Analyzing gtcETH: An unconventional LSD token that continues the Gitcoin gene
While other projects are trying to raise incentives and seize market share, gtcETH has made a completely different innovation around LSD.Author: Azuma, Odaily
In the early hours of March 8, the decentralized donation platform Gitcoin officially announced on its Twitter the details of its jointly launched liquid staking index token Gitcoin Staked ETH Index (gtcETH) in collaboration with the Index Coop, and published the gtcETH trading and minting frontend in an accompanying article on their official website.
However, according to the comprehensive data at the time of writing, the market seems to be skeptical about the "public welfare" narrative that gtcETH promotes. As of the time of writing, the circulating supply of gtcETH is only 61 tokens, with a total market cap of less than $100,000.
The Most "Politically Correct" LSD Product
gtcETH is a liquid staking index token jointly launched by Gitcoin and Index Coop, with the main purpose of issuing this token being to explore a new, effective, and sustainable donation mechanism for public goods.
As an ERC-20 standard token, gtcETH shares many similarities with well-known LSD tokens like stETH and rETH, such as:
Holding gtcETH means having redemption rights for the corresponding amount of ETH;
The circulation of gtcETH is unrestricted, allowing for the unlocking of liquidity for staked ETH;
Holding gtcETH also allows participation in PoS staking rewards.
However, gtcETH also has certain differences from such tokens, for example:
Gitcoin and Index Coop do not directly provide staking services; the value of gtcETH will be supported by a basket of LSD tokens issued by decentralized liquid staking projects like stETH;
gtcETH will automatically strip away a portion of the staking rewards for public goods donations. This is the biggest difference between gtcETH and all other LSD tokens.
In the design of gtcETH, the amount of rewards to be stripped away depends on the streaming fee parameter. Currently, the streaming fee parameter is set at 2% (a direct subtraction from the percentage of rewards), specifically composed of 1.75% flowing to Gitcoin Grants and 0.25% flowing to Index Coop.
Gitcoin provided an example: assuming ETH stabilizes at $1,700 and staking rewards stabilize around 5%, then after one year, 1 unit of ETH would yield 0.05 ETH in staking rewards. If a user chooses to hold gtcETH, then 0.03 ETH of the 0.05 ETH will belong to the user, while the remaining 0.02 ETH will be stripped away, with 0.0175 ETH flowing to Gitcoin Grants for donations and the remaining 0.0025 ETH as fees flowing to Index Coop.
Under these conditions (ETH at $1,700), every $1 million of TVL in gtcETH will contribute approximately $17,500 to Gitcoin Grants annually, thereby improving the issues of limited donation channels and insufficient development funding for public goods.
Can a Path Against the Market Succeed?
From the design of gtcETH, it is clear that due to the need to strip away a small portion of the staking rewards, the passive yield for holding gtcETH will always be lower than that of ordinary LSD tokens, let alone other derivative tokens that offer additional incentives.
According to the information provided by Index Coop, the initial supporting assets for gtcETH will consist of three LSD tokens: wstETH (Lido), rETH (Rocket Pool), and sETH 2 (StakeWise), with approximate ratios of 30%, 44%, and 26%, respectively.
After weighted calculations of the real-time yield rates, fee situations, and composition ratios of the three tokens, the real-time yield rate for gtcETH, after deducting the 2% streaming fee, will be approximately 2.53%. This yield level is somewhat lacking in the currently "booming" LSD sector. The pursuit of profit is the nature of capital, so it is not difficult to understand why the supply data for gtcETH appears so "bleak."
However, gtcETH, which goes against the market, also has its unique advantages.
Due to the inherent "politically correct" nature of gtcETH, individuals, projects, and institutions that have promotional needs for their brand and image may consider sacrificing part of their profits to use gtcETH to support the development of public goods, thereby gaining some community reputation.
Additionally, there is a somewhat speculative possibility that the attributes of gtcETH will lead its holders to continuously contribute to public causes (as the rewards are stripped away), which has led some users on Twitter to believe that gtcETH has the potential to become a future airdrop standard in the industry. Although this approach may be overly speculative, if it can stimulate the supply of gtcETH and thereby increase donations to public causes, it may not be a bad thing.
Overall, gtcETH, which continues the Gitcoin gene, is positioned completely differently from conventional LSD tokens, and forcing it into the LSD battle is not entirely reasonable. As the Shanghai upgrade approaches, LSD is gradually becoming the mainstream narrative in the entire cryptocurrency industry. While other projects are trying to raise incentives and capture the market, we are pleased to see gtcETH innovate in a direction that is completely different from LSD, and we even hope to see more projects follow a similar path.
It may not bring about any wealth effect, but it is expected to benefit the entire industry.
