Lido Staked Ether (stETH) can be seen as the kid cousin to Ethereum (ETH). The Lido protocol was born out of the Ethereum 2.0 update delay and the scalability issues that came with it. Instead of staking your ETH tokens on Ethereum 2.0, you can stake them on Lido. On this protocol, your stETH is represented by stETH tokens.
Ethereum remains the second biggest cryptocurrency. However, it experienced some issues in 2022, mainly stemming from the update delay. This made some question the stability of the coin in general, and also led to the emergence of stETH. Even though stETH basically depends on ETH, there are some differences between the two cryptos.
In this guide, we’ll examine the similarities as well as the differences between ETH and stETH.
History
The history of stETH tokens may be clear, but what about Ethereum itself?
Ethereum
The stETH token obviously wouldn’t exist if it weren’t for Ethereum. Ethereum dates back to 2013 when its whitepaper was first published. Vitalik Buterin wanted to create a cryptocurrency platform where users could establish their own dApps. Fueled by the ether token, Ethereum was officially launched in 2015.
Given the emerging popularity of dApps that followed, Ethereum can be considered a hugely influential cryptocurrency platform.
In the time since its launch, it has undergone several updates to maintain itself against the growing competition. Recently, PayPal added Ethereum alongside other cryptocurrencies to the PayPal wallet.
Ethereum’s beacon chain has been running since December 2020.
Lido stETH
Lido stETH was invented as a liquid staking solution to ETH in 2022.
Ethereum had a small crisis between late 2021 and the summer of 2022. This was caused by the delay of the Ethereum 2.0 upgrade. This delay meant that investors could not stake ETH on the new update as they had planned. So, stETH started getting used instead.
Lido stETH allows users to stake while also earning Ether 2.0 rewards. Once the 2.0 upgrade is live and fully functioning, stETH holders can exchange their stETH back into ETH. It can be thought of as an I.O.U. from Ethereum.
stETH was meant to remain 1:1 in value with ETH. However, in May of 2022, TerraUSD (UST) collapsed. The fall of this stablecoin had a ripple effect on all other 1:1 coins, including stETH.
After continued delays, Ethereum 2.0 is expected to launch fully in 2023. By this point, stETH is expected to regain its 1:1 value with ETH.
What Are They, And Why Were They Created?
Ethereum and its beacon chain obviously serve a slightly different purpose than that of stETH. They cannot be labeled as being identical. However, they both serve a similar purpose from the point of view of crypto investors, given that they both serve as places to make ETH staking deposits.
Ethereum
Ethereum was created to update the crypto world. Instead of providing merely a place to trade, Ethereum made smart contracts a central part of its operations. These smart contracts can be established by investors for social media, gaming, supply chain management, and many other purposes.
Like many crypto sites, Ethereum supports decentralized finance. This means that an online exchange can be made on Ethereum between two crypto investors, without going through a centralized body.
Another purpose of Ethereum was to outdo Bitcoin. One way it undermined Bitcoin was by providing a bigger block size, which means more transactions can be made at one time.
Lido stETH
Staking ETH in stETH is a practice known as liquid staking. This is when you stake a coin and get a receipt in return. This receipt can then be used elsewhere as proof of stake as well as evidence that you own the staked coins.
The purpose of Lido stETH was to avoid the scalability issues that have been plaguing the recent Ethereum update. By using the Lido staking pools, you forgo the Ethereum scalability issues and increase your chances of securing staking rewards – at least this is the intent of Lido stETH.
stETH tokens are minted when you make a deposit; they are also destroyed when you redeem them. However, the stETH derivative token can then be used as a regular cryptocurrency on other exchange platforms. Meaning that it does not exist only as an ETH derivative. You can trade stETH, as well as buy and sell stETH, or other crypto trading sites.
Price History
While Lido stETH exists mainly to gain ETH staking rewards, it still has value. Here’s the price history of both coins:
Ethereum
CoinMarketCap state that the current price of Ethereum is $1,239 (as of December 8th, 2022).
