The core focus of yield strategy is towards profitability of Lido. Lido has been operating on a loss from the get-go, but there have been positive developments in the protocol over its operating years. According to https://dune.com/queries/2467620/4059042, there has been a significant focus on reducing liquidity as well as operational expenses. Lido is very very close to profitability, an impressive feat on its own.
Lido is currently the market leader, and has hit the staking ‘ceiling’. The only way to grow is to grow the market itself. Growth comes at costs, and it can be challenging to grow sustainably. It is hence important to focus on platform strategies that are low-cost by design: e.g. simply holding stETH is the cheapest way to scale.
Several yield sources were analysed based on the following criteria:
Based on data sourced from various data providers, experience and personal knowledge of the various platforms, a risk score is provided, which leads to shortlisting venues/strategies net beneficial to Lido that can be grown at a low cost.
Uniswap v3, Aave v3 Lido instance, and Pendle principal tokens are shortlisted. The report converges to Pendle as a potentially profitable and cheap venue to focus on, owing to the fact that Pendle has had an impressive growth, fixed yields are a potential UX-boost to stETH and PTs can perhaps be proliferated into collateral-worthiness, propagating locked supply sinks to (w)stETH.
The analysis may be flawed and the report could have incoherent patterns. This was a short research, with the potential to be significantly more detailed with more time and resources. Please feel free to share, comment, and provide feedback! Every bit of it is welcomed.
Before we can venture further, here’s my primer on risk. This will help understand my rationale for choosing a strategy over the other. These views on risks are from my experience and are not permanent maxims, subject to change with more knowledge.