What is Staked Ethereum (stETH)?

Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.

You may have heard the name “Staked Ethereum” in the news, as yet another crypto product is at risk of collapsing.

Staked Ethereum, also known as stETH is a token that solves a simple problem: How to participate in the Ethereum 2 transition and not lock up your funds.

Sounds more complicated than it is, so let’s take a step back.

At some point in the future, Ethereum will move to “proof of stake” which means that people who deposit money can take part in validating transactions and getting rewards for it. To get enough people to help validate in the future, the blockchain allows people to put their current Ethereum into an escrow, where it is locked up until the move, but earns interest.

The problem for many: It’s locked up, and nobody knows for sure when the move to Ethereum 2 happens.

That prompted a company called Lido to come up with a solution: They will take your Ethereum and put it in the escrow on your behalf, and give you their own token in return which you can use just like the real Ethereum. On top of that, they are paying you staking rewards, which are like interest. Once Ethereum 2 launches, it all gets exchanged back.

So, in theory - because one stEth will be exchanged back to one Ethereum, both will always have the same price. But if people start to doubt that they will get their money back, or think Ethereum 2 will take longer, they may start selling at a discount - and that is exactly what happened last week.

Currently, stEth is trending 5% under the actual value of Ethereum - so beware, those staking rewards may not be worth it!

Disclaimer: This podcast references our opinion and is for information purposes only. It is not intended to be investment advice. Do your own research and seek a duly licensed professional for investment advice.