Lido is the staking solution of ETH 2.0. Users can stake ETH and use STETH to participate in the on-chain lending, so as to provide them with the opportunity to obtain additional revenue from other protocols and create a more secure ETH network.
STETH is the ETH staked on the Ethereum beacon chain, which is pegged with ETH 1:1 on the beacon chain, that is, 1 STETH = 1 staked ETH. When the Ethereum Merge is completed and the beacon chain opens the withdrawal function, the user can exchange one ETH with one STETH.
STETH effectively acts as a bridge to bring the staking rewards of ETH 2.0 to ETH 1.0, and solves the problems including poor rights and liquidity of using, selling and trading in the Ethereum beacon chain. It is supported by many industry-leading staking providers.
The decentralized finance (DeFi) platform “Lido Finance” has become the largest staking service provider of Ethereum.
How does Lido Staked Ether (STETH) Work?
When the user deposits Ethers into the Lido smart contract, the user will receive ERC20 tokens STETH (staked ETH) at a ratio of 1:1. The deposited Ethereum tokens represent the ETH balance staked by the user on the beacon chain and the accumulated staking rewards or penalties imposed on the validators in the beacon chain. When the beacon chain starts the transaction, the user will be able to directly exchange the STETH into unstaked Ethers and rewards.
Lido mainly involves users (stakers) and validator node operators (validators). The stakers entrust the staked assets to the node operator through Lido's smart contract.
Users can stake on Lido's interface, and their tokens will be sent to the collateral contract of the protocol. The contract will collect the user's funds and distribute them to the node operator selected by the DAO in increments of 32 ETH. The node operator is responsible for the actual staking work on the chain in the collateral protocol.
The node operator has no right to know the user's assets in the process, which belongs to the non-custodial form. Users access staked assets and mint or burn ST assets through staking pool contracts. These node operators are the entities responsible for the management and maintenance of validators, which means that they are the people who actually stake.
What is Lido Staked Ether (STETH)?
STETH is an ERC20 token, representing the Ethereum staked in Lido. Tokens are minted on deposit and burned on redemption. The balance of STETH tokens is 1:1 pegged with the Ether pledged by Lido. When the oracle machine reports the change of total stakes every day, the balance of STETH tokens will be updated.
Users can use STETH in the same way as ETH: sell and use it, and because it is compatible with DeFi, it can be used as collateral for on-chain lending. When trading is enabled on ETH 2.0, users can also exchange STETH for ETH.
1. What determines the price of Lido Staked Ether?
There are two schools of thought in determining the price of Lido Staked Ether.
By way of intrinsic value: This typically involves on-chain metrics, project metrics and financial metrics of Lido Staked Ether, collectively known as fundamental analysis. The law of supply and demand, tokenomics, use case, project roadmap as well as regulations and governance involved would affect the value of Lido Staked Ether from a long term perspective.
By way of price action: Primarily analyzed via candlestick chart patterns and technical indicators such as MACD, RSI and the bollinger bands, technical analysis forecasts the price of Lido Staked Ether on the basis that history tends to repeat itself. As the candlestick charts are a general representation of the emotion of the market, news announcements and community sentiment can be significant price action drivers for Lido Staked Ether as well.
HODLers tend to prefer the long term nature of fundamental analysis, whereas short term traders tend to rely on technical analysis more. In reality, both analyses may combine and create interesting scenarios for Lido Staked Ether and the cryptocurrency market as a whole.
2. What is the highest price of Lido Staked Ether in history?
Lido Staked Ether achieved the all-time high of €4588.57 in 2021-11-10, and is currently trading at €1202.33.
3. What is the lowest price of Lido Staked Ether in history?
In 2020-12-22, Lido Staked Ether reached the all-time low of €458.80.
4. Should I buy Lido Staked Ether now?
It is important to remember that Lido Staked Ether, like all other cryptocurrencies, are subject to extreme market conditions, legal policies, project team management and other unpredictable factors. As such, cryptocurrencies fluctuate greatly and it is important to manage your own risk level. Users are advised to do your own research when making investment decisions in the crypto market.