Another controversial cryptocurrency is causing havoc in the digital asset market — and this time, it’s not a stablecoin. Staked ether, or stETH, is a token that’s supposed to be worth the same as ether. But for the past few weeks, it has been trading at a widening discount to the second-biggest cryptocurrency, fanning the flames of a liquidity crisis in the crypto market. On Friday, stETH fell as low as 0.92 ETH, implying an 8% discount to ether. What you need to know about staked ether, the token at the center of crypto’s liquidity crisis. Each stETH token represents a unit of ether that has been “staked,” or deposited, in what’s called the “beacon chain.” Ethereum, the network underpinning ether, is in the process of upgrading to a new version that’s meant to be faster and cheaper to use. The beacon chain is a testing environment for this upgrade. Staking is a practice where investors lock up their tokens for a period of time to contribute to the security of a crypto network. In return, they receive rewards in the form of interest-like yields. The mechanism behind this is known as “proof of stake.” It’s different from “proof of work,” or mining, which requires lots of computing power — and energy.
Read more : Here’s everything you need to know about stETH, and why it has crypto investors worried.
