Exploring the LSP Protocol: The Best Solution for Building a Security Moat for PoS Networks

Staking
is
usually
the
main
way
to
maintain
the
security
of
the
PoS
network.
For
a
PoS
network,
the
more
and
more
dispersed
assets
in
the
network
participate
in
the
validator
staking,
the
better
the
network’s
security.
Usually,
starting
from
the
PoS
network
itself,
they
provide
incentives
to
validators,
firstly
to
reward
them
as
contributors,
and
secondly
to
encourage
more
validators
to
participate
in
network
staking
and
verification.

 

In
fact,
for
any
PoS
network,
it
is
unrealistic
to
allow
token
holders
to
independently
participate
in
the
network
validator
staking.
One
is
the
cost
perspective.
For
example,
the
minimum
threshold
for
Ethereum’s
PoS
validator
is
32
ETH.
Based
on
the
price
of
ETH
3,800
US
dollars,
the
cost
threshold
to
directly
become
a
validator
is
about
121,600
US
dollars,
but
the
APR
is
only
2.21%,
and
the
capital
utilization
rate
is
extremely
low.
On
the
other
hand,
the
staker
needs
to
have
the
ability
to
run
the
client
independently
to
avoid
fines.
Overall,
it
is
unrealistic
for
non-professional
token
holders
to
directly
participate
in
the
staking
of
any
network
as
a
validator.

 

Therefore,
the
emergence
of
the
liquidity
derivative
pledge
track,
namely
LSD,
just
solves
the
above
pain
points.
On
the
one
hand,
token
holders
can
entrust
token
pledges
to
the
LSD
protocol
(no
capital
scale
is
required,
usually
assets
worth
tens
or
even
tens
of
US
dollars
can
participate),
and
the
protocol
will
participate
in
the
pledge
of
the
PoS
network
on
behalf
of
the
pledger,
and
return
part
of
the
income
to
the
pledger.
At
the
same
time,
the
LSD
protocol
will
also
return
an
LST
token
to
the
pledger,
which
is
equivalent
to
the
value
of
the
pledged
assets
and
can
be
used
to
obtain
new
income
in
LSTFi
to
improve
the
utilization
rate
of
funds.
This
has
a
good
driving
effect
on
improving
the
pledge
rate
of
the
PoS
network.

 

Except
for
the
Ethereum
ecosystem,
other
ecosystems
are
not
large
in
LSD

 

However,
from
the
current
LSD
track,
except
for
the
Ethereum
ecosystem,
the
LSD
scale
of
other
networks
is
not
large.
On
the
one
hand,
in
terms
of
scale,
the
current
liquidity
pledge
scale
of
Ethereum
is
13
million
Ethereum,
about
50.23
billion
US
dollars.
According
to
the
current
32
million
Ethereum
participating
in
the
pledge
in
the
Ethereum
beacon
chain,
the
liquidity
pledge
accounts
for
about
40.6%.

 

In
addition
to
Ethereum,
other
PoS
ecosystems
such
as
Cosmos
and
BNB
Chain
are
relatively
small
in
scale,
and
the
ratio
of
liquidity
staking
sources
is
not
high.
For
example,
among
the
ATOM
tokens
staked
by
Cosmos,
although
its
overall
staking
rate
is
as
high
as
about
63%,
only
about
2%
comes
from
liquidity
equity.

 

On
the
other
hand,
although
LSD
projects
are
rising,
the
leading
LSD
protocols
represented
by
Lido,
Rocket,
Binance
Staked,
etc.
have
obvious
monopoly
effects
in
the
field
of
ETH
LSD
staking,
among
which
Lido
alone
accounts
for
75%
of
the
entire
ETH
LSD
market
share,
and
the
market
share
of
emerging
LSD
protocols
is
extremely
low.
In
particular,
the
leading
LSD
protocols
such
as
Lido
are
centralized
models,
which
may
have
the
risk
of
monopolizing
most
of
the
proportion,
reducing
the
overall
income
of
the
LSD
sector,
and
reducing
the
staking
desire
of
the
pledgers.
In
addition,
excessive
concentration
of
funds
may
cause
security
risks
to
the
PoS
ecosystem.

