Liquid Staking Derivatives (LSD)

Liquid Staking Derivatives (LSD) will be the primary product of Hydro Protocol that offers Liquid Staking. On the LSD product, for example, users may deposit their INJ tokens in exchange for hINJ tokens to start earning staking rewards issued by Injective in exchange for helping to secure the Injective network.

hINJ is the liquid staking token (LST) created by Hydro Protocol that enables instant staking benefits and unlocks liquidity for different uses across other DeFi protocols. When users deposit INJ with Hydro LSD, they will mint and receive hINJ on a 1-1 basis in return. This 1-1 ratio will always be honoured through a smart-contract.


Hydro Protocol stakes received INJ tokens with a set of validators based on a standard criteria determined by the Hydro team. Staking deposits will be on a round-robin basis to ensure fairness across honest validators. The validator set were predetermined by the Hydro Protocol with these criteria:

  • Uptime > 99%

  • Commission ≤5%

  • Voting Power > 0.1%

Hydro Protocol also plans on operating a node and being included into the active validator set. This will increase security and efficiencies on the network for Hydro users. Until then, Hydro will delegate to at least 5 public validators that match that criterion above.

How does it actually work in the background?

Hydro Protocol smart contracts would lockup native assets (ie. INJ) and mints liquid assets (such as hINJ). Liquid tokens like hINJ are practically a proof of ownership or a receipt for the underlying INJ.

When liquid assets are minted, the staked assets start automatically accumulating staking rewards. (which are rewards for interacting and/or maintaining the relevant issuer blockchain network). In the background, Hydro automatically stakes the received INJ to a validator node. Received rewards from the staking are accrued in the user’s interface. When a user initiates a redemption of the hINJ back to the Asset, then the protocol releases all accumulated rewards and starts the unbonding process.

​​It is important to reiterate that smart contract protocols such as Hydro Protocol simply comprise a set of autonomous blockchain-based smart contracts deployed on the relevant blockchain network, operated directly by users calling functions on it (which allows them to interact with other users and/or engage in trading or other activities in a multi-party peer-to-peer manner). There is no further control by or interaction with the original entity which had deployed the smart contract, which entity solely functions as a provider of technical tools for users, and is not offering any sort of securities product or regulated service nor does it hold any user assets on custody. As such, any token or other rewards which users potentially may earn from the protocol arise solely out of the user's involvement in the protocol by taking on the risk of interacting with other users and/or protocols.

Rewards on Hydro LSD:

As aforementioned, staking rewards automatically start accruing immediately after depositing with Hydro LSD. These accumulated rewards can be seen on the front end of the WebApp, and can be re-claimed at any time.

Your choice of INJ or HDRO

An innovative feature that is in Hydro Protocol’s LSD platform is the option of receiving the staking rewards in the basic INJ asset or in an amplified HDRO assets.

We believe it is important to provide users with a flexible option on how to implement their assets for value accrual. That is why we have implemented this feature where users can choose to accumulate rewards in either INJ or in HDRO.

APY’s will be greater in HDRO than in INJ. This means that if a user is bullish on HDRO and have a long term view on INJ, they can opt to lock in their rewards for additional rewards by selecting HDRO.

Examples of hINJ Utility

So you have deposited your INJ in exchange for hINJ. Your INJ is now accumulating rewards, but what can you do with your hINJ? Here are some utility use-cases for your hINJ:

  • Use Hydro’s Farming feature for additional rewards, like the E.A.F strategy

  • Trade on Helix’s INJ-hINJ pair

  • Borrow against collateralized hINJ on Injective’s lending protocol

  • Provide liquidity on INJ-hINJ pairs for further LP incentives

For immediate use within the protocol, you can discover the Hydro Farming described below.

Benefits of using Hydro Liquid Staking:

  • hINJ represents your staked INJ on a 1-1 basis. You are receiving yield.

  • hINJ can be transferred, stored, spent, or traded like the INJ asset

  • Used as collateral on LSDFi applications

  • Used as collateral on RWA indices

  • hINJ can be swapped for INJ immediately, allowing users to get access to their delegated INJ without having to wait for the unbonding period.

  • hINJ can be used across DeFi for lending, LP pools & more.

  • Receive additional rewards in HDRO for a prolonged locked period

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