Steth and ETH are seriously decoupled. Many people say that steth will become the next GBTC. I have pledged a large amount of ETH. What should I do with the steth I have now? In addition, what is the difference between steth and Binance beth? A friend suggested that I switch to beth. Is that okay? To clarify this issue, let’s first talk about the mechanism of stETH. Most people don’t understand the basic principles, so they panic when they see steth decoupling and cannot see the essence.
1/ Eth2.0 pledge Because Eth2.0 has switched to the POS mechanism, physical mining machines are no longer needed, and mining must use ETH to pledge to participate in network security. However, the pledge redemption function has not yet been launched on 2.0. If you want to get back your staked ETH, you must wait for the Ethereum Shanghai upgrade and launch the pledge withdrawal function before you can get it back.
2/ stETH is Lido's ETH liquidity pledge solution. Simply put, everyone uses Lido to participate in 2.0 pledge with their own ETH, and Lido generates a stETH at the same time. This stETH represents the pledged ETH. StETH itself is not ETH, but it represents the ownership of the pledged ETH and can be freely circulated. In order to ensure the liquidity of stETH, Lido has built a stETH-eth lp pool on crv, which is convenient for stETH holders to exit freely.
From this, we can know that stETH is the pledged ETH, but it cannot be directly redeemed for ETH for the time being. The decoupling of steth-eth does not affect the future redemption of stETH for ETH, so there is no need to worry. There is no problem of thunderstorm, because steth is ETH, but it cannot be directly redeemed at present.
3/ Why did steth depeg? What are the risks? Will it return to zero? No, if you hold stETH, it is only a matter of time. There is no risk of thunderstorm, unless eth2.0 does not launch the redemption function. Why did it depeg? Since it is temporarily unavailable for redemption, stETH, as an interest-bearing token and withdrawal voucher, has derived two ways of releasing liquidity. One is to use it as collateral in various DeFi protocols to lend other more liquid assets;
The other is to help relevant investors exit their positions in the Lido protocol by forming a liquidity pool of stETH and ETH on Curve or Aave, so as to conduct premium arbitrage in the process. The reason for this depegging is that a few days ago, the chain showed that multiple crypto whales withdrew from the stETH/ETH liquidity pool one after another, which once aggravated the deviation of the exchange ratio, thus causing the depegging.
4/ The difference between beth and stETH Both of them are solutions to pledge liquidity, and the logic is the same, but with bETH, you give eth to Binance, and Binance, a centralized institution, backs it up and gives you the corresponding beth. Beth must be placed in the Binance exchange to obtain the corresponding income. As for whether your eth is really pledged on the chain, it may not be 100% certain, because beth is a liquid data
5/ Summary: This is not the first time that stETH has been depegged. In June, stETH was depegged due to the UST crash, which triggered a liquidation panic. The reasons for the depegging are: first, the FTX incident caused the giant whales to flee, and second, Ethereum development was upgraded in Shanghai, and it was hesitant about the issue of pledge withdrawal. I think this is the biggest reason. If it is not done quickly, it will be depegged again. However, the depegging will not affect your final exchange, but it may affect the value of your steth holdings.
