unshETH: Your Gateway to LSDfi on Ethereum

Introduction

UnshETH (website) has introduced a unified ERC-20 token, dubbed unshETH. This token aims to significantly increase accessibility by serving as an index for all liquid staking derivative tokens. This unique approach to Liquid Staking Derivatives is what sets unshETH apart from other staking protocols.

UnshETH's primary aim is to improve validator decentralization on Ethereum. It achieves this through a combination of sophisticated incentive engineering and the introduction of liquid staking derivatives. The protocol empowers users with the ability to select their preferred delegate for staking their ETH, thereby ensuring the decentralization of Ethereum validator nodes. Adding a new dimension to the LSDfi domain, unshETH has also pioneered novel LSDfi primitives such as validator decentralization mining and validator dominance options.

UnshETH is promoting competition among Ethereum's liquid staking protocols. Its ultimate goal is to transform the staking experience for millions of ETH users and stimulate decentralization of validator nodes.

Changing Ethereum Staking

UnshETH is an index for LSTs with a specific focus on enhancing validator decentralization on Ethereum, all while aiming to provide an unrivaled ETH staking experience to its extensive user base. The ground-breaking features and services UnshETH introduces are setting new standards in the industry.

At the heart of UnshETH's unique offerings is the concept of LSDfi. These are tokens that stand for staked ETH, providing users with the opportunity to access the liquidity and composability of their staked assets. In return for staking their original tokens, holders receive a derivative that can be further utilized, enabling them to garner rewards from both tokens.

One of the core aims of UnshETH is to enhance validator decentralization on Ethereum. Through the strategic application of incentive engineering combined with liquid staking derivatives, the protocol allows users to decide who should stake their ETH, thereby promoting decentralization of Ethereum validator nodes. Taking innovation one step further, UnshETH has launched LSDfi primitives, such as validator decentralization mining and validator dominance options. These tools leverage incentive engineering to distribute capital and yield across the LST ecosystem in a manner that fosters validator decentralization. By adopting a completely fresh approach to LSTs, UnshETH is disrupting the Liquid Staking Derivatives industry. Its unique method disrupts the existence of a single LST on the Ethereum network by leveraging incentive engineering to guarantee the decentralization of Ethereum validator nodes. UnshETH's objective is to fortify the resilience, accessibility, and resistance to censorship of the Ethereum ecosystem.

Estimating the total addressable market for UnshETH and LSD-Fi is challenging due to its relatively recent emergence. We at Flagship have written a data driven aproach for how big the market can become. You can read it here.

An Anon Team

Even though the UnshETH team operates under anonymity, their expertise and in-depth knowledge are clearly seen in their innovative work. They've developed UnshETH as a leader in the emerging field of LSDfi. Their unique additions to the Ethereum ecosystem, such as validator decentralization mining and validator dominance options, showcase their forward-thinking approach.

UnshETH has partnered with Camelot, to offer liquidity mining rewards for staking Camelot's USH-ETH LP tokens. Additionally, UnshETH has expanded to the Binance Chain, allowing users to use assets like Binance-pegged ETH, USDT, and BNB to directly mint unsh ETH

A closer look at the Tech

Valuing UnshEth

Users of UnshETH can mint the unshETH token by depositing a supported Ethereum liquid staking token, also known as an LSD or LST. Upon redemption, unshETH can be converted back into the basket of underlying LSDs. Currently, unshETH supports four of the largest LSDs in the market: wstETH, cbETH, rETH, and sfrxETH, with a forward-looking plan to extend this support to even more tokens.

When it comes to the valuation of unshETH, the amount minted upon depositing a supported LST is equal to the amount of staked Ethereum underpinning that specific LST. Thus, the value of one ETH in any of the LSDs equates to one unshETH. Similarly, one unshETH can be redeemed into a proportionate basket of LSDs stored in its vault. As all underlying LSDs are the staked versions, unshETH accrues value as these LSDs gather staking yield. For instance, if the average annual ETH staking yield is 5%, one unshETH would equate to 1.05 ETH after one year.

As a liquidity hub for LSTs, unshETH offers additional financial benefits. Users can earn ETH staking yield and swap fees by holding unshETH. Mint and redemption fees are also applied to shield the value of unshETH from arbitrage, which further contributes to the yield. Therefore, the total annual percentage rate (APR) users earn simply by holding unshETH is a combination of ETH staking APR, swap fee APR, and mint/redeem fee APR. Further underpinning the security of the protocol, unshETH has been audited by Certik and plans are in place for continuous audits, ensuring a safe and secure platform for its users.

Validator Decentralization

The need for validator decentralized automated market maker (vdAMM) stems from the historical inefficiencies of the LSD liquidity pools which were mainly dominated by the staked ETH- ETH pairs. These traditional setups proved expensive due to half of the ETH in these pools being unstaked and thus unproductive. Additionally, the liquidity providers and users were burdened by low utilization rates and high swap fees, making these setups highly inefficient.

As the Ethereum 2.0 came out, the requirement for large LSD-ETH liquidity pairs reduced significantly. Meanwhile, the LSDfi space saw a burst of activity with a plethora of new LSTs entering the scene, each bringing their own unique value proposition to various sectors of the DeFi ecosystem.

