# Blue Iris: What is Dinero?

**Published by:** [Sooper](https://paragraph.com/@sooper/)
**Published on:** 2024-08-26
**URL:** https://paragraph.com/@sooper/blue-iris-what-is-dinero

## Content

IntroductionDinero (formerly ██████) turns standard liquid staking into a fat stack of products, making the most of what such protocols can offer. DeFi veterans, passive stakers, financial institutions, and Ethereum L2s alike are all using Dinero’s suite for abstracting their liquid staking returns.View of Dinero's core product suite (SOURCE: https://mirror.xyz/0xE90c74145245B498fef924fAdC7bb34253c7cF90/CMvzeywubVlBSjitiP5_FmKsjGUxwQy1qcNN9wQHq2o)The ProblemLiquid staking feels like an apple tree where most protocols only see fruit, overlooking the rest of the tree as just a “means to an end”. This leaves a ton of untapped potential in simple, lightweight additions that could significantly broaden the addressable market for liquid staking. The recent spot ETF craze suggests a growing appetite for exposure to crypto as an asset class. Much like the case for ETFs, institutions recognize how lucrative things like liquid staking are, but are held back by a lack of compliant rails to participate. This is why “RWAs” seem premature as a starting point for onboarding institutions.Fireblocks is a popular custody solution in "compliant" offerings, but it doesn't address root barriers for liquid staking (SOURCE: https://medium.com/@kroweski/integrating-fireblocks-security-into-injective-e17dd327e51d)Specifically, institutions can’t use the same stuff we do without commingling their funds with ours. Most are also bound by KYC/AML regulations, and therefore can only stake with identified validators. These barriers make current institutional offerings impractical for most global entities.The GoalDinero turns every part of the liquid staking “apple tree” into a unique, value-generating product. Dinero’s two-token LST model splits its treasury (pxETH) and staking yield (apxETH) into two distinct offerings, each with their own target market and purpose.Dinero ETH depositors can use their pxETH in DeFi OR stake for apxETH to earn staking rewards (SOURCE: https://mirror.xyz/0xE90c74145245B498fef924fAdC7bb34253c7cF90)Dinero further extends its apxETH product as a generic “yield baseplate”, such as for institutions who need compliant staking solutions, or L2s looking to offer native staking yield to ETH holders. A wide distribution of pxETH will scale Dinero’s staked TVL over time, paving the way for its ETH-backed stablecoin. pxUSD stands to benefit from Dinero’s expanding validator set; a key to unlock an overall better onchain experience (e.g., MEV protection, gas abstraction, etc).How Does it Work? pxETHOn Dinero users deposit ETH, it’s staked, and they get pxETH tokens backed 1:1. Unlike most LSTs though, pxETH does not automatically earn staking yield. Instead, pxETH holders basically get “exclusive access” to DeFi yield opportunities fueled by the Dinero treasury vehicle.Comparison of different LST designs; Dinero uses the third model (SOURCE: https://medium.com/hashed-official/a-dive-into-eth-liquid-staking-node-operators-shanghai-future-innovations-and-dvt-523e275a467c)Dinero uses its stockpile of strategic assets (e.g., CRV, CVX, AURA, VELO, GRAIL) to create new yield opportunities for pxETH LPs, bolstering deep liquidity for a stronger ETH peg. By decoupling the treasury and staking yield into separate offerings, Dinero makes pxETH a highly liquid and versatile base LST. pxETH has markets on 13 chains today, with most on mainnet. These are updated live on the website, so it’s easy for pxETH holders to find new opportunities and manage their positions. Most opt for DEX LP, but pxETH has dozens of integrations and is constantly expanding to new venues (e.g., money markets, indices, yield-stripping, and eventually restaking).pxETH holders can find available yield at https://dinero.xyz/pxeth/marketsWith Hidden Hand, Dinero can bootstrap pxETH liquidity on new chains at zero cost. Dinero collaborates with native ve(3,3) protocols to launch their own bribe markets, where veNFT holders can let Dinero automate their voting rewards. In return, Dinero retains a small % of delegated voting power and uses it to direct incentives to pxETH pools. So far we’ve only seen this strategy with Thena to expand pxETH onto BNB.HH's Marionnette feature lets voters automate their rewards (SOURCE: https://x.com/dinero_xyz/status/1757133863661547697/photo/1)pxETH is susceptible to usual LST risks. Holders can exit pxETH by selling at market price or redeeming 1:1 for the underlying staked ETH. Redemptions undergo Ethereum’s unstaking queue delay, unless users want to pay a higher fee to instantly redeem.How Does it Work? apxETHIn Dinero’s two-token model, every pxETH is backed by staked ETH that’s producing rewards, but only holders who deposit to the staking vault will capture these rewards. This vault receives all ETH staking rewards earned by Dinero validators and auto-compounds them into more pxETH. As rewards accrue to the vault, depositors can withdraw more pxETH than they initially deposited, reflecting their earned rewards.As rewards accrue over time, each