Liquid Staking Index (LSI)
Tracking the performance of Liquid Staking Protocols
The Liquid Staking Index (LSI) is a weighted index that measures the performance of liquid staking governance tokens.
The construction of the LSI is motivated by the increasing popularity and user base of liquid staking. This approach is supported by the fact that liquid staking provides users with more capital efficiency and is a key pillar in the rapidly growing decentralized finance (DeFi) sector.
Recent developments, such as Lido's deployment of v2, which allows for stETH to be redeemed into native ETH, and MetaMask's announcement of native in-app staking and unstaking of ETH, enhance the user experience in liquid staking and promote mainstream adoption. With numerous protocols building on top of liquid staking, creating a liquid staking index becomes a logical step to facilitate easy exposure to this emerging trend.
Applications
The LSI offers an opportunity for savvy investors and traders to potentially outperform traditional cryptocurrencies like BTC and ETH, enabling them to stay ahead of the curve and capitalize on the growth potential of liquid staking governance tokens.
The above graph illustrates that an initial investment of $1000 in the LSI at the start of the year would result in a current value of over $2500, whereas investing the same amount in BTC or ETH alone would yield approximately only $1500.
This highlights the main purpose of the LSI, which is to provide a convenient way for traders to have a diversified portfolio of liquid staking governance tokens, thereby mitigating the risks associated with selecting individual tokens.
Construction
The inclusion criteria for the LSI involves meticulous consideration of key factors including market capitalization, market share, and total value locked (TVL). The index is curated by identifying prominent liquid staking protocols that exhibit distinct strengths and demonstrate promising growth prospects. This meticulous approach ensures a reliable representation of the liquid staking governance token sector.
Below is the list of shortlisted liquid staked governance tokens:
Ankr ($ANKR)
Frax Share ($FXS)
Lido DAO ($LDO)
Rocket Pool ($RPL)
StaFi ($FIS)
Stride ($STRD)
These selections can be modified through the review process.
Below is a comparative table showcasing key metrics of the governance tokens.
| Token | ETH/ATOM Staked ($) | TVL Staked ($) | Market Share (MS) (%) | Market Cap (MCAP) ($) | MS/MCAP Indexed (%) | User Staking APR (%) | Est. Annual Revenue ($) | P/S Ratio (Lower better) |
|---|---|---|---|---|---|---|---|---|
Ankr ($ANKR) | 41,284 | 76,375,400 | 0.50 | 214,850,676 | 3.67 | 4.48 | 342,162 | 627.92 |
Frax Share ($FXS) | 216,596 | 400,702,600 | 2.50 | 638,123,584 | 6.18 | 6.60 | 2,644,637 | 241.29 |
Lido DAO ($LDO) | 6,625,187 | 12,256,595,950 | 76.80 | 1,654,259,627 | 73.19 | 5.00 | 61,282,980 | 26.99 |
Rocket Pool ($RPL) | 450,032 | 832,559,200 | 5.20 | 948,501,153 | 8.64 | 5.89 | 4,903,774 | 193.42 |
StaFi ($FIS) | 17,312 | 32,027,200 | 0.10 | 18,933,714 | 8.33 | 7.40 | 237,001 | 79.89 |
Stride ($STRD) | 2,203,307 | 23,134,719 | 79.97 | 113,594,912 | 49.71 | 20.50 | 83,560,402 | 1.36 |
Each protocol offers unique features and benefits, making them valuable additions to the LSI.
Ankr ($ANKR)
Ankr, as one of the earliest liquid staking protocols established in 2019, provides easy access to staking services for various cryptocurrencies, including Ethereum.
Ankr's ETH LSD, known as ankrETH, follows a value-accrual model. With a globally distributed node infrastructure, Ankr aims to build robust multi-chain tools to support Web3, DeFi, and the broader crypto economy.
Frax Share ($FXS)
Frax Protocol, initially known for its stablecoin, has expanded its offerings to include an ETH liquid staking platform. Frax has experienced rapid growth in this space, thanks to its high yield for ETH stakers, achieved by controlling a significant percentage of CRV rewards through its frxETH liquidity pools.
Frax offers two tokens, frxETH and sfrxETH, utilizing a value-accruing model similar to wstETH.
FXS was included in the selection due to its rapid growth in the quantity of ETH staked.
Lido DAO ($LIDO)
Lido, known as the most popular liquid staking protocol for Ethereum, has gained significant market share. With over $10 billion in ETH staked, Lido offers two ETH tokens, stETH and wstETH, employing different models to accommodate varying user preferences.
Lido was included in the selection as it has the largest Market Capitalization and Est. Annual Revenue.
Rocket Pool ($RPL)
Rocket Pool stands out for its decentralized approach to Ethereum staking. It enables users to earn rewards by depositing their ETH into a pool and receiving rETH, a value-accruing ETH token.
With over 1,000 node validators, Rocket Pool boasts a high level of decentralization compared to other protocols, such as Lido.
StaFi ($FIS)
StaFi is an early multichain liquid staking protocol compatible with both EVM and non-EVM chains, including Ethereum, BSC, and Polkadot. With a low commission rate of 5% and a low minimum requirement of 4 ETH to run an ETH validator node, StaFi offers an accessible staking solution. Their LSD tokens, denoted with an 'r' prefix (e.g., rATOM), provide flexibility across various chains.
StaFi was included in the selection due to its low market capitalization and a consistently low price-to-sales ratio, positioned closely to Lido (excluding STRD, which operates in a different sector).
Stride ($STRD)
Unlike other ETH liquid staking providers, Stride primarily serves the Cosmos ecosystem, offering liquid staking solutions for IBC tokens. Stride prioritizes security and liquidity in their offering, catering to the specific needs of the Cosmos ecosystem.
Stride was chosen because it holds the dominant position as the primary liquid staking service provider on the Cosmos network, boasting an impressive market share of approximately 80% for liquid staked ATOM tokens.
Weightage
| Factor | Weight Allocation |
|---|---|
Market Capitalization | 70% |
30-Day Volume | 5% |
Volatility | 5% |
Circulating Supply | 20% |
Learn more about the factors involved in the weighting process here.
Calculation
The starting price of the LSI is set at $100, and it follows a price-normalized and weighted index methodology.
Learn more here.
Review
The review process is standardized across all indexes.
Carbon's governance model empowers SWTH holders to initiate changes in the shortlisted markets, corresponding weights, and selected variables of the LSI. This gives investors a voice in shaping the index's composition, ensuring its relevance and effectiveness.
Learn more here.
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