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Liquid Staked ETH

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Discover Liquid Staked ETH's fundamentals and latest news.

This content was generated by Whalee (BETA), an AI crypto assitant that analyses cryptocurrencies. Informations can be incomplete and/or erroneous. Please always double check and DYOR.

What is Liquid Staked ETH?

Liquid Staked ETH (LsETH) is a token representing staked ETH plus network rewards. It allows users to maintain liquidity while staking ETH, providing on-chain transparency and robust diligence. LsETH is minted when ETH is staked and can be transferred, stored, traded, and utilized in decentralized finance (DeFi) while continuing to accrue network rewards. The token's conversion rate reflects the underlying staked ETH and accrued rewards, minus fees or penalties, and is not pegged 1:1 with ETH.

How is Liquid Staked ETH used?

Liquid Staked ETH (LsETH) is a liquid staking token that represents staked ETH plus any accrued Ethereum network rewards, minus any fees or penalties. Here is how it is used:

  • Staking and Minting: Users stake their ETH through the Liquid Collective protocol, which programmatically mints LsETH tokens as a receipt for their staked ETH.
  • Liquidity and Transferability: LsETH tokens can be transferred, stored, traded, and utilized in decentralized finance (DeFi) and supported dapps, providing liquidity while the user's ETH is staked.
  • Redemption: Once Ethereum withdrawals are enabled, users can redeem LsETH for ETH, with the conversion rate reflecting the accrued network rewards and any penalties.
  • Capital Efficiency: Liquid staking improves capital efficiency by allowing users to stake ETH while maintaining liquidity, which can be used in other DeFi applications.
  • Security and Governance: The Liquid Collective protocol implements robust security measures, including best-in-class node operators and DAO governance, to minimize slashing risk and ensure the integrity of the staking process.

Overall, LsETH provides a flexible and secure way for users to participate in Ethereum staking while maintaining control over their assets.

How do I store Liquid Staked ETH?

To store Liquid Staked ETH (LsETH) tokens, you can use supported platforms that offer custody services. These platforms include Coinbase Prime, where LsETH tokens are displayed as a separate asset within the portfolio page after staking ETH through the Liquid Collective protocol. Additionally, Blockdaemon integrates LsETH into its wallet product, providing secure custody and management of LsETH tokens.

How to buy Liquid Staked ETH?

To buy Liquid Staked ETH (LSETH) tokens, you can follow these steps:

  1. Find a Reliable Exchange: Look for a trusted centralized exchange where you can purchase LSETH. Some popular options include Coinbase, Binance, and Uniswap V3 (Ethereum).

  2. Create an Account: If you don't already have an account on the chosen exchange, sign up and complete any necessary verification steps.

  3. Deposit Funds: Deposit the necessary funds (e.g., USD or other cryptocurrencies) into your exchange account.

  1. Search for LSETH: Find the LSETH token on the exchange and select it for purchase.

  2. Place an Order: Enter the amount of LSETH you want to buy and execute the trade.

  3. Store Your Tokens: Once you have purchased LSETH, ensure you store them securely. You can use a cold wallet, such as a hardware wallet or a paper wallet, for long-term storage.

Remember to carefully review the exchange's fees, trading volumes, and market conditions before making your purchase.

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History of Liquid Staked ETH

Liquid Staked ETH (LsETH) is a token generated when Ethereum (ETH) is staked through the Liquid Collective protocol. The protocol is designed to meet the needs of institutions and is built and operated by a collective of leading web3 teams, including Blockdaemon.

LsETH is a liquid staking token, which means it allows users to maintain liquidity while staking their ETH. This is achieved by minting LsETH tokens when users stake their ETH, which can then be used in decentralized finance (DeFi) or transferred to others. The token represents the ownership of staked ETH and any accrued network rewards, minus fees or penalties.

The Liquid Collective protocol is built to provide enterprise-grade security and performance, with a compliance-focused ecosystem. It uses a floating conversion rate to reflect the value of accrued network rewards, penalties, and fees associated with the underlying staked tokens. This means that the value of LsETH can change over time as the underlying staked ETH accrues more rewards.

LsETH has gained significant traction, with various implementations and integrations. For instance, BitGo has collaborated with Liquid Collective to offer regulated custody for LsETH, allowing users to securely custody their LsETH tokens with a leading, regulated, qualified custodian. Blockdaemon has also integrated Liquid Collective's ecosystem into its platform, providing LsETH as a dynamic and fully integrated solution for institutional clients.

Overall, LsETH has become a prominent solution in the liquid staking market, offering a secure and compliant way for institutions to stake their ETH while maintaining liquidity and flexibility.

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How Liquid Staked ETH works

Liquid Staked ETH (LsETH) is a token that represents staked Ethereum (ETH) and any network rewards it earns. Here's how it works:

  1. Staking ETH: Users deposit their ETH into a liquid staking pool, such as Liquid Collective. This ETH is then staked on the Ethereum network to help secure it and earn network rewards.

