It’s only been a month since the collapse of Terra, and the chaos that it created in the crypto market, and now Lido Finance and its Staked Ethereum (stETH) are at the center of another potential liquidity crisis.
Crypto lending company Celsius is one of Lido’s principal clients and, as such, one of the largest holders of stETH. The problem? Staked ETH is always supposed to be worth 1 ETH—and it hasn’t been for some time now.
Staked ETH represents Ethereum that’s been locked up on the Ethereum 2.0 beacon chain—a network that will soon be merged with the Ethereum mainnet in a highly anticipated upgrade that transitions the blockchain to proof of stake. Normally, users would need a minimum of 32 ETH (worth roughly $40,000) to participate in ETH 2.0 staking and earn rewards. But Lido Finance makes it possible for users to stake any amount of ETH. And because it’s “liquid staking,” it gives users stETH tokens in return.
That stETH can then be lent, staked, and traded for other tokens.
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