frxETH v2 will launch an efficient and decentralized LSD protocol

**Frax Finance recently released details of their upcoming LSD protocol frxETH v2 and why it is the most unique, versatile and efficient decentralized protocol, and the news quickly garnered a lot of attention. We know that in the traditional LSD protocol, their basic structure is similar, the lender lends ETH and obtains a receipt token, and the borrower rents ETH and pays interest. The way something like Rocket Pool works is by staking ETH on validators. Lenders can stake ETH on Rocket Pool and earn rETH (Rocket Pool’s receipt token). Borrowers can lease ETH and pay interest in order to be validators. Rocket Pool’s receipt token, rETH, has a one-to-one correspondence with the value of ETH. Therefore, the value of rETH will fluctuate with the price fluctuation of ETH. **

** Lido, also on the LSD protocol, works by staking ETH on Ethereum 2.0 validators. Investors deposit ETH into Lido and then receive stETH (Lido’s receipt token). Similar to Rocket Pool, borrowers can lease ETH and pay interest in order to be validators. However, Lido’s validator leasing is limited and only specific nodes can be used for validators, which are managed and controlled by the Lido team. Although there are differences in the specific implementation of the two, the basic logic remains the same. **

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**The founder of Farx also stated on the social platform that the motivation and first principle of building the frxETH protocol is precisely because the basic structure of all LSD protocols is a simple lending market. No matter what kind of incentive mechanism or marketing strategy, lenders borrow By withdrawing ETH and receiving a receipt token (LSD), the borrower leases the right to run a validator and pays interest to the lender according to loan terms based on loan-to-value (LTV). **The purpose of FrxETH v2 is also very clear, focusing on creating a truly decentralized, unique and multifunctional LSD protocol. And the key to creating a truly decentralized LSD protocol is to create a peer-to-peer pool lending marketplace where lenders can receive receipt tokens and borrowers can rent validators. This structure allows for maximum decentralization and versatility. The frxETH v2 protocol is designed to be as simple as possible, and borrowers only need to provide a minimum of ETH collateral to rent a validator. Withdrawal addresses and all custody are decentralized on-chain, just like the DeFi lending market. Interest is paid directly from the borrower’s ETH and PoS cash flow, with rates determined by market forces and utilization. There are no fees or commissions for hardware, making the protocol very profitable for advanced node operators.

If interest rates spike and you can't make a profit, just get out or pay off your debt. Because your debt is in validators, not in ETH. So you can pause for now and wait for rates to match your expectations again. And your loan-to-value ratio (LTV) is calculated by dividing the validator value by the stake value plus the validator value.

These features ensure that the frxETH node becomes the best operator in the entire industry in a decentralized manner without restrictions such as whitelists, KYC or reputation. Like the frxETH v1 validator, the frxETH v2 node will also top the performance rankings, making it one of the highest rated nodes in PoS history.

Also, make sure your LTV is healthy. Otherwise you will be liquidated (aka the validator is ejected). If you are punished or misbehaved, your LTV will go up and some collateral will be forfeited. If your collateral fails to pay your debt, you must increase your collateral or be liquidated.

Currently, frxETH v2 is the most efficient and decentralized lending market and is a stablecoin backed by ETH collateral. It is also the most programmable LSD base layer on which projects can build. There are more innovations in the protocol, for example, ETH not used by validators will be sent to Curve AMO for liquidity and yield. Utilization will take into account AMO ETH, so it is self-balancing. Beacon oracles are also fully decentralized and controlled on-chain, with zk proofs and no admin keys, multi-signatures, or trust in EOAs.