How can we improve the stETH ETH peg?

1

Right now the stETH to ETH rate is at 0.977. stETH is almost 2.5% cheaper than ETH.
This is discouraging people to stake their ETH with Lido.

In the last 7 days only 1500 stETH have been created (~210 stETH per day), against 182k ETH since December 18 (~2500 stETH per day).

We should add incentives to improve the stETH to ETH rate so people choose Lido for staking their ETH.

2 Likes
2

I don’t think pointing out the fact that there has been a decrease in ETH staked from now since December is entirely significant. Lido launched in December, got a lot of hype (Eth2 Phase 0 as well), hence why many people staked then compared to now.

This proposal helps to improve the peg between stETH and ETH, and will soon be taken into effect. Future integrations with other protocols (eg. Aave, Maker) will also benefit the peg aswell.

2 Likes
3

I’m certain this is due to the composability of regular ETH vs stETH. There’s no reason for this though, and it seems like free money to swap into stETH on Curve. As @cryptodenier mentions, DeFi integrations are coming!

1 Like
4

To add some clarity. There have been a few factors that are causing this.

  1. The referral program was being abused and resulting in one-sided liquidity additions to the primary curve pool. This is being addressed with the whitelist proposal here: Switch Referral Program to Whitelist Mode
  2. There have been some recent projects that have been offering high APR on native ETH and the liquidity vampire swarm has removed ETH out of the curve pool as well (similar to one sided staking). These have already decayed drastically as the rewards have turned off and will take a week or two to distribute back to the ecosystem. Hopefully that finds its way back to the curve pool as well but not for sure.

Lido is working on increasing utility (Aave, Maker) and incentivizing tighter liquidity bands (Uni V3). This will take a little time but is a priority for the DAO to correct. As more utility is found with stETH the peg will continue to become stronger.

1 Like
5

The peg will improve as stETH, among other things, gets onboarded as a collateral type on Oasis.app (Maker) et al. which should be happening in the near future.

The recalibration of the referral program like Jake mentioned above will help too.

1 Like