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Ethereum Shanghai upgrade approaching, liquidity pledge product to become the first narrative this year?

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Don't be afraid to miss out because of the recent surge in tokens for various floating pledge concepts.

Ethereum Shanghai upgrade Approaching, Liquidity Pledge Product Is the First narrative of the Year?

Original article by Viktor DeFi

The DeFi way

Liquid pledged derivatives (LSD) are hot with the upcoming Ethereum Shanghai upgrade.

I spent a lot of time exploring the LSD narrative.

In this article, you will learn the following:

Overview of liquidity pledge

Ethereum Shanghai Upgrade

Key player

Innovative liquid pledge agreement

Risk of liquid pledged products

An overview of floating pledges

Before the era of liquid pledge, pledging crypto assets was one of the main ways to generate income for investors.

Even now, it is still profitable.

But it is not without some drawbacks.

Accessibility, immobility and illiquidity are the biggest disadvantages of encrypted pledge.

The pledged assets on the DeFi agreement provide a lock-up period that limits the user to neither trade nor withdraw the assets.

But liquid pledge solves this problem.

Through liquid pledge, investors obtain liquid collateral derivatives by pledging their assets, which represents their equity in a given pool of collateral and its earnings.

For example, when you deposit ETH into Lido, you will receive stETH.

In essence, floating pledge allows the pledgee to:

-Receive the proceeds of the mortgaged assets and also have the leverage to trade, borrow and use the assets as collateral for other agreements.

- You can easily pledge assets without being a verifier.

Ethereum Shanghai Upgrade

The most anticipated Ethereum Shanghai upgrade, scheduled for the first quarter of 2023, will allow users to withdraw their pledged ETH.

Currently, users cannot extract the ETH pledged as a verifier of Ethereum 2.0 and can only trade on the DeFi protocol using derivatives.

But Ethereum Shanghai changed everything.

At present, the ETH pledge rate is 13.79%, with more than 15 million ETH deposited.

Given the scale of the Ethereum network, that's just a fraction.

The Ethereum Shanghai upgrade will not only enable ETH withdrawals, but also accelerate the growth of some flow-pledge products.

Important player

Lido Finance (stETH)

Lido is the leading liquidity pledge protocol and the largest Ethereum pledge market share.

Not only that, Lido is now TVL's largest DeFi agreement, controlling about 16.03% of TVL in the entire DeFi market.

On the Lido platform, users pledge ETH in exchange for stETH in a 1:1 ratio.

These stETH can be deployed on other platforms such as Yearn and Aave, thus improving capital efficiency for users.

The platform takes a fee of 10% of all pledged rewards, which are divided between the Lido DAO and the node operator.

Rocket Pool (rETH)

Rocket Pool is the second largest player in the flow pledge vertical, with a market share of about 7%.

Unlike Lido, Rocket Pool is permissionless and highly decentralized.

They've experienced incredible growth since the Ethereum merger, and it's not going to stop anytime soon.

Again, you will receive a 1:1 rETH on each ETH deposit.

Rocket Pool's focus on diversification of node operators is one of its key drivers.

Stakewise (SWISE)

Stakewise is another innovative flow-through mortgage product that is really emerging quickly. They are ready to launch their version v3 ahead of the Ethereum Shanghai upgrade.

Interestingly, their v3 upgrade is designed to improve the ability of independent pledgers to participate in liquidity and commissioned pledge.