Lido Staking Ether (STETH): The Most Successful Staking Cryptocurrency in the History of the Market

While there are many cryptocurrencies that can be used for staking to earn crypto rewards, there is a class of cryptos designed specifically for these purposes. Among these cryptos, the only one that has ever reached the top 10 cryptos by market cap is Staking Ether by Lido. STETH is now the 8th largest crypto and has achieved an impressive market cap of nearly $11.5 billion.

What is STETH Crypto by Lido?

Lido is a decentralized platform that enables flexible staking on a number of popular blockchains, including Ethereum. The Staking Ether (STETH) token is Lido’s primary crypto used for Ethereum staking. STETH is an ERC-20 token that represents the staked Ether on the blockchain.

When a user stakes their Ether on the Ethereum blockchain, they receive a certain amount of rewards in the form of Ether. These rewards are automatically converted into STETH by Lido and sent to the user's wallet. The conversion rate is 1:1, which means that 1 Ether staked on Ethereum is equivalent to 1 STETH.

STETH holders can trade or transfer their tokens just like any other ERC-20 token. In addition, STETH can be used as collateral for loans and other DeFi applications.

There is no hard peg maintained by Lido between ETH and STETH. However, STETH’s mechanism of action ensures that the two cryptos’ prices are normally very close to the 1:1 ratio. Over the last year, the highest deviation of STETH from ETH happened in June 2022, when STETH touched a low of 0.93 ETH. By September, STETH was back to parity with ETH.

Features and Benefits of STETH

Liquidity: STETH is a highly liquid token that can be easily traded or transferred on various decentralized exchanges. This makes it easier for holders to manage their staked Ether and use it for various DeFi applications.

Easy to Use: STETH can be easily accessed and used by anyone with an Ethereum wallet. Users can stake their funds on the Ethereum blockchain and receive STETH rewards without having to worry about the technical details of staking.

DeFi Applications: STETH can be used on other DeFi applications. This allows holders to use their staked crypto without having to unstake it from the blockchain.

Passive Income: STETH, and staking in general, is a form of passive income. Users can earn rewards without having to actively trade or manage their crypto funds.

Diversification: STETH allows users to diversify their cryptocurrency holdings by adding exposure to Ethereum staking, a form of crypto investment that is different from other crypto strategies such as yield farming via lending and borrowing protocols or active swing trading of crypto on exchanges.

Accessibility: Normally, in order to participate in Ethereum staking, users would need to run a full staking node on the chain and commit at least 32 ETH (around $60,000). This amount is often unaffordable for many crypto users. In contrast, you can stake on Ethereum via Lido and STETH using any amount.

Potential Drawbacks of STETH

Potential Hacks: Staking STETH is not an entirely risk-free endeavour. Users could potentially lose their staked funds if there is a security breach or other technical issue with the network. When staking directly on Ethereum using ETH, you are exposed to one point of vulnerability – the blockchain itself. When using Lido and STETH, you are adding the second point of vulnerability – the Lido platform.

Price Volatility: Despite its tight 1:1 ratio with ETH, STETH’s price is subject to some volatility. The value of STETH has occasionally fallen below the price of ETH by more than a minute amount.

Opportunity Cost: Staking with STETH rarely pays the highest yield available in the world of crypto. At the moment, Lido offers an annual return of 5% for staking on Ethereum. Using your crypto funds on other DeFi platforms may potentially deliver higher returns.

STETH is a unique token that offers users a way to trade, transfer, and use their staked ETH for various DeFi applications. While there are some potential drawbacks, such as potential hacks and price volatility, the benefits of STETH make it an attractive option for many crypto investors. Judging by STETH’s massive market cap and its membership in the top 10 crypto club, the crypto investor community is being appreciative of the token’s flexibility and unique benefits.