Ethereum has come a long way since its lowest value point, which it experienced the year it was launched. Throughout the entirety of 2015, Ethereum never got past the $1 value mark. In November 2021 though, Ethereum reached $4,815. This is its record height to date.
Lido stETH
According to CoinGecko’s statistics, Lido Staked ETH is currently valued at $1,240.59. The lowest value of the coin was $4,829.57, which occurred in November 2020. The lowest point of the coin was $482.90, which occurred in December 2021.
Market Cap
The market cap of a cryptocurrency conveys how much the coin is worth in total. I.e., when you add the value of all the individual coins together. Like nearly all aspects of the crypto market, the market cap is subject to extreme fluctuation. Just like the price of crypto, the market cap is changing all the time.
Ethereum
The market cap of Ethereum is currently at $153,351,703,644.
Lido Staked Ether
The market cap of Lido Staked ETH currently sits at $5,932,752,934.
Daily Transactions
Every time someone trades, the daily transaction count of the crypto they traded for increases.
Ethereum
Up-to-date figures from YCharts suggest that Ethereum has a current daily transaction rate of 972,121.
Lido Staked Ether
The daily transaction figure of Lido stETH on Lido Finance is not currently known. However, the current 24-hour trading volume of the crypto is at $7,320,286. This will give you some indication of how it is performing in terms of daily transactions.
Block Size
The block size of a cryptocurrency suggests the transaction capacity of a cryptocurrency. The bigger the block size, the more transactions can be carried out within a set time frame. For this section, it is worth noting that the average crypto block size is between 1 and 1.3 MB.
Ethereum
The Ethereum block size is 4 MB. This is a decent size, given that it is well over the average. This capacity means that Ethereum can process up to 30 transactions per second.
Lido Staked Ether
The block size of Lido Staked E is not currently known. However, it would be safe to assume it has a similar block size to that of Ethereum.
Similarities
- Pegged equally: stETH is pegged at 1:1 with regular ETH. They can also be used in exactly the same way as ETH, in that they can be used to earn Eth 2.0 staking rewards. Although stETH fell below the 1:1 pegging due to Ethereum update delays, it is ensured that it will return to 1:1 when Ethereum 2.0 officially launches.
- Both provide Ethereum staking rewards: While they may be different, buying stETH works the same as buying ETH. The purpose of both is to earn Ethereum staking rewards in the future. The only difference is that you gain liquid assets when you stake on stETH tokens.
Differences
- Staking: The big difference between the two cryptos is what the staking represents. When staking on Ethereum, you stake real assets. On the other hand, stETH is a liquid staking solution.
- Ethereum’s popularity: Ethereum is a popular cryptocurrency in its own right. Lido stETH is just an offshoot of Ethereum.
Risks
Ethereum
- Ethereum will likely face more restrictions in the future. Being at the top of the crypto game, it is at risk of becoming more centralized as time goes on.
Lido Staked Ether
- Lido stETH has fluctuated a lot in the past year. stETH tokens reflect the fluctuating secondary market price.
Where to Buy
Ethereum and Lido stETH can be bought in the following places:
Ethereum
Lido Staked Ether
- HTX
- Coinbase
- Uniswap
Exchanging Ethereum for Lido Staked Ether
The easiest way of exchanging Ethereum for Lido Staked ETH would be to set up an account on Lido Finance. Alternatively, you could swap Ethereum for stETH on other crypto market exchange sites. This includes sites like Coinbase and Uniswap, where you can also buy stETH and ETH.
Future Plans
What do the roadmaps look like for Ethereum and its offshoot stETH?
Ethereum
Given how frequently Ethereum updates, it is no surprise that the platform has more updates planned for the future. In the immediate future, Ethereum will be focusing on switching to Ethereum 2.0.
Lido Staked Ether
Lido Staked Eth will continue to serve as an Ethereum staking alternative until Ethereum 2.0 officially arrives.
https://phemex.com/academy/what-is-steth-lido-finance
https://www.fool.com/investing/2022/06/20/why-steth-could-matter-more-than-ethereum-now/
https://www.coingecko.com/en/coins/lido-staked-ether
https://coinrivet.com/guides/defi/what-is-lido-staked-ether/
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