Research Roundup Newsletter
1. Market Index
The 30-day price, volume, and volatility indices were positive at +19.98%, +16.61%, and +56.00%, respectively.
2. Crypto.com Visa Card Consumer Spending Insights
We took a deep dive on how our users spend their crypto, where, and on what. For 2022, the card saw more than 80% growth in total spending compared to the previous year.
Here is a summary of which categories attract the most crypto spending in 2022.
- Recreation (including recreation, sports, and culture) grew the strongest, by 52%.
- Transportation came in second, spiking by 29%. This reflects increased consumer confidence post-COVID-19 as countries reopened their borders.
- Similarly, on the back of recovery from COVID-19, consumers’ spending on hotels and dining also spiked, by 28%.3. Monthly Feature Articles
Monthly Feature Article | Liquid Staking Derivatives: Money Legos in DeFi
In this feature report, we provide an overview of the current market landscape, key market players and their features, how liquid staking works as ‘money legos’ in DeFi, and what the upcoming Shanghai upgrade entails for liquid staking derivatives (LSDs).
Key takeaways:
- Liquid staking is now the second-largest sector in crypto after decentralised exchanges, replacing DeFi lending. Today, the liquid staking narrative remains strong in anticipation of Ethereum’s Shanghai Upgrade, which will enable staked ETH withdrawals in the network.
- In liquid staking, native coins of a Proof of Stake (PoS) chain are deposited to a staking pool, which is delegated to one of many validators participating in the consensus protocol. The staking pool then issues a ‘receipt’ in the form of a liquid synthetic token that is often 1-to-1 pegged to the underlying PoS token.
- Ethereum staking is the largest staking market, with over 17.8 million ETH (around US$32 billion) deposited into the Ethereum Beacon Chain staking contract as of March 2023, constituting 14.8% of the total ether supply. Over a third of the total ETH staked is locked up in liquid staking.
- In combination with other DeFi protocols, liquid staking can be viewed as a type of building blocks or ‘money legos’, which can be combined or stacked on top of each other to create more financial applications, typically through liquidity mining and/or lending and borrowing.
- In general, there are several risks to consider regarding liquid staking, like slashing, centralisation, and depegging.
- A case can be made that the Shanghai Upgrade will ultimately contribute to de-risking ETH staking and driving the development of the liquid staking derivatives market.
Monthly Feature Article | Deep Dive Into Liquid Staking Derivatives
For our latest private report, we dive deep into LSDs. The concept of liquid staking is relatively new, and as such, the LSD market is still in its early stages. Nevertheless, there are already around 70 projects providing LSDs, which allow users to trade their staked tokens without having to wait for the staking period to end. This report will highlight three of the major LSD protocols: Lido, Rocket Pool, and Frax. We explore in detail their key features, their validator delegation mechanisms, and their associated staking derivative tokens.
Key takeaways:
- Liquid staking derivatives allow users to earn staking rewards on Proof of Stake (PoS) blockchains while retaining the ability to use their staked tokens on other decentralised platforms.
- Based on the design of liquid staking protocols, there are three main liquid staking token models: rebasing tokens, reward-bearing tokens, and the dual-token model.
- Various LSD protocols have different types of mechanisms to secure blockchain validation.
- Lido relies on node operators to run validator nodes on behalf of the protocol, and they receive a fee in return as a reward.
- A key feature of Rocket Pool is their minipool validator mechanism: Its nodes only need to deposit 16 ETH per validator, which will be combined with 16 ETH from the staking pool to create a new validator, called a minipool.
- The Frax Ether validator mechanism relies on the Frax ETH Minter (frxETHMinter) smart contract, which creates new validator nodes whenever sufficient ETH (32 ETH) is available.
- Although LSDs can maintain liquidity while earning staking rewards, there are still some risks that users need to pay attention to. These include the centralisation of validators and the risk of depegging.
- The liquid staking sector is expected to grow after the Shanghai upgrade given the relatively low staking ratio of Ethereum compared to other PoS chains.