Thread by @chennai2london

There is an ongoing FUD attack on ETH with the liquid staking token stETH being compared to the LUNA vs UST scenario & has been the latest story in Crypto for the last 2-3 days. I will try and make a short video later. But here is a small explanation thread 🧵 (1/13)

Before we look at stETH, in blockchain there is PoW (Proof Of Work) & PoS (Proof Of Stake) To run blockchain on PoW (Like bitcoin) it needs a lot of computing power & electricity

PoS doesn't need consume as much & has been proven to be a good node alternative e.g. Cronos (2/13)

Ethereum was on the PoW & is slowly moving to the PoS. Ethereum staking is already live with 4.2% APR & you can read all about it here - ethereum.org/en/staking/
(3/13)

If it's already live then why is it not full PoS yet? The Beacon chain was first introduced in Dec 2020, but as I understand withdrawals have not been fully enabled and are expected in 2-3 months. As such Staked ETH on validator node can then not be used anywhere else. (4/13)

Also you need minimum of 32 ETH for Staking. If you don't want to lock up your ETH or not have 32 ETH, then there is a concept of Pooled Staking enabled by 3rd parties. You can read more about Pooled Staking here ethereum.org/en/staking/poo…
(5/13)

The concept of Liquid Staking also exists on other blockchains and is not unique. E.g. recently introduced @ArgoProtocol bCRO vs CRO.

One of the biggest 3rd party protocols on Ethereum is @LidoFinance which gives you stETH against ETH deposited - lido.fi/ethereum (6/13)

In simple terms, if you have 1 ETH and you deposit it with LIDO & 32 people do the same, then there is enough ETH to earn staking from ETH staking. It's a pool. Native ETH staking is 4.2% & LIDO 4%. As a token of representation you get stETH token (Staked Ethereum (7/13)

You can read more about it here - lido.fi/faq#1-5
The small difference in APR is the LIDO staking rewards fees, but for that it enables you to stake your ETH. However this stETH vs ETH has become the point of the FUD attack now. Why ? (8/13)

As such stETH is "pegged" to ETH today. It is not "equal" as the withdrawal not been enabled. Which means you cannot convert stETH to ETH on the LIDO finance till the beacon chain transactions are fully enabled (which is in 2-3 months). So liquidity of stETH to ETH comes in (9)

On the secondary markets you can now exchange your stETH for ETH (that's also why it's called liquid staking) or use it as a collateral just like ETH. Meaning it was treated and respected just like ETH token.

This is useful to sell it if you can't afford to wait (10/13)

However here is where the comparisons to LUNA start. You could technically sell stETH for 1.01 ETH or buy stETH for 0.99 ETH for e.g. and benefit from arbitrage by exchanging it in LIDO later or find another market of price difference. (11/13)

People have deposited stETH as collateral on DeFi sites like Aave and Curve and borrowed ETH & there is a risk of people getting liquidated causing price differences of stETH & ETH.
If you had seen my EP41 on LUNA, you will fully understand how different this scenario is (12/13)

I will try and make a short video about it later if possible. But in the meantime I hope this gave some clarity at least on why ETH is falling as the FUD attack comparing the depegging on stETH vs ETH to LUNA is increasing & people never understood what happened to LUNA. (13/13)