The DeFi protocol YieldNest is rolling out a new liquid staking derivative (LSD) named ynLSDe

Decentralized finance (DeFi) protocol YieldNest has announced the launch of a new liquid staking derivative (LSD) named ynLSDe, specifically designed to capture restaking yield from EigenLayer, according to an announcement on August 21.

This new token is intended to provide holders of Ether staked with platforms like Lido, FRAX, Origin Protocol, or Mantle the opportunity to earn additional yield through restaking, as stated by YieldNest. Each of these platforms—Lido, FRAX, Origin, and Mantle—are decentralized Ethereum staking solutions that issue their own unique LSDs.

Restaking is a process that involves using Ether (ETH) that has already been staked with a validator on the Ethereum network as collateral in exchange for rewards, and then redeploying it to secure other protocols simultaneously. The idea behind restaking is that by assuming additional risks, users can significantly increase their rewards.

The concept of restaking gained significant attention following the launch of EigenLayer, an Ethereum-based restaking protocol, which has amassed approximately $12 billion in total value locked (TVL) since its inception in 2023, according to data from DefiLlama.

In addition to EigenLayer, other liquid restaking protocols like Ether.fi and Puffer Finance collectively hold around $11 billion in TVL, as shown by the data.

EigenLayer has become the home to a growing network of "actively validated services" (AVS), including protocols such as EigenDA, eOracle, and Lagrange State Committees, all of which rely on EigenLayer’s restaked ETH for security.

To obtain ynLSDe, users can deposit stETH (from Lido), sfrxETH (from FRAX), mETH (from Mantle), or OETH (from Origin Protocol) into YieldNest’s restaking pool, according to the protocol. The ynLSDe token serves as a tradable and liquid "receipt" token that represents the underlying restaked token generating yield. The restaking rewards generated are then distributed back to holders of ynLSDe.

Receipt tokens like ynLSDe provide users with the ability to restake their assets while maintaining liquidity, allowing them to continue participating in other DeFi activities using their staked assets. However, YieldNest also notes that while LSDs offer increased potential rewards, they can also amplify risks.

"The full spectrum of risks associated with restaking has yet to be fully understood," stated Mike Silagadze, CEO of the liquid restaking protocol Ether.fi, in a comment on August 12.

YieldNest also highlighted that its protocol aggregates all possible sources of yield for users. This includes rewards from EigenLayer Points, YieldNest Seeds, yields from AVS, and even AVS airdrops, in addition to the standard yield from staked ETH.