apxETH is redeemable for more pxETH from the vaultSo holders have two options with their pxETH: use it in DeFi markets, or put it in the vault to earn rewards from Dinero’s staked ETH. Those who stay outside the vault (i.e. those who prefer DeFi yield) effectively “forfeit” their staking rewards, leaving that as extra yield for vault depositors. Today, only 30% of the pxETH supply is in the vault, meaning rewards from the rest of Dinero’s staked ETH are captured as additional yield by apxETH vault depositors. This is how apxETH is the highest-yielding LST on the market today: a whopping 9.59% APR in pure ETH staking yield.Standard LST (e.g. Lido's stETH) vs. dual-token LST (e.g. Dinero's apxETH/apxETH)Like the branches of an apple tree, Dinero extends apxETH as a basic consumer-facing yield product that’s integrable for any audience (not just “liquid stakers”).ipxETHOne way Dinero does this is via an end-to-end institutional rail for putting in dollars for ETH, staking with validators, and earning Dinero’s competitive apxETH staking yield. Big players can simply plug into Dinero without compromising on compliance or risk.Flow of fiat to ipxETHipxETH is just apxETH managed by institutional asset managers. The ipxETH vault is kept separate from the retail apxETH vault, and institutional deposits go through their own pxETH contract that stakes to distinct KYCed validators.Validator sets are separate, but the sum of their rewards go to the same destinationDespite the separation, both vaults accept the same asset (pxETH), and rewards are split pro-rata as if deposits are commingled in one vault. This setup allows institutions to participate in an enterprise-grade liquid staking solution while earning the same yield as retail.Full overview of ipxETH together with apxETH; everything flows through pxETH and back to the auto-compounder "vault bubble"L2-Branded apxETHAnother branch for distribution is “native-yield-as-a-service” for layer 2s. Dinero is working with different L2s to launch branded versions of apxETH, giving L2 users a way to earn staking yield by holding their native branded LST. When users bridge ETH from mainnet to an L2, they’ll have the option to mint an L2’s branded LST instead. When users choose to do this, their ETH is deposited to apxETH on mainnet, and LayerZero issues brandedETH to the user on the L2. With no validator overhead, this seems like a no-brainer for L2s to boost user retention. L2s get a branded ETH alternative to grow liquidity around their networks, and those who value "L1 alignment" can further achieve this with Dinero. Just like ipxETH, Dinero expands its reach into yet another addressable market by offering apxETH as a generic yield product.How Does it Work? pxUSD and RelayerOnce pxETH and apxETH are both liquid enough for Chainlink price feeds, Dinero will launch its own stablecoin (now pxUSD) that accepts both as collateral. Users will be able to mint pxUSD and leverage their staked ETH in-house. As pxUSD matures, Dinero can extend its utility by effectively token-gating access to its validator set. Initially, this will let anyone transact on Ethereum using pxUSD as gas, facilitated by a relayer on Dinero’s public RPC. Basically, pxUSD holders get a sort of “built-in gas abstraction”; something like Avocado Wallet but no integration needed.Sketch overview of the relayer product (SOURCE: https://x.com/CipherResearchx/status/1806363975405404359)With enough volume, Dinero can monetize the relayer’s order flow and protect users from MEV onslaught in the public mempool. Users get better onchain execution just by holding pxUSD, or what Sami likes to call “tokenized Flashbots”. Zooming out, this adds a final layer of demand for pxETH, since it’s needed to mint pxUSD and access the relayer’s “premium blockspace”. Farther into the future, as Dinero validators control an increasing share of Ethereum blockspace, it could pursue its own block-building service. Paired with the relayer, Dinero could give top-order priority to pxUSD transactions in every block it builds. This would offer much stronger protection than relayer services today that outsource to third-party builders. Terence @0xTerence damn it would be really cool if i could stake my eth somewhere that was properly decentralized and still sufficiently liquid, borrow a stable against it w a healthy amount of levg, then transact mev protected, paying fees in the stable i borrowed that would be really cool damn 5 1:10 PM • May 24, 2023 If Dinero wants, it can easily replicate this strategy on any PoS-based L1: launch an LST, scale its validator set, and run a relayer. Dinero can even help L2s who want to decentralize their sequencer by adding its relayer as an alternative for execution. In any case, pxUSD holders get top-order priority for their transactions paid in a stable gas currency. This intrinsic utility creates "sticky" demand, making pxUSD sought-after for its practical benefits (i.e. enhanced onchain UX), not just yield.PartnershipsGalaxy Digital is a staking service provider with fully KYCed validators, offering a ready-made solution for Dinero’s ipxETH partners. This eliminates the need for them to bootstrap their own