The existing automated market maker (AMM) models, like Curve and Balancer, were unsuitable for pooling multiple assets together due to inherent risks. If a risky asset was added to a pool containing high-quality assets, the entire pool’s value was susceptible to being wiped out if the risky asset failed. unshETH's vdAMM offers an effective solution to these challenges by pooling together all LST protocol liquidity under the unshETH basket. Around 95% of the unshETH total value locked (TVL) will continue to earn native ETH staking yield, while also providing highly efficient LSD-LSD and LSD-ETH liquidity. Moreover, vdAMM treats all supported LSDs equally based on the ETH backing them, facilitating zero-slippage swaps and minimizing risk exposure.

With vdAMM, users and LST protocols no longer have to sacrifice earning ETH staking yield for swap fee APR or DeFi utility. All the while, unshETH holders continue to benefit from ETH price appreciation, ETH staking yield, and mint/redeem fees, thereby achieving higher sustainable real yield than any other ETH liquidity pool token or staking product. Additionally, users can further utilize unshETH across various DeFi platforms and beyond.

USH: A Decentralized Token

USH serves as the governance token and incentive layer for unshETH. Its primary function is to stimulate growth of unshETH's total value locked (TVL) and liquidity, while encouraging competition among various liquid staking protocols. USH is current trading at $0.14 with a market cap of $7.2 Million. The TVL is 3 times larger than the current market cap, sitting at $29 million.

Holders of staked USH, also known as validator decentralization USH (vdUSH), exercise governance over key aspects of the unshETH protocol such as LST inclusion or exclusion, directing USH and partner protocol incentives, setting target and maximum weights, and adjusting fee curve parameters.

vdUSH, a non-transferable token, embodies the voting power of an address in the unshETH governance system. It is obtained by locking USH/ETH Sushi LP, USH/unshETH 80/20 BPT, or USH itself. The lock time ranges from a minimum of one month to a maximum of one year. The maximum voting power is attained by minting vdUSH using USH/unshETH 80/20 BPT (or Sushi USH/ETH LP on ETH or Pancake USH/BNB LP) and locking it for the full term of one year. This voting power decreases linearly from the moment of lock creation. However, users can extend their lock time or lock more assets to bolster their voting power. By engaging in the governance process via vdUSH, users earn USH tokens as well as governance tokens from partner protocols.

The reward structure for vdUSH holders incorporates a dual system. Firstly, USH rewards for farms (unshETH, LP, and USH) will include a base APR and a boost APR, which is contingent on vdUSH balances. Secondly, boosted rewards that are proportional to vdUSH balances, and especially favor those with a longer lock duration, can be claimed for staked/locked USH or 80/20 USH-unshETH BPT. This dual-reward system promotes a long-term commitment to governance and encourages users to lock their tokens for extended periods. As more partner protocols join and receive approval from the community, their governance tokens will be added to the reward pool. This not only enriches the ecosystem but also fosters synergies among the participating projects, thereby solidifying the long-term growth and success of the unshETH platform.

Future potential

As we take a look at the future, unshETH has significant potential to further its development, fostering novel features and breakthroughs that will attract a larger user base and bolster its total value locked (TVL). One such possibility could be the introduction of new LSDfi primitives. Moreover, the protocol could venture beyond Ethereum and Binance Chain, expanding its presence to encompass additional blockchains, thereby increasing its utility and broadening its audience.

The overall trajectory of the cryptocurrency market can also exert a significant impact on the future potential of unshETH. Should the market sustain its growth momentum, a rising number of users may show an inclination towards staking their ETH. Key partnerships also play a pivotal role in shaping the future potential of unshETH. Partnerships serve to expand unshETH's reach and user base, and can thus significantly enhance its growth prospects. As such, the forging of strategic partnerships and alliances will likely emerge as a key determinant of unshETH's future potential and growth in the ever-evolving crypto landscape.

Final thoughts

unshETH has emerged as an innovative protocol striving to enhance the landscape of LSDfi within the Ethereum network. The introduction of a unified ERC-20 token, unshETH, is a game-changing feature that sets this protocol apart, making it a common exchange medium for all LST tokens and vastly increasing accessibility.

As a significant step towards achieving decentralization on Ethereum, unshETH brings with it unprecedented features, such as validator decentralization mining and validator dominance options. This disruption not only promotes competition amongst Ethereum's liquid staking protocols but also aims to transform the staking experience for millions of ETH users.Despite the anonymity of the unshETH team, their expertise is clearly reflected in their groundbreaking approach to validator decentralization. This innovation, combined with strategic partnerships with entities such as Camelot and an expansion into the Binance Chain, underscores the potential growth and reach of unshETH.

The protocol's unique design allows it to serve as a liquidity hub for LSTs, while users can earn a combination of staking yield, swap fees, and mint/redeem fees. By employing sophisticated incentive engineering and providing decentralized options, unshETH ensures that users and LST protocols do not have to sacrifice earning ETH staking yield for swap fee APR or DeFi utility. The creation of the governance token USH further strengthens the protocol's commitment towards decentralization, by involving users in decision-making processes and rewarding them accordingly.

As we look towards the future, unshETH's potential seems promising. With continued market growth, strategic partnerships, and potential for innovation and expansion, unshETH is poised to be a leading player in the evolution of the Ethereum ecosystem. This project is certainly one to keep an eye on, as its trajectory could redefine the course of decentralized finance and the broader cryptocurrency market.