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💡 ETH Staking 101: Discover the world of $ETH staking, understand Liquid Staking Derivatives (LSD), explore the use of $stETH and $rETH in DeFi. Learn to hedge with Perpetual Futures. All in one thread. Let's go! #ETHStaking #DeFi #PerpetualFutures 🚀 Credits: @InvestgineerX

1/ Ethereum uses Proof-of-Stake (PoS) where validators stake 32 $ETH as collateral, vote, and earn rewards. Traditional staking locks up ETH and reduces efficiency. Liquid Staking pools offer a more efficient way to stake with lower barriers to entry. 💰

2/ 🔑The key difference in Liquid Staking Pool is the many-to-many relationship between users & validators. Reduces hurdles & enables participation with less than 32 ETH. Users can fund a new validator by entering a pool and tokenize their stake in proportion to their deposit.

3/ Tokenized stakes like stETH, rETH, and sfrxETH are known as LSD (Liquid Staking Derivatives). The service provider charges fees for managing pool operations. The protocol pay out staking rewards to LSD holders. The holder can use LSD-ETH in DeFi without locking up in PoS. twitter.com/blockworksres/status/1620478150319931393?s=20&t=QqpWZveWWR5glwJlIy0X1g

4/ DeFi Use cases: There are several ways to use LSD in DeFi with some risks & rewards associated with it, this thread only illustrates the possibility and not the financial advice of any kind. Please note that the APR is subject to change from when this article was written.

5/ Stake and HODL Just HODL remains a strategy nonetheless. Currently, the APR for staking ETH is above 4.4%, despite ETH being in deflationary mode. ultrasound.money/

6/ Stake and Lend An example of "Stake and Lend" involves simply staking ETH at @LidoFinance, which offers 4.9% APR, and supplying stETH on @compoundfinance with a return rate of 1.87% APR

7/ Stake and Farm A moderately complex and involves low liquidity on ETH L2. The process includes staking 50% of ETH on @Rocket_Pool (4.5% APR). Then, bridge ETH and rETH to the Optimism, and provide liquidity in the rETH-WETH pool on @VelodromeFi, which offered 14.2% APR.

8/ Hedging If you have USDC and want to enter the WST-ETH-USDC pool on @KyberNetwork (95% APR) without being affected by ETH price volatility, you can hedge by shorting a desired amount of ETH on @perpprotocol.

9/ Preparing for Rough Sea Since the start of the transition (Dec 2020) to the PoS consensus mechanism, the Ether deposited in the beacon chain has not been withdrawn. The Shanghai upgrade (tentatively planned for March) will mark the completion of the transition to PoS.

10/ This upgrade will give users the ability to withdraw their $ETH which has been locked up. The market seems to have confidence in this coming event, as evidenced by the price movements of protocol tokens such as $LDO, $FXS, $RPL and $ANKR which recently outperformed. twitter.com/aarnasays/status/1620089933049499648?s=20&t=QCpL4Egx9OLzKeKGW5mGww

11/ In one viewpoint, the staking ratio of ETH remains much lower compared to other Proof-of-Stake (PoS) chains. With the ability to withdraw ETH from the Beacon Chain, there will likely be a positive sentiment as people become less reluctant to stake. twitter.com/MessariCrypto/status/1567211061635588096?s=20&t=qB8LPzVQl0KiWURi-uFAtw

12/ In the opposing viewpoint, some individuals who staked two years ago may choose to withdraw their stakes and receive their rewards after having their capital locked up for such a prolonged period. twitter.com/0xfoobar/status/1621559338086158338?s=20&t=QqpWZveWWR5glwJlIy0X1g

13/13 Wishing you the best of luck with your upcoming trip to Shanghai ✈️. Make sure to check out this blog for more information on hedging. blog.perp.fi/how-to-hedge-yield-farming-risk-with-perpetual-contracts-51d45aff7967