identified validator set, outsourcing this to Galaxy instead. Nomura is the largest investment banking group in Japan, with a prominent global standing and nearly $400 billion in assets. Nomura’s crypto arm, Laser Digital, is the first institutional partner for ipxETH. Laser Digital will facilitate capital from Nomura brokerages into Dinero, providing clients a “higher-yielding ETH ETF alternative”.The “local brokers” are Nomura’s brokerage entities, the “asset manager” is Laser Digital, and the “KYCed validators” are operated by GalaxyDinero is in talks with 10 to 15+ chains for branded LSTs. Mode was first in line for this back in January, followed by Hypr. In a recent space, it was soft-confirmed Movement will participate as well. In another space, the team hinted Optimism might also launch their own branded LST, while Velodrome is the most incentivized pxETH venue outside of mainnet. Sami goes in depth about the ideal role of branded LSTs within the OP Stack in general. Dinero mainly uses LayerZero for interop, but announced in the past it will also use Chainlink CCIP. pxETH is available in the IBC ecosystem via Picasso. On the L1 side of things, Sami is an architect of Berachain. He calls it “a second home” for Dinero, so Berachain’s PoL could be a new facet of Dinero’s strategy. The team also apparently has a proof-of-concept for launching on Sui.LayerZero and its OFT standard allow pxETH to go cross-chain (SOURCE: https://dinero.xyz/pxeth/bridge)Users were told “stay tuned news soon” on Dinero’s expansion to the recently announced Corn L2. Dinero mentions zkSync as suitable for pxUSD gas payments even with a centralized sequencer (possible for any L2 with a similar PAYMASTER feature).Tokenomics$DINERO Price: $0.09 Market Capitalization: $44.9 million Circulating Supply: 488,198,988 Total Supply: 1,154,659,219 FDV: $106.1 million SOURCE: Coingecko DINERO is the protocol’s governance token, allowing holders to vote on changes to the protocol and strategies for deploying the DAO treasury. By staking DINERO, users can earn auto-compounded DINERO rewards and gain 3x voting power. Total rewards earned by sDINERO will scale tightly with Dinero’s TVL and corresponding revenue. Part of the supply is reserved for incentives and strategic allocation (e.g., token swaps, DINERO bonds, treasury management, etc). Dinero has around $46 million in TVL backing pxETH today, with 15,874 ETH staked across 495 of its validators. It has another ~$12 million across its Pirex and Hidden Hand products.pxETH is the fastest-growing LST on the market today (SOURCE: https://defillama.com/lsd)RevenueAs their core revenue model, LST protocols retain a portion of the yield generated by staked assets. Dinero’s treasury collects 10% of all staking yield generated by retail, institutional, and L2 deposits alike, ensuring steady inflows from its wide distribution of pxETH. This fee structure fuels a powerful feedback loop:revenue is used to acquire more strategic governance assetsthese generate higher DeFi yields exclusive to pxETHhigher yields attract more ETH deposits to mint pxETHmore ETH deposits mean more staking rewards for apxETH, ipxETH, and L2pxETHas total staking rewards increase, so does Dinero’s revenueOf Nomura’s total assets, a modest 1% allocation to ipxETH could generate $15-$20 million for the Dinero treasury, just from this partner alone. If Dinero successfully partners with 15+ L2s for its branded LST offering, it would grasp a sizable share of the L2 market. This would allow the treasury to scale its inflows directly with the growth of native ETH TVL on Ethereum L2s.ConclusionOkay I promise no more fruit tree analogies. The main takeaway is there’s so much untapped potential in liquid staking, and protocols today only scratch the surface. Dinero stands out by scaling in two directions: horizontally with apxETH as a generic yield baseplate, and vertically with neat extensions like pxUSD or the relayer. Its vision is nicely balanced, practical and succinct. Dinero doesn’t bite off more than it can chew, with its ambitions always in arm’s reach.Innovation in this industry can feel so niche and circular that it’s easy to forget the big picture. As we enter month 47 of the DeFi bear market and suits continue to chuck money into ETFs, it seems more and more likely that “going back to the basics” will spur a revival of DeFi. Maybe Dinero will be the butterfly that shows us how to fly again.Come join the Galaxy Box Follow me on Twitter Join the Dinero Discord Follow Dinero on Twitter DISCLOSURE: sDINERO is currently the fourth largest position in my portfolio (~7%). I have not been compensated in any way for this article, and I was not asked to write this article. The information provided in this article is solely for educational purposes and should not be considered as financial advice. The views expressed in this article are my own and do not necessarily reflect the official policy or position of any company or organization. Linked references are not endorsements. Readers should always conduct their own research and seek professional advice before making any financial decisions.

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