Staked ETH (stETH)

Please review the risk warning at the bottom of this article and please do your own research before using the DeversiFi stETH Invest product

Staked ETH Overview

Ethereum is moving towards a proof-of-stake consensus mechanism called Ethereum 2.0, where anyone can use their ETH to help run network validators that earn a share of inflation rewards. ETH stakes will also earn a share of Ethereum network transaction fees after an event called The Merge occurs, which is when the old proof-of-work consensus mechanism is turned off in Q2/Q3 2022

stETH is what is known as a liquid staking token. Created by a project called Lido Finance, stETH allows anyone to participate in Ethereum network staking, regardless of how much ETH they own. Prior to Lido Finance, in order to participate in Ethereum staking, you were required to stake 32 ETH at a time ($100k at the time of writing) which is prohibitive to all but a few very wealthy people. Liquid staking also means that you can trade your stETH tokens back for ETH (via markets such as those on DeversiFi) so that your ETH is not locked-up in validators if you need it back!

By staking your ETH for stETH on DeversiFi, you earn the same native Ethereum inflation & transaction fee rewards in terms of % return, as someone who was staking a much larger amount of ETH.

Staked ETH Risk Warning

When you stake your ETH for stETH on DeversiFi you are exposing yourself to some of the following risks, which are not limited to:

Lido Finance smart contract risk
Ethereum 2.0 upgrade or technical risk
Lido DAO security and key management risk for the ETH treasury that controls the ETH staked
Validator slashing risk
stETH de-peg risk. stETH may trade lower or higher then un-staked ETH due to demand fluctuation, liquidity or technical constraints

More information regarding the risks of stETH can be found on the Lido Finance FAQ

Staked ETH FAQ?

How is interest earned on my stETH?

Ethereum inflation rewards and some transaction fees (after The Merge) accrue to your stETH tokens. This is reflected by an increase in the value of the stETH token over time so that one stETH token is worth more than one ETH token

You can see the stETH/ETH exchange rate fluctuating over time by checking the stETH/ETH market on the DeversiFI Trade section

Why is the APR displayed on the stETH DeversiFi Invest page lower than the global Ethereum APR?

Due to high demand for staking ETH to run Ethereum validators combined with technical constraints that means only a certain amount of validators are permitted to go online per day (a queue), the stETH APR is slightly lower than the global Ethereum APR. This will catch up over time as the queue clears

If I withdraw stETH from DeversiFi, which tokens do I receive on the Ethereum blockchain?

You receive wrapped stETH tokens (wstETH). If you would like to unwrap your wstETH tokens then you can use the unwrapping portal on the Lido website after you have withdrawn your wSTETH from DeversiFi

What are the fees for staking my ETH for stETH on DeversiFi?

In order to cover the cost of rebalancing and gas fees, DeversiFi charges a 0.05% unstaking fee on the amount of aUST that you unstake. Although no one likes fees, no fees are charged to stake, meaning that you do not pay anything to start participating in the aUST opportunity on DeversiFi

Why does the amount of interest that I have earned sometimes decrease & increase more than I expected?

The accrued interest calculation on the DeversiFi invest dashboard and supply/remove page reports the difference in value between the price of your stETH tokens at the current time vs the price at which you supplied your ETH. If the accrued interest calculation is not reporting what you expected, then the cause is likely due to one of the following reasons:

stETH is a rebasing token which changes price once per day at approximately 12pm UTC. You may just need to wait until after 12 pm UTC to notice a chance in the accrued interest calculation

When you invest in the stETH token (either on DeversiFi or directly with Lido Finance), you are exposed to the stETH/ETH price - ie, the price at which you can sell your stETH tokens back into ETH for. The main stETH/ETH market is a Curve Finance pool, which at the time of writing has 1,600,000 ETH ($4.8bn) in liquidity. This large amount of liquidity should be enough to ensure that stETH/ETH trades close to fair value. However small fluctuations in the stETH/ETH price can occur in the short term, which will impact your accrued interest calculation on DeversiFi

Was this article helpful?
Thank you!