Liquid Staking Platform Lido Sees Largest Daily Stake Inflow, Receives 150,000 ETH Reportedly From Tron Founder

February 26, 2023 Bitcoin.com

Only 0.04% of Ethereum validators have been slashed since 2020, says core dev

February 23, 2023 Coin Telegraph

Only 226 validators have been slashed since Ethereum staking began, with 75 of those coming from a single event in February 2021.

The Ethereum ecosystem has seen only 226 validators slashed since the launch of the Beacon Chain on Dec. 1, 2020 — amounting to just 0.04% of 524,060 validators, according to an Ethereum core developer.

Slashing is a process where a validator breaches the proof-of-stake consensus rules, which often results in the removal of that validator from the network and slashing a portion of the staked Ether (ETH) that the validator provided as collateral.

Such slim odds of being slashed were highlighted by Ethereum core developer “Superphiz” in a Feb. 23 Twitter post, which suggests that people shouldn’t be concerned about staking ETH for that particular reason.

226 out of 523,000 validators on the beacon chain have been slashed. This is nothing to lose sleep over. Many slashings have occurred during failed system migration. Here are four emerging best practice tips to avoid this:https://t.co/wleR4YQmDD
— superphiz.eth (@superphiz) February 22, 2023

The developer also explained “four emerging best practices” to reduce those odds even further.

One of these practices was to wipe any existing chain data on old staking machines and to reinstall and reformat the validator where necessary, said Superphiz, noting that many slashings occur due to “failed systems migrations.”

Superphiz then suggested using “doppelganger detection,” which checks whether the validator’s keys are active before starting the validation process.

While this can impact validator uptime, he explained that “perfect uptime” isn’t worth getting slashed in the grand scheme of things:

“It's wise to throw away $0.06 to save $1700. (A slashing costs about 1 Ether).”

The developer said it is also worth watching buffers and logs on the Beacon Chain to become aware of any potential problems that may arise.

*Log of the slashed validators on the Beacon Chain.* *Source: Beaconcha.in*

If something feels wrong, Superphiz suggested “unplugging everything” and to “come back” when the problem has been identified and a proposed solution is set in place.

The developer also noted that over 150 of the 226 slashings have been caused by services rather than “home stakers.”

*Staked ETH and number of active validators on the Beacon Chain. Source: Beaconcha.in*

Slashing can occur due to an “attestation” or a “proposal” violation, according to the Ethereum Foundation.

An attestation violation is one where a malicious validator attempts to change the history of a block or “double votes” by attesting two candidates for the same block.

A proposal violation occurs when a validator proposes and signs two different blocks for the same slot.

The majority of slashing events have come from attestation violations, according to data from beaconcha.in.

One of the largest slashing events occurred on Feb. 4, 2021, when staking infrastructure provider “Staked” had 75 of its validators slashed for producing competing blocks. Staked said the attestation violation came about due to a “technical issue.”

Since the Beacon Chain merged with the Ethereum proof-of-work chain on Sept. 15, only 35 of the total 226 slashings have taken place, according to beaconcha.in, which suggests that the Merge has not had a profound impact on slashing rates.

With about 16.7 million ETH staked (according to beaconcha.in) out of 120.4 million ETH currently in circulation (according to CoinGecko), the percentage of ETH staked is about 13.9%.

ETH can be staked via a centralized exchange, by delegation to a third-party validator network, or by running on an independent node, which requires 32 ETH.

Sell or stake: Ethereum staking giant Lido mulls choices for its $30M ETH

February 15, 2023 Coin Telegraph

Sell or stake: Ethereum staking giant Lido mulls choices for its M ETH

Capella Upgrade

While LidoDAO’s current inflows of about 1000 stETH are sufficient to cover operating costs for the time being, it’s worried that may not last.

The decentralized autonomous organization (DAO) behind Lido — the largest Ethereum staking pool — is deliberating whether it should sell or stake the $30 million in Ether (ETH) from its treasury.

A proposal was submitted on Feb. 14 by the DAO’s financial unit, Steakhouse Financial that considers four choices, one of which contemplates staking part or all of its ETH on Lido in the form of Lido Staked ETH (stETH).

Another would see LidoDAO selling a part or all of its 20,304 ETH for a stablecoin, with the purpose being to extend the DAO’s runway.

*The four proposals (pictured) submitted by Steakhouse Financial to the LidoDAO asking how it should manage its treasury. Source: Lido*

The proposal comes as ETH staking withdrawals will soon be enabled through Ethereum’s Shanghai and Capella upgrades expected to take place sometime in earl 2023 according to the Ethereum Foundation.

While converting the ETH to Staked ETH may lead to more protocol rewards, the DAO is wary that too much staking may risk it not having enough Ether on hand “in case of need.”

*Assets currently held in LidoDAO’s treasury. ETH currently accounts for about 9% of the DAO’s over $350 million treasury holdings. Source:* *Lido.*

Regarding operating expenses, Steakhouse Financial suggested it may be necessary to swap Ether for a stablecoin in order to “preemptively secure additional runway.”

