A Comparison Of stETH To ETH

Staking and mining are two different phenomena related to cryptocurrency that are used for creating new coins and circulating them on the market. In mining, a miner solves computational equations to mine new coins and get rewarded. As part of staking, a staker deposits money into a cryptocurrency wallet to support the security and operation of a blockchain network. In its simplest form, staking is the process of locking cryptocurrencies to receive rewards for holding them.

Staking is a term used to refer to the delegating of a certain number of tokens to the governance model of the blockchain and thus locking them out of circulation for a specified length of time

Nicole DeCicco

What is Lido and what problems does Lido solve?

Ethereum’s transition to proof of stake (PoS) began on December 1st, 2020, with the launch of the Beacon Chain. As a result, holders of Ethereum tokens were able to earn rewards by staking their tokens to protect the Ethereum network. However, staking is not something a typical ETH cryptocurreny holder can do because it requires extensive technical knowledge to make it work. Here are some issues associated with staking ETH tokens.

1. Technical expertise: It is important for a person to have the ability to install and update software all the time so as to stay current with the latest release of the stake module. The failure to run the software due to power outages or other issues results in a loss of rewards and in the worst case, staked Ethereum.

2. No unstaking: Due to the fact that Ethereum 2.0 has not yet been launched and no deadline has been set, once ETH tokens have been staked they cannot be withdrawn until Ethereum 2.0 is launched. Because there is no deadline for Ethereum 2.0 network launch, no one knows when they will be able to withdraw their funds. Probably by the end of 2023, maybe even earlier. All depends on how quickly Ethereum core developers complete the transition from Proof of Work to Proof of Stake.   

3. ETH Token requirements: In order to serve as a validator and stake tokens, one must have ETH tokens worth 32 ETH. At today’s ETH price it is more than 100,000 USD investment one must make to start earning staking rewards. 

Lido tackles all these problems head on and solves them elegantly. With LIDO, anyone can stake ETH tokens even if they only have a fraction of them. Lido’s liquid staking solution for Ethereum is backed by the biggest providers.

What is stETH Token ?

A staked ETH token is an ERC20 token in Lido. Once a deposit is made, the token is minted and burned when redeemed. Ethers staked by Lido are pegged 1:1 to the balance of the stETH token. Every day the oracle reports the change in stake, which is when stETH token balances are updated.

We will be comparing the prices of stETH to ETH in this post, as well as analyzing any events that triggered a big difference in price between the two tokens.

This graph gives us a comparison of the price of stETH over a period of time and with the price of ETH over the same period. We can see here that in terms of both stETH and ETH, the price is not much changing, but there are a few dates where we can see a slight difference between the two prices.

To get a clear understanding between the stETH and ETH prices, we have seperated a view by taking the stETH premium > 0 and all other cases into consideration.

As you can see from the above analysis, we can see the stETH premium values on an hourly basis for each day. If we consider the stETh premiums > 0, we are able to see them on some specific dates and hours.  A maximum stETH premium of 0.13 was found on April 2nd, 2022. The same has been observed on March 6th, 2022. stETH and ETH tokens didn’t see many large price changes here. In that case, we can conclude there were not many events that caused a large price difference between the two tokens.

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