Foresight Ventures: Why do we invest in LSDx

The emergence of new on-chain assets often spurs shifts in the DeFi paradigm, and Foresight Ventures is dedicated to seeking various opportunities within these transformations. In the PoS ETH-driven LSD narrative, we can see the tremendous potential of LSD assets as both interest-bearing and liquidity assets. The upcoming Ethereum “Shanghai Upgrade” will undoubtedly further expand the scale of LSD assets. Therefore, at this critical juncture, we choose to invest our resources and energy into the LSD space.

The primary challenge for new assets lies in liquidity. However, current liquidity solutions for LSD assets have high barriers and fragmented liquidity. High barriers result from established DeFi protocols that have built moats around various DEX liquidity offerings, making it costly for emerging assets to cross them. Fragmented liquidity stems from LSD assets being distributed across different DEX protocols, making it difficult to aggregate liquidity through a unified path.

This is where LSDx Finance comes in, aiming to establish a liquidity protocol specifically for LSD assets to address high barriers and fragmentation. In DeFi’s development history, a common business model has been the “vampire attack,” such as Sushiswap’s assault on Uniswap’s token issuance. LSDx Finance targets DEXs like Curve with high barriers in their LSD asset segments (e.g., stETH, FrxETH, and rETH), effectively capturing market share in LSD asset liquidity.

To maintain liquidity, LSDx Finance adopts a GLP architecture, similar to GMX. GMX’s GLP pool model is a highly efficient liquidity solution, offering high liquidity and scalability by allowing all assets within the GLP pool to be swapped pairwise. This model significantly addresses the current fragmentation issues faced by LSD assets.

As a result, LSDx Finance introduces ETHx, a unified liquidity pool for LSD assets, with all LSD assets composing the ETHx Pool. Like GLP tokens, users receive $ETHx upon providing liquidity for LSD assets, representing ownership in the LSD unified liquidity pool.

Building on the foundation of addressing LSD asset liquidity, LSDx Finance takes it a step further by launching the $UM stablecoin, backed by $ETHx as collateral. Users holding $UM can access the ETH staking rewards underlying LSD assets, effectively turning the stablecoin into an interest-bearing asset. In the current climate of heightened inflation, an interest-bearing and fully decentralized stablecoin will undoubtedly serve as a safe and effective means of hedging against external inflation.

In summary, LSDx Finance’s advantages include:

• Timely positioning enables LSDx Finance to potentially execute “vampire attacks”;

• GLP-like liquidity solutions address LSD asset liquidity issues;

• ETHx, as a basket of LSD tokens, balances different LSD risks and interests;

• UM, as a decentralized, interest-bearing stablecoin asset, holds value for the entire crypto ecosystem.

We hope this protocol will inject new vitality into the LSD sector.