 

In
addition
to
LSD,
the
re-staking
track
centered
on
EigenLayer,
namely
the
LRT
track,
is
also
centered
around
the
Ethereum
ecosystem.
Some
LRT
protocols
including
Kyper
DAO,
Renzo,
Ether.fi,
EigenPie,
YieldNest,
Swell,
etc.
are
all
built
around
LST
and
ETH
assets
to
provide
staking
services,
and
lack
support
for
native
tokens
on
other
chains.
Similarly,
EigenLayer
also
has
shortcomings
in
maintaining
network
security.
For
example,
in
a
PoS
network,
if
EigenLayer’s
incentive
mechanism
conflicts
with
the
existing
PoS
incentive
mechanism,
it
may
reduce
the
validator’s
commitment
to
network
security.
EigenLayer
may
cause
some
validators
to
gain
more
rights
and
control,
thereby
increasing
the
centralization
risk
of
the
network.
Centralized
networks
are
more
vulnerable
to
attacks
and
manipulation,
weakening
overall
security.

 

So
overall,
LSD
and
LRT
may
not
be
the
best
solutions
for
PoS
ecosystem
to
obtain
security:

 

●
The
LSD
sector
is
severely
monopolized
and
centralized.
The
scale
of
pledged
income
has
decreased
due
to
monopoly
and
it
threatens
the
security
of
the
PoS
network,
which
deviates
from
the
original
intention
of
PoS.

 

●
The
multi-layer
nesting
model
of
LSD
and
LRT
is
risky,
especially
since
some
of
the
leading
LSD
protocols
are
too
large
in
scale.
Once
a
security
problem
occurs
and
a
run
occurs,
it
will
be
catastrophic
for
the
Ethereum
ecosystem.
The
Terra
ecosystem
is
a
lesson
for
this.

 

●
The
LSD
and
LRT
tracks
are
mainly
based
on
Ethereum.
It
is
difficult
for
other
PoS
ecosystems
to
encourage
more
users
to
pledge
through
liquidity
pledge
and
re-staking,
and
the
problem
of
low
capital
utilization
is
difficult
to
solve.

 

●
Except
for
the
Ethereum
ecosystem,
there
is
a
lack
of
infrastructure
to
support
other
PoS
ecosystems
to
expand
the
scale
of
staking,
and
the
trend
of
multi-chain
development
is
hindered.

 

Of
course,
there
are
more
solutions
to
maintain
PoS
network
security
and
improve
capital
utilization
than
just
LSD
and
LRT.
The
recent
market-oriented LSP
protocol has
brought
a
better
solution.
Based
on
the
innovative
Node
Slicing
and
OmniVerify
Chain
solutions,
it
capitalizes
the
user’s
asset
rights
and
node
income
rights
and
gives
them
liquidity.
Compared
with
existing
solutions,
the
LSP
protocol
is
expected
to
achieve
better
results
in
PoS
network
security
and
promote
the
balanced
development
of
the
PoS
network
system,
and
PoS
will
return
to
its
original
intention.

 

LSP
protocol “node
slicing”
solution

 

The
LSP
protocol
is
a
new
PoS
liquidity
derivative
pledge
solution.
One
of
its
features
is
the
use
of
the
Node
Slicing
solution
as
a
core
processing
method
for
nodes
during
the
protocol
execution.
Similar
to
LSD,
PoS
asset
holders
can
pledge
directly
through
the
LSP
protocol.
The
LSP
protocol
verification
network
will
pledge
funds
to
different
PoS
networks
through
the
OmniVerify
Chain
network,
and
after
verifying
and
hosting
the
decentralized
network,
the
pledge
certificate
will
be
sliced.
The
sliced
assets
will
include
the
user’s
asset
rights
and
node
income
rights.

