LST diversification refers to the strategy of holding various Liquid Staking Tokens (LSTs) from different protocols or validators to spread risk and potentially optimize returns. Instead of staking native assets directly, users receive LSTs, which can then be used in other decentralized finance applications. Diversifying across multiple LSTs helps mitigate risks associated with individual protocol failures or validator performance issues. This approach aims to reduce concentration risk within the liquid staking ecosystem.
Context
LST diversification is a growing strategy within the decentralized finance (DeFi) sector, particularly as liquid staking gains prominence. Discussions often involve evaluating the trade-offs between yield optimization and minimizing exposure to smart contract vulnerabilities or de-pegging risks of specific LSTs. News about new liquid staking protocols or analytical reports on LST market performance provides current insight into this evolving investment approach.
The launch of Isolated Liquid Restaking Tokens (iLRTs) structurally de-risks the restaking primitive, transforming it into a capital-efficient, multi-chain money lego.
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