Seamless Protocol introduces Integrated Liquidity Market on Lido

Seamless Protocol is launching an Integrated Liquidity Market (ILM) on Lido for wrapped staked Ethereum (wstETH), offering borrowing strategies for tokenholders seeking an alternative to traditional restaking.

According to Seamless, the ILM will enable stakers on Lido to automatically use a borrowing strategy and compound positions on wstETH, meaning that it automatically reinvests the returns from staked Ether to potentially increase the users’ rewards.

The difference between this approach and restaking is in the level of sophistication of the investment strategy. Per the protocol, its ILM continuously manages the users’ funds, enabling low-collateral borrowing since the funds are maintained within the ILMs. Restaking, on the other hand, involves reinvesting staked ETH to earn additional rewards without relying on advanced automated strategies.

On-chain lending can be used for various purposes, such as by traders seeking leverage or liquidity and long-term investors. This process on Seamless targets single-purpose loans, where the lender knows where the liquidity is being used, and the borrower cannot use it for anything else.

“Because the Borrowing Strategies are on-chain in smart contracts, the Liquidity Suppliers have full visibility into how the funds are used,” the company previously told Cointelegraph.

This strategy balances the risk taken and enables lower collateral requirements. According to Seamless’ Daryl Hok, strategies are created and voted on by the community, before being coded into smart contracts.

“Seamless is community-led, so new ILM strategies and markets can be proposed through the governance process. SEAM governance holders and delegates vote on strategies to be added to the protocol.”

The protocol was built on the Base network and went live in mid-2023 by developers from Seashell, RNG Labs and Loreum Labs, as well as previous contributors from Uniswap, Aave, Ampleforth and CertiK. According to DefiLlama, Seamless currently has $41.91 million in total value locked (TVL), with over $20 borrowed on-chain since January.

Tokenholders who stake tokens or participate in decentralized finance protocols are usually exposed to risks, including security vulnerabilities in smart contracts, market volatility and regulatory uncertainty.

Source: https://cointelegraph.com/news/seamless-protocol-introduces-integrated-liquidity-market-lido