Liquid Staking Protocol

Liquid Staking Protocol: Unlocking Real-World Asset Liquidity

The Liquid Staking Protocol (LSP) enables the integration of real-world assets (RWAs) into DeFi, creating yield-bearing stable assets like cEUR, cJPY, and cXAU. These assets combine stable valuations with continuous yield generation, offering users a bridge between traditional finance (TradFi) and decentralized finance (DeFi). By leveraging on-chain FX hedging and key partnerships, the protocol optimizes liquidity provision and addresses inefficiencies within the TradFi system.

Key Mechanisms

1. Direct Deposits and Asset Minting

Users can deposit sUSDe or USDe into the protocol, initiating the minting of stable assets that track the value of foreign currencies or commodities. A swap function enables seamless conversion of any supported asset into sUSDe, simplifying access and eliminating the need for foreign bank accounts or costly currency exchanges.

2. FX Hedging and Price Stability

To maintain price stability, the protocol employs a hybrid FX strategy, utilizing both on-chain and off-chain mechanisms for precise hedging. Partnerships with liquidity providers such as Shift Markets allow for effective hedging through derivative instruments. The Pyth Network provides real-time price data, while periodic rebalancing ensures that stable assets stay aligned with global market conditions.

3. Yield Generation Linked to Economic Conditions

The yield generated by stable assets like cEUR is influenced by the interest rate differentials between USD and other currencies. For example, if EUR interest rates surpass USD rates, cEUR holders receive higher yields. This mechanism ensures that yield generation is closely aligned with real-world economic conditions, offering an alternative to USD-centric DeFi systems.

4. Transparency and Trust

Transparency is central to the protocol’s design. The details of the treasury and collateral positions are made public through cryptographic attestations. Users can verify these positions using signed data snapshots, ensuring that all stable assets are fully collateralized and properly hedged. This approach fosters trust through verifiable, real-time reporting.