Frax's sfrxETH Surpasses Lido's stETH in Yield
A new player in the decentralized finance (DeFi) space has emerged, offering higher yields than one of its competitors. sfrxETH provides a yield of around 3% per annum, compared to stETH's 2.2% APY offered by Lido.
The difference in yield is due to sfrxETH's dual-token design, which allows it to concentrate validator rewards among vault stakers. In contrast, Lido takes a 10% fee on staking rewards.
Frax Finance, the protocol behind sfrxETH, distributes 90% of rewards to sfrxETH holders, with 8% going to the protocol as a fee and 2% to an insurance fund. This approach allows sfrxETH holders to capture higher staking yields while frxETH stays pegged to ETH within a 1% range.
Lido, on the other hand, relies on a rebasing model where the stETH balance in a user's wallet grows as rewards accumulate. The protocol also faces centralization concerns due to its concentrated validator set.