March 15, 2022: The Urge to Merge 🚊🔜
Lido $stETH and Rocket Pool $rETH prepare for Ethereum Merge
Kiln testnet, the successor to Kintsugi, just went live.
Researchers anticipate the Merge is on track to occur in time to disarm the looming difficulty bomb in a few months.
Speculators are asking“wen Merge” even more than “wen token”. The checklist is winnowing to the point it could occur as soon as three months from now.
The effects of the Merge will clearly be a game-changer for Ethereum.
While speculators are interested in the Merge’s effects on the ETH price, it’s almost more exciting to wield proof of stake as a rebuttal to the “NFTs boil the oceans” FUD. Bewarned that facts will only make embittered trolls even more hostile, so gird yourself for more decibels of screeching.
With the Merge now timeline tallied in months, not years, we’re seeing much more interest in wrapped Ethereum that can shepherd your bags through the singularity.
LIDO $stETH
The success of LIDO’s liquid staked $ETH is a well deserved win for the ecosystem. Lido launched when the timeline for the Merge was farther out and offered the perfect solution in $stETH. Consider the landscape set out a year ago:
The team battled through a ton of FUD surrounding the utility of $stETH, but stuck it out thanks heavily to their trusty Curve pool. The pool allows for $stETH depositors to fluidly convert between $ETH and $stETH at their leisure guaranteed by enormous liquidity.
With about $3B in total pool liquidity, this means about a quarter of the $6B worth of $stETH’s total supply is sitting in the well-balanced Curve pool. The pool has not always been so balanced, but the Curve stableswap invariant has proven exceptional at maintaining the peg.
You couldn’t do this with a constant-product pool, but it’s phenomenal on Curve. Lido has gotten a pretty good return on their investment in Votium bribes, typically in the neighborhood of just $500K per round to reinforce its goliath $3B in liquidity.
Having survived a year now, $stETH has also become a foundational layer for more complex money legos.
Just this week, DeFi Saver introduced MakerDAO $steCRV vaults. Users can stake their LP tokens as collateral, earning $LDO rewards all the while.
The only losers, as usual, were Americans. Lido’s webpage is blocked to burgers, so we just had to watch the fun from afar. Except, somehow, for Silicon Valley investors who were allowed to invest directly. PROTECTION!!!!
The team’s long game will pay off as they prepare for the Merge to go live.
For more background on LIDO, check this recent thread:
ROCKET ETH
As the Merge approaches, Rocket Pool also blasted off as a viable alternative.
Rocket Pool requires just 16 ETH requirement to run a Rocket node, undercutting the typical 32 ETH. Since launch it’s quickly found its way to half a billion in TVL. About $50MM worth of liquidity has already made its way into its new Curve pool.
As anticipation of The Merge draws closer, we may see more speculators looking to pounce on the potential bonanza.
The successful launch of Rocket Pool also helps to combat FUD about centralization issues as Ethereum moves to Proof of Stake.
Additionally, Rocket Pool is responsible for launching a full 7.4% of new Ethereum validators since launch.
More details on Rocket ETH via this thread:
Wars
All this of course may change the ongoing battlefields. For Rocket ETH, their pool has made a splash, yet their liquidity is quite shallow compared with Lido. Are they planning bigger moves to bootstrap this promising pool and shore up more liquidity?
We also can’t tell if there’s a wider war breaking out between the two protocols. Some users are clearly taken with the Rocket Pool experience.
Others are staying loyal to $stETH. Liquidity inertia is a real phenomenon.
We expect there’s room for plenty of protocols to prepare for the forthcoming merge, and that the general public grows weary of wars in this world.
For some more background about how staked Ethereum operates, this thread from a year prior has stood the test of time:
Disclaimers! Author has small position in the Curve $stETH pool.