Layer 2 (L2) is a secondary protocol built on top of an already existing blockchain system. The main aim of such protocols is to boost the transaction speed and overcome scaling difficulties faced by major cryptocurrency networks like Ethereum and Bitcoin. While the main chain, layer 1, guarantees security, the 2nd layer provides high throughput, so thousands of transactions can take place.
LSDFi can be described as a combination of the world of decentralized finance and liquid staking, namely DeFi protocols built on top of liquid staking derivatives. LSDFi combines liquid staking with decentralized finance to provide users with more lending and staking options.
LSD stands for liquid staking derivatives - financial instruments that allow crypto holders to stake their tokens in a blockchain network to earn rewards while also obtaining a liquid asset representing their staked tokens. These derivatives enable users to benefit from staking, for example earning staking rewards, while trading or using their tokens without waiting for lock-up periods to end.
A liquidity provider (LP-provider) is an individual or entity that supplies liquidity to DEXs or liquidity pools, typically by depositing a pair of assets (e.g., tokens) into a smart contract. LPs earn rewards or fees in return for facilitating trading on these platforms and helping maintain balanced markets.