 

Although
the
process
of
returning
sliced
assets
seems
similar
to
LSD,
what
is
returned
is
not
just
an
LST
asset.
Based
on
having
all
the
capabilities
of
LST
assets,
it
is
also
an
asset
that
can
represent
asset
rights
and
node
income
rights
(LST
assets
do
not
have
complete
equity
utility),
that
is,
the
process
is
a
process
in
which
users
directly
participate
in
the
PoS
network
verification
through
the
LSP
protocol
and
obtain
all
the
income
rights
obtained
by
the
node.
At
the
same
time,
the
sliced
assets
can
be
freely
exchanged
and
held
in
the
LSP
protocol
trading
platform,
and
can
also
be
further
traded
in
some
LSTFi
or
even
some
LRT
protocols.

 

 

Improving
the
scale
and
decentralization
of
PoS
staking

 

In
fact,
from
the
perspective
of
the
PoS
network
itself,
it
requires
large-scale,
decentralized
users
to
participate
in
the
verification
of
the
network.
From
the
perspective
of
scale,
it
is
definitely
difficult
to
meet
the
demand
by
simply
attracting
more
retail
traders
to
participate,
so
from
this
perspective,
it
is
very
necessary
for
some
whale
users,
large
node
verifiers,
and
mining
pools
to
participate.

 

A
considerable
number
of
these
users
run
their
own
clients
instead
of
participating
in
staking
through
the
LSD
protocol
(potential
risks
are
too
high),
but
this
method
greatly
reduces
the
utilization
rate
of
funds,
so
the
LSP
protocol
can
become
a
good
starting
point.
Using
the
LSP
protocol,
the
above
can
more
lightly
carry
out
the
funds
in
and
out
of
the
mining
pool
shares,
and
will
not
be
affected
by
the
fluctuation
of
assets
in
the
mining
pool
staking
nodes,
making
the
public
chain
network
more
secure
and
reliable.

 

By
utilizing
the
LSP
protocol,
nodes
no
longer
need
to
go
through
complicated
transaction
confirmations
and
asset
transfer
pressures
when
exchanging
asset
ownership.
Node
holders
can
directly
sell
the
node
assets
that
need
to
be
traded
through
the
LSP
trading
platform,
making
it
easier
to
exit,
rather
than
requiring
redemption
to
exit
from
the
LSD
and
LRT
platforms.

 

Of
course,
the
decentralization
of
POS
network
staking
nodes
is
equally
important.
On
the
one
hand,
the
sharding
scheme
of
the
LSP
protocol
eliminates
the
potential
threat
of
large
stakers
to
the
security
of
the
PoS
network.
On
the
other
hand,
it
is
also
expected
to
attract
more
decentralized
users
to
participate
in
staking.

 

For
users
who
need
to
participate
in
node
staking,
they
do
not
need
to
participate
in
the
construction
of
the
network
in
a
real
sense.
They
can
directly
purchase
node
slices
under
the
network
ecosystem
through
the
LSP
protocol.
This
greatly
reduces
the
threshold
and
deployment
pressure
for
new
users
to
participate
in
the
public
chain
ecosystem,
and
also
avoids
various
potential
security
threats
in
this
process.

 

Adaptability
to
multiple
PoS
networks

 

Ethereum
is
currently
the
main
market
for
LSD
and
LRT
(centralized
service
providers
dominate),
and
most
emerging
LSD
and
LRT
protocols
usually
choose
Ethereum
ecosystem
as
their
first
choice
in
order
to
better
capture
users
and
funds.
Therefore,
it
is
unable
to
provide
the
original
independent
functionality
of
nodes
to
more
ecosystems,
including
the
data
verification
function
of
the
network
to
which
it
belongs
as
an
independent
node.
When
it
is
unable
to
participate
in
verification,
it
also
loses
the
core
value
of
nodes
as
a
guarantee
of
network
data
security,
which
is
what
we
call
a
deviation
from
the
original
purpose
of
PoS.

 

This
has
resulted
in
the
scale
of
Ethereum’s
liquidity
derivatives
growing
larger
and
larger,
while
other
PoS
ecosystems
have
difficulty
in
scaling
up,
which
in
turn
has
caused
many
emerging
PoS
networks
to
face
certain
difficulties
in
maintaining
security
and
capturing
stakers.

