On Tuesday, June 27th, we were gifted with a new feature on Frax Facts that compares how the APY of sfrxETH lines up compared to the most popular LSDs on the market. If you have been paying attention to Frax Check, without surprise, sfrxETH comes out on top by a wide margin. In the team’s own announcement, they tweeted a screenshot showing that per 1000 ETH in sfrxETH, a user would earn roughly 45% more ETH compared to RocketPool and around 30% more ETH compared to Lido.
To put APR percentages into perspective, an extra 1% at 4% APR is 25% more ETH. Say you put in 1000 ETH that 1% change at a 4% rate would give you an additional 250 ETH.
That’s a lot of potential ETH to be earned considering 59.3% of frxETH (137,884.36) is staked in sfrxETH, with a TVL of $256,632,128. With the current 5.06% APR, there is 6,976.9 ETH being earned, if the percentage were to go up by 1% that would be an extra 1,378.9 ETH earned.
Paving the way from the start
The diagram above provides data from the release of sfrxETH since October 20th, 2022 up until the present. As we can see since the dawn of sfrxETH, it was poised to lead the pack with an impressive APY of 6.23% per 1000 ETH staked. Fast forward to today, sfrxETH has maintained it’s crown with an APY of 6.80% per 1000 ETH staked and the highest amount of earnings across all LSDs.
Why It Matters
What makes this new feature so significant is that it is objective proof of the superiority of the stablecoin maximalist vision of DeFi. Stablecoin maximalism is the idea that on a long-enough timescale almost all DeFi protocols will resemble a stablecoin and at scale they will look universally the same in structure. sfrxETH is the risk-free yield component of the frxETH system which is also made up of the swap facility that is the frxETH-ETH Curve Pool and frxETH itself which is the ETH-pegged stablecoin. Because not all frxETH is staked in sfrxETH, there is always a boosted floor compared to competitors which is clearly shown in the Earnings for 1000 ETH Staked chart.
It’s not coincidence why Frax Facts selected 1000 ETH to be the standard for the metric, DAOs and institutions that hold large amounts of ETH will look for a place to earn yield. This simple but powerful statistic shows how much ETH is being left on the table if they don’t choose to stake with sfrxETH. Although interest is a key factor in picking an LSD, other factors institutions consider include withdrawal availability and protocol risk.
Currently, the only way users can convert their frxETH into ETH is via the Curve pool, but Sam K recently signaled that a withdrawal contract is in the works that will be slower but avaliable for those who desire that option. Furthermore, while frxETH v1 has validators run by the core team, v2 will create a lending market for validators themselves, alleviating responsibility from the team from running all the nodes themselves. On top of frxGov on the horizon that will bring final decision power to veFXS holders, institutions who embark on due diligence can conclude that sfrxETH in the very near future will be the highest performing and sufficiently decentralized option to go with as their LSD of choice.