1. Introduction to LST and LRT

What is LST

Users obtain stETH through Liquidity stake protocol such as Lido

LST behind: PoS network security, Staking Interest

What is LRT

Users delegate assets like stETH and lsdETH to Liquidity and then stake them on the protocol. The protocol deposits lsdETH into EigenLayer and then stakes it to obtain collateral tokens, namely LRT assets.

*Restaking is a concept first proposed by Eigenlayer.

2. Overview of LRT Incentive Data

EigenLayer The recent reward, was first (even exclusively) announced the distribution data and executed the distribution by Renzo. Let's take a look at the data:

"During the period from August 15th, 2023 to October 8th, 2023, ezETH generated a reward of 769.01 ETH (593, 727.31 EIGEN) through staking."

ezEIGEN generated 1,731.05 EIGEN in just one week from October 1st to October 8th

During the period from August 15, 2023, to October 8, 2023, users obtained over 2 million US dollars in rewards through EigenLayer's compound interest, which were directly deposited into the user's account through an automatic compound interest mechanism. Meanwhile, the price of ezETH surged from 1.0224 to 1.0242, currently trading at a premium of 0.043%. Over 2 million US dollars in compound interest rewards have been distributed and continuously compounded. These rewards are automatically allocated to the user's account through a compound interest mechanism, greatly enhancing the participation experience.

1. High collateral ratio

From the data of the third party in the above figure, we can see that among the many protocols of EigenLayer, Swell, Renzo, and Kelp are far ahead with a high compound interest rate, compared to Puffer (73%) and EtherFi (72%), the total TVL ratio of compound interest is significantly higher, thereby maximizing the income of AVS rewards.

2. Automatic compound interest revenue

The traditional process of stake is not only complex, but also accompanied by high gas fees and cumbersome manual management. Taking EigenLayer as an example, users usually need to select operators through the EigenLayer App, manage risks, and manually claim and handle rewards. In addition, EIGEN stakers also face long unlocking periods and frequent tax events. For most users, this series of operations is time-consuming and labor-intensive.

$ezEIGEN addresses these pain points by providing an automated solution. Through Automated Operator and Validators Service (AVS), $ezEIGEN significantly reduces user burdens, while automatically claiming rewards weekly and implementing compound interest, thereby reducing gas fees and increasing overall yield. Perhaps it is for this reason (of course, not only this!) that we can see the "sincere feelings" of community users.

Four, LRT income efficiency calculation

EigenPods is a tool for Ethereum validation nodes to interact with EigenLayer, ensuring that the UniFi AVS service can slash validation nodes that violate pre-commitment promises. As the number of EigenPods increases, the gas fees for claiming rewards rise significantly. Renzo has only 5 EigenPods, with weekly gas fees remaining in the range of a few hundred dollars, while other protocols like EtherFi may have thousands of EigenPods, with weekly gas costs as high as 35 ETH. With fewer EigenPods, Renzo not only reduces gas costs but also ensures efficient reward distribution.

In addition, the distribution of AVS rewards will be conducted on a weekly basis, which further enhances the user's participation value and income frequency.

Overall, Renzo itself not only provides basic stake or restake services, but also focuses on providing professional operation and technical support for AVS, such as network management and Node operation. So, with a high stake ratio, automatic compound interest, lower gas costs, and efficient use of EigenPods, Renzo stands out in the AVS reward competition, which I think is reasonable.

Let's compare Renzo and Ether.Fi again:

TVL and re-stake: According to EtherFi's latest reward distribution tweet, the first batch of re-stake reward distribution includes 2,478,088 EIGEN, plus 500 K ETHFI that can be claimed. ezETH stakers received 593,727.31 EIGEN, while weETH stakers received 2,478,088 EIGEN. On the surface, it seems that weETH stakers received 4.17 times the reward. However, considering the unit yield in conjunction with TVL, Let’s do the math.

According to the calculation results, the reward per unit of weETH is 1.33 EIGEN, while the reward per unit of ezETH is 1.93 EIGEN. Therefore, the unit reward for ezETH users is 1.45 times that of weETH users. Therefore, the distribution process of this trap seems to have a large total reward amount, but the actual income is not as satisfactory.

Renzo's automatic compound interest vs. EtherFi's manual claim: Renzo's automatic compound interest mechanism saves users high gas fees. Users do not need to manually claim rewards, all earnings automatically compound interest into staking. While EtherFi's rewards require manual claiming, leading to higher gas fees, dropping actual returns.

Gas fee issue: Because EtherFi users need to claim rewards manually, especially on the Ethereum network, this means that users will face high gas costs. However, Renzo's automatic compound interest feature eliminates this cost, allowing users to receive and reinvest their rewards without paying gas fees.

5. Incentive Rules for Each LRT

With the continuous development of the Eigenlayer-based stake track and the gradual division of market share, users who are more interested in 'airdrops' rather than stake rewards have a good understanding of their gains. We can also take a look at the basic situation of this track from the incentive rules.

Obviously, each project's incentive rules have their own strengths in different aspects.

Shorter time expected: The incentive activities of Ether.fi and Renzo take the shortest time, compared to the nearly 10 months spent on activities like Puffer's first season. Users spend less time on Ether.fi and Renzo, enabling them to participate and profit more quickly.

Token distribution expectations: Puffer's single-phase supply distribution ratio is 7.5%, the highest among all projects, but considering the market and compound interest rate, the author believes that Puffer is just a superficial wealth, whereas Ether.fi and Renzo appear more sincere.

Long-term participation is expected: Compared with other projects that are just one-time games, projects that can continue to participate and be profitable are the best choice in the current market Fluctuation. Renzo with a total season duration of 10.5 months and Ether.fi with a data rush period of 10 months at the end of the year are both very good choices.

VI. Future Outlook for the Stake Industry

Currently, the related protocols based on Eigenlayer are still in the initial stage, and eventually one or two will definitely dominate the market. It depends on which protocol can maintain a continuous rise and pull far ahead of the second and third, then the basic leading position can be determined. Each round of the Bull Market will always bring new narratives. Lido has stood the test of time, so who will be the next "lido" in the stake race?

With the continuous emergence of stake platforms, who really calculates the users' earnings and platform benefits clearly? This is a race that needs time to verify, and time happens to be what everyone lacks the most. So, how to eliminate the projects with hidden agendas in the market, each person has their own trap indicator, and the author does not make any biased statements.