Hasu, strategic advisor to Lido, and Tarun Chitra, founder of Gauntlet, explain everything about staked ETH, aka stETH, how it should be priced, Lido’s market dominance, and much more.

Show highlights:

  • the role of Lido, what stETH is, and what its benefits are
  • whether Ethereum’s lack of delegated proof of stake contributes to the need for stETH
  • why stETH is not mispriced and why it doesn’t necessarily have to be worth 1 ETH
  • the inherent risks associated with stETH
  • how there was not enough liquidity to handle all the liquidations, especially in automated vaults on, for instance, Instadapp 
  • how automated market makers work and what Curve’s amplification factor is
  • whether 3AC and Celsius had a significant impact on the stETH/ETH “de-peg”
  • how does the Merge affect the liquidity of stETH
  • Hasu’s and Tarun’s level of confidence that the Merge will happen this year and whether it will be a success
  • what will happen to the price of stETH after the redemptions are enabled
  • why Lido has achieved such a level of dominance
  • how Lido decreases the cost of staking and helps improve the security of the Ethereum blockchain
  • whether there is going to be a “winner take all” in the liquid staking derivatives market
  • how liquidity fragmentation can cause the system to blow up
  • why LDO tokenholders might not have the same incentives as ETH tokenholders
  • what is Lido’s new dual governance model and what is it trying to achieve
  • whether Lido should self limit its market dominance
  • how Lido coordinates validators and the role of the LDO token in this coordination
  • what are the lessons to be learned from the stETH situation
  • how governance is a liability to DeFi protocols

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Read the episode transcript here