral anymore if you want to use it on Landing market for example now what you can do is you can deposit Stak eat or some LRT um you can borrow itat and you have a very very stable ratio because you you you know that you can only get slashed if uh slashing happens on ethereum layer which is a protocol that that we all know we we all know the rules there's very robust infrastructure but then when you get some oracles when you get some data availability layers a bunch of services with their own rules and slashing at that moment you're not really sure that the principle will not get slowly eaten if a lot of bad events start happening and uh that basically prevents uh risk uh risk assessors to put the same amount like the same quality and same um same like same parameters for lsts and lrts on Landing market so you cannot do that anymore or you can do it on the Lower Side what you can also do with uh with lrts and lsts at the moment is recursive raking for a long time uh stake it was only supplied as a collateral um as a collateral to Landing markets and it was used for recursive staking uh that means that all of the stake te that is supplied in the market is basically sitting idle so now when you have lrts that should produce more rewards than lsts you can actually Supply L lrts to borrow this huge amount of Stak e basically for free or for very cheap so you can do recursive reaking but if you want to do that I mean not the financial advice of course uh there is a limited amount of time until you can do it because as I said with slashing these things will change and as I'm going to explain um lrts are becoming uh risk Man actually asset managers um and I hope they will collaborate a lot with Professionals in the space that are doing risk management for for landing markets I think that's very comparable it's going to be very significant uh not only choosing the services that they're going to secure uh but also CH choosing the uh raking middleware there are lot of options like kak like ganir like symbiotic also node operators and and then uh also the assets that you that you can restake initially it was all about reaking e or lsts but now we see risk taking of stable coins we see RIS taking of pretty much anything that there is there how to manage all of that well I don't know there is many different options um I I just hope it will be very transparent um and I think what's going to come out of all of this is that uh we are not going to see like one big LRT I think we're going to have more popular lrts than we have lsts why because lsts are very simple as I said it's they're they're very comparable between one and each other all are following the simple rule of ethereum protocol and very diverse is the underlying infrastructure so you choose according to your preferences when it comes to alertes one will be more conservative it will only support RIS taking to couple of services but it will offer rewards maybe it will be a better collateral another one will be more Dean it will restake to multiple Services it will offer huge APR but maybe it's not such a good uh collateral because it's unstable the the APR is unstable um so that means at least what I think is that uh we will have more action between different lerts some users some type of users will be more conservative they will try to do uh recursive restak using more conservative assets some will opt just to like holding an LRT that is producing higher amount of rewards um but definitely lsts are here to stay there is no there is no D doubt that lsds will still have a place there is a lot of value in lsds being only lsds I got a lot of questions during the past two quarters if Lio state it is uh going to become an LRT my answer is no uh as I said there's a lot of value in just providing the best staking middleware service thank you that's all