A token which unleashes a new panic in the cryptocurrency market .. What is the Ethereum ratio?

A controversial new cryptocurrency has wreaked havoc in the money market asset digital, but this time it’s not one stablecoin.

Stacked ether, or stETH, is a token which is expected to be worth the same value as ether, but has been trading at an escalating discount on the second largest cryptocurrency in recent weeks, fueling the flames of a liquidity crisis in the cryptocurrency market.

On Friday, stETH dropped to 0.92 Ether, which means an 8% discount on Ether, the cryptocurrency shown on the Ethereum network.

But what is StETH, or what can be translated for Arabic in conjugated ether?

Each stETH token represents a unit of Ether that has been “stored” or deposited, called the Beacon Chain.

On the other hand, Ethereum, the network on which Ether is based, is in in the process of being upgraded to a new version which aims to be faster and cheaper to use and Torch Chain is an environment of test for this update.

Staking, or staking, refers to a practice in which investors freeze their own token for a period of time to contribute to the security of the cryptographic network.

In return, they receive rewards in the form of interest-like returns.

The mechanism behind this is known as Proof of Stake, which is different from Proof of Work or mining, which requires a lot of computing power and energy.

Currently, to participate in the Ethereum upgrade, users must agree to secure a minimum of 32 Ether even after the network has been upgraded to a new one. standardknown as Ethereum 2.0.

However, a platform called Lido Finance allows users to share any number of Ether and get a token derivative called stETH, which can then be traded or loaned to other platforms.

It is considered an important part of decentralized finance, which aims to reformulate financial services such as loans and insurance using blockchain technology.

StETH is not one stablecoin such as tether or terraUSD, la stablecoin “algorithmic” that collapsed last month, but rather a proof of debt bond that allows stETH holders to redeem their cryptocurrency for an equivalent amount of ether once the upgrade is complete.

Separation of the ether

When the land project stablecoin plunged, stETH’s price started trading below Ether, as investors raced to exit.

A month later, cryptocurrency lender Celsius began stopping withdrawals from the account, causing stETH to drop further.

Celsius operates in much like a bank, taking cryptocurrencies from users and lending them to other institutions to generate a return on deposits.

The company took the users’ Ether and mortgaged it via the Lido platform to increase its profits.

Celsius holds over $ 400 million in stETH deposits, according to data from the DeFi Board Ape analytics website.

The fear now is that Celsius will have to sell stETH coins, leading to huge losses and further downward pressure on the token.

But even the sale is practically unavailable, as StETth owners will not be able to redeem theirs token for Ether up to 6-12 months after an event known as a “merger”, which will complete the transition of the Ethereum network to the new Proof of Work for Proof Update of Stake.

This leads to an increase in the cost of the process, as it means that investors are locked out unless they choose to sell it on other platforms. One way to do this is to convert stETH in Ether using Curve, a service that pools funds to enable a trading faster in entrance e in exit of token.

liquid assets

For his part, Ryan Shea, an economist at the investment firm in cryptocurrencies Trakx.io, claimed that the pool Curve’s cash flow for the stETH to Ether switch “has gotten pretty skewed”, with the second largest cryptocurrency accounting for less than 20% of Curve’s reserves, meaning there won’t be enough liquidity to meet all withdrawals.

“The stETH coin issued by Lido is supported by a 1: 1 ratio with the deposits of Ether,” Lido said. in a tweet last week in an effort to allay investor concerns over the growing divergence of the token STETH from the value of Ether.

“The exchange rate between Ether and an Ether adhesive does not reflect the volume of the reserve Ether on the platform, but rather the volatile rate of the secondary market,” he added.

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