Before we start with Lido Staked ETH (teeth), it is important to understand two things – Beacon Chain and Lido. The ‘beacon chain’ is the base the Ethereum ecosystem hopes to become secure, sustainable, and scalable. Currently, the Beacon Chain runs in parallel to the main net and uses proof-of-stake; when the merge happens, the Ethereum mainnet will move to proof-of-stake. Ethereum staking currently requires a minimum of 32 ETH to be locked until after the blockchain upgrades to the new standard — Ethereum 2.0.
That’s where Lido steps in. It is a liquid staking platform that lets users stake any amount of ETH. In return, users get stETH – a derivative token.
What is Staked Ether?
Staked Ether (stETH) is a token you get on a 1:1 basis when you stake with Lido.
stETH represents your staked ETH,; you can use your stETH to earn yields and lending rewards like regular ETH.
Your teeth balance is updated daily and is calculated as initial deposit + staking rewards – penalties.
Wondering what these penalties are? ETH validators are penalized if they fail to validate transactions.
stETH can be considered a promissory note – stETH holders can redeem their tokens for an equivalent amount of ETH – 6 to 12 months after the upgrade or merge is completed.
Decoupling from ETH
start price has gone below that of ETH because of many reasons:
The fear created by the crash of the Terra project. The halting of withdrawals by the major crypto lender Celsius. Three Arrows Capital, a crypto hedge fund in financial trouble, is actively selling its stETH holdings. The Curve liquidity pool for switching between stETH and ETH does not have adequate liquidity.
Since Celsius has over $400 million (roughly Rs. 3,141 crores) in stETH deposits, investors fear it will have to sell its stETH, which will create additional downward pressure on stETH.
When writing, stETH has fallen to 0.95 ETH – a discount of 5 percent to ETH.
Other risks
Some of the potential risks are:
You could lose your capital if the Lido smart contract is exploited. ETH 2.0 is experimental and under development. You could lose your money if any bugs in it are exploited. You could lose your money if ETH 2.0 fails to get adequate adoption. Multiple multi-signature accounts hold around 20 percent of the stake. You could lose your capital if signatories lose their key shares, get hacked,, or go rogue.
You could lose your capital to staking penalties.
Tens can be withdrawn only when transfers and smart contracts are implemented on Ethereum 2.0.
Ethereum co-founder Vitalik Buterin feels that since Lido Finance holds 1/3 of staked ETH, it could “theoretically disturb the Ethereum network post-Merge”.
The project must have a large, vibrant, active, engaged, and positive community with a fair share of fanatics. The major social platforms are Discord, Facebook, Instagram, LinkedIn, Medium, Reddit, Telegram, Twitter, and YouTube.
Rohas Nagpal is the author of the Future Money Playbook and Chief Blockchain Architect at the Wrapped Asset Project. He is also an amateur boxer and a retired hacker. You can follow him on LinkedIn.
Cryptocurrency is an unregulated digital currency, not a legal tender, subject to market risks. The information provided in the article is not intended to be. It does not constitute financial advice, trading advice, or any other advice or recommendation offered or endorsed by NDTV. NDTV shall not be responsible for any loss arising from any investment based on any perceived guidance, forecast, or other information in the article.