 

The
LSP
protocol
is
natively
compatible
with
all
PoS
ecosystems,
rather
than
being
deployed
at
the
bottom
of
one
or
several
PoS
networks
like
the
LSD
protocol.
Therefore,
the
LSP
protocol
is
not
only
aimed
at
Ethereum,
but
also
other
PoS
ecosystems,
which
means
that
you
can
also
pledge
through
the
LSP
protocol
and
get
the
return
of
slice
equity
assets.

 

When
a
large
number
of
nodes
on
the
same
public
chain
network
participate
in
the
LSP
protocol,
or
when
a
public
chain
network
user
interacts
with
the
LSP
protocol
for
the
first
time,
a
node
pledge
pool
dedicated
to
the
network
ecosystem
will
be
opened
to
ensure
that
these
sliced
certificate
assets
come
from
the
same
public
chain
network.
After
the
node
pledge
pool
is
established,
the
node
network
that
joins
later
will
enter
this
pledge
pool
by
default
and
conduct
the
required
asset
transactions
or
holding
activities
with
other
pledged
certificates.

 

The
above
process
is
achieved
through
the
verification
network
OmniVerify
Chain,
which
can
ensure
that
the
node
assets
held
by
users
can
obtain
the
original
node
income
and
data
verification
functional
value
of
the
network
to
which
they
belong
while
running
as
an
independent
node.

 

Focusing
on
OmniVerify
Chain
itself,
it
is
an
important
underlying
infrastructure
for
the
operation
of
the
LSP
protocol.
The
LSP
protocol
is
built
on
OmniVerify
Chain,
which
includes
a
Rollup
layer
and
a
data
availability
service
DA
layer,
which
provides
absolute
security
and
data
consistency
guarantees
for
the
underlying
assets
and
completes
data
verification
and
equity
ownership
through
cloud
nodes.
In
the
actual
operation
of
OmniVerify
Chain,
users
actually
only
need
to
perform
a
few
simple
steps
such
as
delegated
verification,
purchase/sale
of
node
slices,
and
other
proof
certificates.

 

Since
the
security
and
functionality
of
the
user-delegated
nodes
are
guaranteed
by
OmniVerify
Chain,
strictly
speaking,
as
long
as
the
distributed
network
security
management
of
OmniVerify
Chain
is
friendly
enough,
its
asset
security
is
much
better
than
storing
it
in
the
user’s
hot
wallet.

 

Composability
and
Programmability

 

The
LSD
protocol
is
composable
and
programmable.

 

Composability
is
reflected
in
the
ability
of
PoS
verification.
In
fact,
in
some
PoS
networks,
if
we
want
to
make
a
cross-chain
bridge,
a
game
application,
a
derivatives
protocol
featuring
a
synthetic
asset
protocol,
or
even
some
protocols
or
layers
attached
to
Layer1
and
Layer2
(such
as
Layer3),
etc.,
we
need
to
build
a
set
of
verification
groups
with
different
schemes
by
ourselves,
and
these
verification
groups
need
to
have
certain
PoS
capabilities.
Building
a
set
of
verification
groups
requires
sufficient
pledges
and
nodes
to
ensure
decentralization,
but
this
need
is
based
on
a
lot
of
economic
costs
and
also
lacks
certain
security.
Although
EigenLayer
can
provide
certain
support,
the
protocol
must
be
built
on
the
Ethereum
system
and
also
faces
some
centralized
risks
such
as
the
centralized
risks
we
mentioned
above.

 

The
LSD
protocol
can
solve
the
above
problems
through
composability
in
this
direction.
While
the
LSD
protocol
itself
provides
verification
capabilities
for
the
PoS
network,
this
verification
capability
is
also
extended
to
its
underlying
Dapps.
For
example,
the
LSD
protocol
integrates
the
Solana
network
and
supports
users
to
participate
in
staking
on
Solana.
Then
these
SOL-based
verification
capabilities
can
also
provide
support
for
Dapps
on
Solana.
These
Dapps
do
not
need
to
build
their
verification
groups
but
can
be
directly
developed
and
adapted
through
the
OmniVerify
Chain
of
the
LSD
protocol.
The
data
verification
revenue
generated
by
the
development
of
this
product
will
be
captured
by
most
of
these
node
slices,
which
will
further
expand
the
profitability
of
these
node
slices
in
the
LSP
protocol.