Steakhouse Financial noted that with LidoDAO’s current inflows at about 1000 stETH per month, the DAO is making approximately $1.3 million to 1.5 million per month with the price of ETH hovering between $1,100 and 1,700 over the past few months.

*The monthly inflow of stETH on Lido has steadily increased since January 2021. Source:* *Dune Analytics.*

Steakhouse Financial said those figures alone should be “sufficient to cover monthly operating expenses.”

However, they’re still deliberating whether it is worth converting excess stETH into a stablecoin to better prepare for any change in market conditions that may lead to increased operating expenses.

A business development representative from LidoDAO noted that they’re not particularly thrilled with the current state of the stablecoin market:

“Considering all the FUD and rumors, both DAI due to USDC collateral and USDC itself pose potential risk if they become frozen. That being said I have issues with the liquidity of LUSD and USDT has yet its own issues.”

It appears as though most LidoDAO members are in favor of partially selling and staking a portion of the 20,304 ETH locked in its Aragon smart contract.

The proposals come as the total value locked (TVL) of stETH fell 6.66% between Feb. 6-13.

Lido Analytics: Feb 06 - 13, 2023

TLDR:
- Lido TVL is down -6.66%, following a -7.22% fall in the price of ETH.
- Lido led in new stake on Ethereum, with a 27% share in weekly deposits.
- New @AaveAave V3 wstETH: 34,726 (+34.87%).
- Lido on Polygon reaches 2% market share. pic.twitter.com/iWA9YccM6e
— Lido (@LidoFinance) February 13, 2023

The TVL of Lido is currently $8.13 billion, according to the on-chain metrics platform DeFiLlama.

Proof-of-Work Proponents Question Validator Censorship as 59% of Staked Ethereum Is Held by 4 Companies

September 16, 2022 Bitcoin.com

DeFi contagion? Analysts warn of ‘Staked Ether’ de-pegging from Ethereum by 50%

June 9, 2022 Coin Telegraph

celsius network

Liquid staking firms could default on their Ether obligations if "the Merge" does not happen.

The next big crypto crash could be around the corner due to Lido Staked Ether (stETH), a liquid token from the Lido protocol that is supposed to be 100% pegged by Ethereum's native token, Ether (ETH).

Notably, the stETH peg could drop against ETH by 50% in the coming weeks, raising the risk of a "DeFi contagion" as Ethereum moves toward proof-of-stake, argues popular Bitcoin investor and independent analyst Brad Mills.

Over 1M Ether liability risks default

In detail, investors deposit ETH in Lido's smart contracts to participate in "the Merge," a network upgrade aiming to make Ethereum a proof-of-stake blockchain, also called the "Beacon Chain." As a result, they receive stETH representing their staked ETH balance with Lido.

Users will be able to redeem stETH for unstaked ETH when Beacon Chain goes live. In addition, they can use stETH as collateral to borrow or provide liquidity using various DeFi platforms to earn yield.

But if the switch to ETH 2.0 gets delayed, this could cause a massive liquidity problem across DeFi platforms, Mills asserts, using Celsius Network, a crypto lending platform that offers up to 17% annual percentage yields, as an example.

"If customers start withdrawing from Celsius, they will have to sell their stETH," Mills explained. "Celsius has liabilities of 1 million ETH. So, 288k are inaccessible until [the] Merge, ~30K are lost, ~445k are stETH, and 268k are liquid. Could cause a run."

But regardless of unverified rumors that Celsius could be insolvent, the best way to secure your funds is to control your own private keys. He adds:

stETH might not 'depeg', but the risk of DeFi contagion in a crypto bear market is high.

Contagion risks?

Moreover, even centralized yield platforms could face insolvency risks due to their ETH liabilities, argues market commentator Dirty Bubble Media (DBM), citing crypto asset management service Swissborg as an example.

Swissborg offers daily yield on about $145 million worth of Ether it holds, including 80% exposure in stETH.

*Swissborg's daily yield offerings. Source: Official Website*

The firm had staked around 11,300 ETH out of its total Ether holdings in Curve's stETH/ETH pool. Then the ETH peg became imbalanced on May 12 in the wake of Terra's collapse with stETH/ETH dropping to 0.955 on the day.

*Staked Ether to Ethereum exchange ratio in 2022. Source: CoinMarketCap*

"How is Swissborg paying daily yield on these assets, when the yield from staked Ether is locked along with the principal," questioned DBM, adding that it could have the firm "exit their entire stETH position," thus forcing its ETH peg even lower.

Meanwhile, the warnings coincided with a whale dumping its staked Ether positions for ETH on June 8.

Battening down the hatches before ropsten. pic.twitter.com/MPQV5n0XMf
— Hsaka (@HsakaTrades) June 8, 2022

Mills responded, saying that stETH's "dynamic is no different than GBTC at a perma-discount." In other words, sell-pressure can be "merciless" once the market flips bearish and yields vanish.

He explained:

"When there's deep liquidity & potential to arbitrage, quants, Wall Street raccoons [and] flashbois will milk the yield. When the strategy goes against them, they will add merciless sell pressure."

As of June 9, the stETH-ETH ratio had recovered to 0.97, still 3% below its intended peg.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Staked Ether

Over 1M Ether liability risks default

Contagion risks?

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