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unshETH: Exploring Shared Liquidity and Trading Efficiency for LSDs
Osgur Murphy O Kane
Key Takeaways
14 min read
  • unshETH aims to become the liquidity hub for LSDs by creating shared liquidity for a diversified basket of LSDs. This approach seeks to offer easy access to liquidity for lower-cap tokens with the goal of improving overall decentralization of validators.
  • Assets in the basket have a governance-determined maximum weight. This is to ensure that if an asset in the pool depegs, its impact will be mitigated due to the limits. This differentiates it from Curve and Balancer who have uncapped weights for stable pools.
  • The rationale is that a basket offers better risk-adjusted yields compared to singular LSDs due to diversification benefits. However, it also adds additional smart contract and governance risks.
  • Projects can participate in governance to gain, maintain or improve their weighting, and bribes can be used to incentivize their inclusion. If the protocol gains sufficient traction, ‘USH Wars’ could create strong demand for the token. However, this introduces governance risk and the potential incentivization of riskier tokens.


unshETH is seeking to become the liquidity hub for LSDs, creating shared liquidity for a diversified basket of LSDs and an AMM (vdAMM) for the lowest swap rates. The ultimate aim is to have unshETH ubiquitous in DeFi, solving the liquidity problem with various LSD tokens. In effect, the protocol aims to ‘enhance the decentralization of validators’ by making the benefits of holding particular LSDs more uniform by providing shared liquidity for newer and less popular LSD protocols.

The protocol consists of two tokens, USH - the incentivization and governance token, and unshETH - an LSD representing a basket of LSDs with shared liquidity. unshETH and USH are omnichain and can be used on BNB Chain and Arbitrum so far.