Beacon Chain and Lido should be understood before we begin with Lido Staked ETH (stETH). The Ethereum ecosystem's foundation for sustainability, scalability, and security is the "beacon chain". Currently, the Beacon Chain operates independently of the mainnet and employs proof-of-stake; after the merge, the Ethereum mainnet will switch to proof-of-stake as well. Until the blockchain is upgraded to the new standard, Ethereum 2.0, a minimum of 32 ETH must be locked for staking.
Lido jumps in to help with it. Users can stake any amount of ETH on our liquid staking platform. Users receive the derivative token stETH in exchange.
Describe Staked Ether.
When you stake using Lido, you receive a 1:1 token called Staked Ether (stETH).
Your staked ETH is represented by stETH, which you can utilize to earn yields and lending rewards just like ordinary ETH.
Your daily stETH balance is determined by subtracting any fees from your original deposit and staking rewards.
Are you curious about these sanctions? If validators for ETH don't validate transactions, they will be punished.
Six to twelve months after the upgrade or merge is finished, holders of stETH can exchange their tokens for an equivalent quantity of ETH, making stETH akin to a promissory note.
Decoupling from ETH, there are several reasons why the price of stETH has fallen below that of ETH.
the anxiety brought on by the Terra project's failure.
the suspension of withdrawals by prominent cryptocurrency lender Celsius.
The troubled cryptocurrency hedge company Three Arrows Capital is actively offloading its stETH holdings.
There is insufficient liquidity in the Curve liquidity pool for switching between stETH and ETH.
Investors worry that Celsius will have to sell its stETH because it has over $400 million (approximately Rs. 3,141 crore) in deposits, thus depressing the value of stETH.
As of the time of writing, stETH is now 0.95 ETH, or 5% less than ETH.
Other dangers
The following are a few possible risks:
In the event that the Lido smart contract is misused, you risk losing your money.
ETH 2.0 is a prototype that is still being developed. If any bugs are found and used against you, you can lose your money.
If ETH 2.0 doesn't gain enough traction, you can lose your investment.
The investment is held by various multi-signature accounts to the tune of 20%.
If signatories lose control of their major shares, are compromised, or become rogue, you could lose your money.
Staking fines could cause you to lose all of your money.
Remember that withdrawals of stETH are only possible once Ethereum 2.0 supports transfers and smart contracts.
Since Lido Finance owns a third of the ETH that has been staked, according to Ethereum co-founder Vitalik Buterin, it "theoretically disturbs the Ethereum network post-Merge."
The initiative needs to have a sizable, lively, active, involved community that is positive and has a healthy proportion of zealots. Discord, Facebook, Instagram, LinkedIn, Medium, Reddit, Telegram, Twitter, and YouTube are the top social media sites.