 

In
addition,
in
terms
of
programmability,
the
node
assets
are
shared
through
the
LSP
protocol,
allowing
more
complex
protocols
to
expand
the
ecosystem
of
assets
in
a
composable
manner,
ensuring
the
composability
of
assets.
Since
the
OmniVerify
Chain
network
meets
the
EVM
execution
standards,
its
assets
are
also
programmable.
Any
developer
is
allowed
to
use
node-slicing
proof
certificates
to
perform
any
type
of
asset
combination.

Backed
by
the
huge
PoS
system,
the
LSP
protocol
has
broad
development
prospects

 

Whether
it
is
the
LSD
or
LRT
track,
in
theory,
it
has
benefits
for
building
a
security
moat
for
the
PoS
ecosystem,
but
in
reality,
there
are
still
many
limitations
and
security
issues.
The
LSP
protocol
is
of
great
significance
to
the
development
of
the
PoS
ecosystem
in
terms
of
wide
adaptability,
programmability,
composability,
and
many
other
aspects.
It
can
not
only
further
promote
the
expansion
of
the
scale
of
the
Ethereum
pledge
system
to
disperse,
but
also
accelerate
the
balance
of
the
scale
of
the
PoS
network
pledge.

 

With
the
LSD
protocol,
users
who
participate
in
PoS
staking
can
participate
extensively
in
different
ecosystems,
and
this
more
direct
way
of
participation
does
not
have
the “nesting
doll”
attribute
and
thus
does
not
have
the
risk
of
a
death
spiral.

 

From
a
market
perspective,
the
LSP
protocol
has
huge
market
potential
in
a
broad
sense.
Some
potential
directions
include:

 

●
Data
availability
layer,
such
as
AI-based
data
availability
networks
such
as
TAO
and
RNDR.

●
Oracle
networks,
such
as
LINK,
API3,
etc.,
require
nodes
to
participate
in
data
verification
value
networks.

●
Cross-chain
bridges,
such
as
LayerZero,
Wormhole,
and
other
networks
that
require
nodes
to
participate
in
data
consistency
verification.

●
Other
consensus
protocols,
and
consensus
verification
networks
similar
to
POS
mechanisms.

●
Rollup-based
L2
networks,
such
as
BTC
L2,
ETH
L2,
and
L2
of
more
public
chain
networks
in
the
future.

●
Depin
networks
of
cloud
computing
services,
such
as
Aleo,
IO.net,
Aethir,
etc.,
use
cloud
computing
to
provide
computing
resources.

 

These
networks
cover
almost
all
the
non-POW
public
chain
networks
in
the
market.
We
believe
that
the
overall
market
valuation
of
these
networks
will
exceed
one
trillion
US
dollars
in
the
next
five
years.
On
the
other
hand,
the
market-oriented
consensus
systems
are
all
moving
towards
PoS,
and
even
some
infrastructure
in
the
BTCFi
field
are
following
the
PoS
consensus
mechanism.
This
trend
is
providing
impetus
for
the
development
of
the
LSP
protocol.
If
the
LSP
protocol
can
capture
most
of
the
nodes
in
a
small
part
of
the
main
public
chain
network
ecosystem,
then
the
node
assets
that
the
LSP
protocol
can
manage
and
operate
will
also
exceed
tens
of
billions
of
US
dollars,
which
also
indirectly
confirms
the
broad
development
prospects
of
the
LSP
protocol
in
the
future.

 

Official
Website: https://lsp-2.gitbook.io/lsp

 

Disclaimer:
The
information
provided
in
this
press
release
is
not
a
solicitation
for
investment,
nor
is
it
intended
as
investment
advice,
financial
advice,
or
trading
advice.
It
is
strongly
recommended
you
practice
due
diligence,
including
consultation
with
a
professional
financial
advisor,
before
investing
in
or
trading cryptocurrency and securities.