Zircuit LST/LRT Liquidity Hub
Intro
A Liquid Staking Token (LST) is a blockchain token that represents the staked amount of cryptocurrency on a Proof-of-Stake blockchain (e.g., Ethereum) or in a liquidity pool. An LST can be transferred and used in DeFi activities despite the underlying asset being locked. Similarly, a Liquid Restaking Token (LRT) represents an asset that has been used in multiple staking or DeFi activities (i.e., restaked), e.g., to secure multiple protocols simultaneously. Both LSTs and LRTs allow for improved capital efficiency of staked capital.
Although users have been able to use LSTs for their staked ETH for a few years now, the landscape of LRTs is still nascent and rapidly evolving. New LRT protocols constantly emerge (e.g., allowing users to restake their BTC), making it challenging for even experienced users to track and choose the best and the safest protocols for deploying their capital.
Zircuit aims to address this problem by becoming a major liquidity hub for restaked ETH, BTC, LSTs and LRTs where users can easily allocate their capital and have peace-of-mind knowing that funds are deployed to the safest and highest quality protocols. As of June 2024, Zircuit has demonstrated its ability to attract capital by collecting nearly $3.5B in ETH, LSTs, and LRTs deposits within a few months.
On the technical level, Zircuit is an Ethereum Virtual Machine (EVM)-compatible Zero-Knowledge Layer 2 rollup launching on the Ethereum network. Apart from offering much lower network fees and higher transaction throughput than Ethereum mainnet, Zircuit's main focus is security. Zircuit prevents malicious transactions and hacks by utilizing its novel AI-enabled feature: Sequencer Level Security (SLS). We envision Zircuit as a central hub for restaked assets that features unparalleled security and allows users to earn industry-leading yields natively.
Zircuit and LST/LRTs
Bootstrapping Zircuit Liquidity via LST/LRTs
LST and LRT protocols have successfully attracted users and significant Total Value Locked (TVL) as they were able to strike a balance between their relatively high yields, convenience and safety. Zircuit has partnered with leading LST and LRT protocols (and others; for a full list see Zircuit Stake) to provide users with boosted Zircuit rewards on top of native LST/LRT yields. Users stake a compatible asset into the Zircuit staking contract (on Ethereum mainnet) and immediately start earning Zircuit rewards, in addition to the underlying LST/LRT yields, while also helping to bootstrap Zircuit’s liquidity.
Yield
Assets staked in Zircuit earn yield from:
Staking rewards from securing Ethereum network;
Rewards from Actively Validated Services (AVSs) being secured by restaking (e.g., EigenLayer points);
Rewards from LST/LRT partners (e.g., Renzo points);
Rewards from Zircuit (e.g., Zircuit points); and
Partner-specific reward multipliers and boosts.
A list of rewards distributed by LST/LRT partners can be found in the FAQ.
Assets Staked in Zircuit
Assets staked in Zircuit remain untampered and no additional risk is incurred. Zircuit staking contract is minimalistic and has been audited internally and externally (public security audit reports can be found at Zircuit Stake page).
Once the Zircuit L2 mainnet is live, there will be an opt-in migration process where depositors will be incentivized to move their assets staked on Ethereum mainnet onto the Zircuit L2 rollup. Users will be able to choose to either:
Participate in the migration process; or
Withdraw and receive all earned rewards, points, and yield.
Withdrawal Period
Users can withdraw their assets at any time and retain any Zircuit rewards earned up to that moment (without any lockups or withdrawal periods). Please note that although Zircuit has no withdrawal periods, there may be withdrawal periods for the LST/LRT partners. Please check with the respective partner for details.
Endgame: Zircuit L2 as a Liquidity Hub
LST protocols have already demonstrated success due to their yield, simplicity, and safety. We expect LRTs to follow a similar adoption path. As LRTs mature, they will likely differentiate based on yield rates, the AVS they secure, operators, decentralization factors, and slashing risks. It is important to note that LRTs are exposed to inherently more risks than LSTs since they represent assets that are staked in multiple projects simultaneously. Hence, a single slashing event may have a much larger impact than on LSTs (where the impact is contained). We expect that navigating this landscape will become more complex over time.
Zircuit will continue to support the development and adoption of both LSTs and LRTs by strategically partnering with high-quality protocols and by helping them implement rewards tracking directly on the rollup. Additionally, through various integrations, Zircuit will enable native staking on its network to secure other networks and protocols that are deployed outside of the rollup. Zircuit will offer the safest and the most convenient yield opportunities to its users in a secure environment that improves upon Ethereum’s transaction throughput and cost. Zircuit intends to become a major liquidity hub for restaked ETH, BTC, LSTs and LRTs, where protocols and users are matched easily and efficiently.
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