Introduction

With the growing popularity of Consensus Proof (PoS) networks and their various types, the role of validators has become increasingly important. In many networks, ordinary users can deposit their digital currency through these network validations and use the rewards of validations in addition to helping to ensure network security, due to the network architecture on a proxy basis and without the hassle of setting up and maintaining ninety validators.

In some other networks, the proxy stake feature is not part of the protocol architecture, but services have been developed to facilitate the use of ordinary users' capital alongside the knowledge of experts in setting up node. Services such as Lido are among the most important players in the ethereum network.

What is Ethereum Liquid Staking?

After the potential for stock-based consensus prototypes (especially in terms of energy consumption and processing speed) became apparent, an issue called Nothing at Stake arose that allowed malicious and hostile agents to intervene in the network. Calls into question. Thus, the concept of stake and slashing was gradually added to the protocol architecture. Thus, users could only act as nodes in the network if they could guarantee honest behavior with significant capital.

One of the disadvantages of this method was the reduction of capital productivity (native network ciphers commonly used for staking). Significant amounts of capital are embedded in smart contracts embedded to lock up staking amounts and could not be used. Gradually, protocols came up with solutions to use this capital; Create artificial assets(like stETH)on behalf of the staked token. In this way, users can participate in the defense with a token that represents their stuck property, use it as collateral and borrow, or lock it in other protocols and earn double interest.

What is Lido?

Lido is a service for providing staking services in some of the top blockchains available. This platform works with some of the most reputable validator companies. Lido receives native tokens from networks such as Ethereum, Solana, Kusama, Polygon and Polkadot, giving them to a select group of validators. validators are rewarded by working in the network, and after receiving a commission, they pay the share of the liquidity provider. Lido's share of Ethereum Staking Pools is very significant and nearly 90% of the ethers deposited through Staking Pools have been done through this platform.

stETH

By depositing ether to the Lido platform, users are given a 1:1 stETH token. After this, users can receive a staking bonus every 24 hours. In fact, this token has a flexible balance (Rebase) and its amount increases in users' wallets (under normal circumstances).

It is not possible to exchange stETH with ether on the platform itself, and users must use decentralized liquidity exchanges such as Curve and Balancer and Uniswap dexs and centralized exchanges such as FTX and GATE.IO. Although traditionally, the stETH token has shown good parity with ETH, there is no reason to maintain this trend, and market forces (supply and demand), competing projects, and validity of validators (their collateral not slashing) influence pricing. .

As mentioned, stETH Token has shown a good price barrier with Ethereum so far. The chart below shows the comparison of stETH Token price with WETH from the beginning of January 2022.

The image below shows the stETH/WETH price chart:

The image below shows the diagram above more accurately

As you can see in the picture above, on January 23, the price of stETH/WETH reached its highest value.Now let's take a look at the ethereum price chart on the same date

As we can see, at this date, Ethereum has reached its lowest price, falling from $ 4,800 to $ 2,400, and this is one of the reasons why the price of stETH is equal to that of Ethereum.

conclusion

The stETH token has shown good parity with ETH so far, but factors such as the supply and demand of ethereum and steth, and competing projects for the issuance of validator collateral can affect this price parity, as we saw in the above analysis of how the fall of ethereum caused the price to be unequal With ethereum.