  2. Minting LsETH: In return for staking their ETH, users receive LsETH tokens. These tokens serve as a receipt, proving ownership of the staked ETH and any accrued network rewards.

  3. Liquidity: Unlike traditional staking, where staked tokens are locked and cannot be used, LsETH tokens can be transferred, stored, traded, and utilized in decentralized finance (DeFi) protocols or supported dApps. This unlocks liquidity for staked assets, allowing users to earn additional yield across various DeFi protocols.

  1. Conversion Rate: The value of LsETH is tied to the amount of ETH it represents, including accrued network rewards. The conversion rate is not fixed at 1:1 and increases over time as the underlying staked ETH earns more rewards. This means that the same number of LsETH tokens can be redeemed for a different amount of ETH based on the accrued rewards.

  2. Redemption: When users want to redeem their staked ETH, they can do so by burning their LsETH tokens. The LsETH tokens are removed from the available supply, and the user receives their staked ETH plus any accrued rewards.

  3. Fees: Liquid Collective charges a 15% gross protocol service fee on all staking rewards generated by the protocol. This fee is shared with Coinbase.

  1. Security: Users need to trust that the liquid staking provider maintains well-functioning validators to avoid penalties or "slashing" of their staked ETH. However, Liquid Collective has a slashing coverage program to mitigate these risks.

Overall, LsETH provides a way for users to stake their ETH while maintaining liquidity and earning additional rewards across the DeFi ecosystem.

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Liquid Staked ETH's strengths

Liquid Staked ETH (LSETH) has several strengths:

  1. Maintaining Liquidity: LSETH allows users to maintain liquidity while staking their ETH, which is not possible with traditional staking methods where tokens are locked up. This liquidity enables users to participate in various DeFi protocols and use their staked assets as collateral.

  2. Capital Efficiency: Liquid staking improves the capital efficiency of staked ETH by allowing users to retain the liquidity of their assets while still accruing staking rewards. This is particularly beneficial for institutional clients who require dynamic and integrated solutions.

  3. Onchain Transparency and Robust Diligence: LSETH is built with onchain transparency and robust diligence, ensuring a high level of security and trust in the protocol.

  1. Compliance-Focused Ecosystem: The Liquid Collective protocol, which issues LSETH, is designed with a compliance-focused ecosystem, making it suitable for businesses and institutions.

  2. Enterprise-Grade Security and Performance: LSETH is backed by diverse leading teams, ensuring enterprise-grade security and performance, which is critical for institutional clients.

  3. Diverse Node Operators: The staking is distributed across a diversity of leading Node Operators, which helps to minimize risks and ensure a more secure and reliable staking process.

  1. Direct Staking Model: LSETH uses a direct staking model where ETH is staked directly in the Ethereum deposit contract, ensuring that users have direct control over their staked assets.

These strengths make LSETH an attractive option for individuals and institutions looking to stake their ETH while maintaining liquidity and capital efficiency.

Liquid Staked ETH's risks

Liquid Staked ETH (LSETH) carries several risks:

Smart Contract Security Risks
  • Hacks: LSETH is susceptible to smart contract vulnerabilities or bugs, which could lead to the theft of assets held as collateral. This risk is mitigated by open-source development, audits, and bug bounty programs.
Liquidity Risks
  • Low Liquidity & De-Pegging: If liquidity in the pools drops, LSETH can lose its peg, causing high slippage when swapping between assets. This can result in significant losses for investors.
  • Secondary Market Volatility: LSETH's price can drop below the underlying ETH during liquidity crunches or unexpected events, making it volatile.
Validator Risks
  • Slashing: LSETH validators are at risk of staking penalties, with up to 100% of staked funds at risk if validators fail. This risk is minimized by staking across multiple professional and reputable node operators.
Counterparty Risks
  • Centralization Tendency: Liquid staking derivatives like LSETH can lead to centralization, which can undermine the integrity of Ethereum and increase the risk of censorship demands and other abuses of power.
  • Technical Risks: LSETH is built on experimental technology, and any vulnerabilities in ETH can lead to slashing risk and stETH fluctuation risk.
Adoption Risks
  • Adoption Risk: The value of LSETH is tied to the adoption of Ethereum, and if ETH fails to reach required levels of adoption, it can lead to significant fluctuations in the value of LSETH.
Other Risks
  • stETH Price Risk: Users risk an exchange price of LSETH that is lower than its inherent value due to withdrawal restrictions, making arbitrage and risk-free market-making impossible.

These risks highlight the importance of careful consideration and thorough research before investing in LSETH.

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Liquid Staked ETH's ecosystem

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Liquid Staked ETH’s team

  • Alluvial: The team behind Liquid Collective, which includes Alluvial CEO Mara Schmiedt and other members distributed across the U.S., Europe, and Dubai.

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