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Liquid Staking Derivatives Capitalizes on Ethereum’s Dencun Upgrade to Propel Web3 Innovation

2024-02-08 06:00:00

EIP-4788 will greatly benefit DApp security and reduce risk industry-wide. By removing reliance on external oracles, which accounted for $1B in DeFi hacks in 2022, Dencun fortifies the ecosystem against a major attack vector. This change aligns with the broader trend toward protocol-owned infrastructure for reduced risk.

Liquid staking protocols are poised for exponential growth as crypto staking matures into a multi-billion dollar industry. Total value locked in Ethereum liquid staking has already surged over 300% in the past year to $5B. Liquid staking protocols like Lido, Rocketpool, Swell, Stader can directly access critical data like validator balances and status to improve efficiency and security. Ethereum liquid staking has risen since the transition to PoS, although Lido still dominates. We expect this growth to continue post-Dencun, with Lido's share further diluted by new protocol entrants such as Ankr. 

Restaking protocols like Eigenlayer, KelpDAO, Swell, ether.fi also benefit from direct data access for enhanced operations. Notably, Renzo as part of Eigenlayer's ecosystem has launched on Ethereum mainnet. The restaking niche is still early-stage, though liquid staking protocols are entering too. Eigenlayer leads for now, as seen in its staked assets spike in mid-2023, partly due to raised caps. Dencun and future Eigen tokenomics should propel ecosystem growth.

The Dencun Upgrade will ignite further creativity for DeFi offerings leveraging staked assets. For example, Lybra Finance and Prisma Finance already offer varied risk/yield profiles on staked ETH. Adventurous yield aggregators like Abracadabra will likely expand into liquid/restaked assets. More composability unlocks growth.

The Dencun Upgrade also fortifies cross-chain bridges via EIP-4788's optimizations and EIP-4844's fee reductions. Lower fees diminish Layer 2 siloization, elevating bridges' usage and importance for an interconnected blockchain network. This spurs broader cross-chain ecosystem prosperity.

For blockchain gaming, Dencun's Layer 2 boosts enable gradual decentralization of Web2.5 models while smoothing onboarding for early-stage true blockchain games. With performance barriers reduced, developers can focus more on gameplay and business logic. This brings the vision of a thriving ecosystem closer to reality, paving the way for blockchain gaming to disrupt the $200B gaming market. 

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