HyFi & Fintech

Pacman LSD Finance: the LSD War on Arbitrum

Pacman is building an LSD cross-chain bridge based on LayerZero’s technology.

Pacman LSD Finance: the LSD War on Arbitrum
Pacman LSD Finance: the LSD War on Arbitrum
Source - Pacman Finance

Singapore, May 09, 2023 (GLOBE NEWSWIRE) -- Pacman committed to building a permissionless DeFi product for LSD liquidity staked token on Layer2.

Pacman allows for the transfer of assets from Layer 1 to Layer 2 through either the Arbitrum Bridge or LayerZero’s bridge. The low transaction fees and high-speed network performance of Layer 2 will help Pacman build decentralized financial products based on LSD (liquid staking derivatives) staking assets more efficiently.

Table of contents:

1. What are the Motivations?
2. How does Pacman LSD Finance work?
3. LSD Assests Bridge base on LayerZero

What are the Motivations?

The goal is to develop a platform that can meet the needs of two stakeholders:
LSD holders

  • The higher yield for low-risk
  • Lower the cost of staking and utilizing LSD assets.
  • Gain exposure to DeFi yield by retaining the liquidity of their assets.

Other LSD-relative protocols

  • Provide deeper liquidity for their LSD assets.
  • Provide a leveraged composable DeFi ecosystem for their LSD assets.

How does Pacman LSD Finance work?

Pacman has developed a comprehensive LSD staking + Leverage trade + bribing system by using the Stake-Vote-Bribe-Leverage-Farm process. LSD staking users can earn interest income and token pledge rewards in the ecosystem, as well as receive bribes from other LSD projects.

Pacman has built a complete LSD staking + Leverage trade + bribing system through:

  • Stake
  • Vote
  • Bribe
  • Leverage Farm
  • Farm

LSD staking users can earn income through:

  • Interest
  • Staking rewards
  • Bribe

Revenues of the Stake Model come from lending interest, subsidies of oPAC from protocol, bribery from other LSD protocols, and the LSD treasury.

  • Lending interest: When an LSD asset is added to the Lend module, a Staked-LSD-ETH + ETH leverage trading pair will be added to the Leverage Farm. Users who stake their LSD ETH can earn transaction fees generated from lending in the leverage trading pair.
  • Subsidies of oPAC from protocol: In the early stages of the project, Pacman will provide subsidies to all ipTOKENs in the Stake module to increase the protocol’s liquidity depth. The weighting of individual users in a single Stake module also uses the C&FOO model. This means that users holding vePAC can earn more protocol income.
  • Bribery from other LSD protocols (LSD War): As more and more LSD-related protocols appear in the market, what they need most is LSD/ETH liquidity. Pacman Protocol can efficiently help them boost their initial liquidity. Each protocol can add additional subsidies to a single Stake mining pool in Bribe, which will be claimed after the end of the Epoch.

The Vote module will add emission voting related to LSD assets.

    LSD treasury: Pacman aims to provide sustainable, long-term returns on LSD assets to the investors while increasing the efficiency of asset utilization in the Lend module. In addition to ensuring stable lending rates and asset safety on the Farm side, we will also launch lock-up products with durations of 7, 14, and 30 days to further optimize asset utilization.

The potential strategies are:

  • Stake-incentivized low-liquidity LSDs have better mechanism designs and returns compared to Lido.
  • Injecting ETH into Aura and the Balancer pool related to LSD assets.
  • Providing rETH-WETH pair liquidity on Aura.
  • Providing LSD for Gearbox passive pool.
  • Providing LP rETH-WETH Aura liquidity on Pendle, etc.
  • Converting ETH into frxETH and staking in Frax to obtain sfrxETH for a base rate.
  • Converting ETH into wstETH and using a lending strategy in Aave V3.

LSD Assests Bridge base on LayerZero

As the majority of ETH and ERC-20 assets exist on the Layer 1 mainnet, users can only transfer these assets from Layer 1 to Layer 2 by using the Arbitrum Bridge. Unfortunately, there are no interoperable channels between different Layer 2 solutions at the moment.

Pacman is committed to providing improved LSD services for Layer 2 and acquiring more LSD assets from Layer 1. To achieve this, it is crucial to develop a cross-chain bridge that supports LSD assets. Currently, Pacman is building an LSD cross-chain bridge based on LayerZero’s technology. Pacman will announce the latest development progress on GitHub after the project is launched.

Arbitrum Official Bridge

LayerZero Development Docs


Iwatani Sashi

Source: Pacman Finance

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