When you stake ETH through stETH, a tokenized version of staked Ethereum issued by Lido Finance that represents your share of the staked ETH pool. Also known as liquid staking derivative, it lets you earn rewards while still using your ETH in DeFi. But when stETH depeg happens—meaning it trades for less than 1 ETH—it triggers panic, liquidity crunches, and real losses. This isn’t theoretical. In 2023, after the Lido governance vote to allow risky liquidity pools, stETH dropped to $0.95 on some exchanges. People who thought they were holding ETH found themselves stuck with an asset that couldn’t be easily swapped back at par value.
Why does this matter? Because Lido Finance, the largest liquid staking protocol on Ethereum, managing over 30% of all staked ETH is the backbone of DeFi. Many DeFi apps, lending platforms, and yield farms rely on stETH as collateral. When it depegs, those systems freeze. Borrowers get liquidated. Liquidity pools drain. And users who trusted stETH as a safe, stable asset suddenly face uncertainty. The problem isn’t just technical—it’s psychological. People expect stETH to always be worth 1 ETH. When it isn’t, trust breaks.
The Ethereum staking, the process of locking ETH to help secure the Ethereum network and earn rewards system was built to be simple: stake, earn, withdraw. But the reality is messier. Withdrawals are still delayed due to Ethereum’s upgrade timeline, and stETH can’t be instantly redeemed. That delay turns into risk when markets panic. stablecoin depeg, when a token meant to hold a fixed value, like USDC or stETH, loses its 1:1 backing isn’t new—but it’s rare for a major protocol like Lido to experience it. What makes stETH different is that it’s not backed by cash or gold. It’s backed by locked ETH, which itself is volatile and illiquid.
What you’ll find in these posts isn’t theory. It’s real cases: users who lost money during the 2023 stETH depeg, how exchanges reacted, which DeFi apps froze withdrawals, and what steps people took to recover. You’ll see how Lido’s governance decisions affected everyday holders, and why even "safe" staking isn’t risk-free. This isn’t about fear—it’s about understanding what happens when the system cracks. And if you’re using stETH right now, you need to know what to watch for before it happens again.
Liquid staking lets you earn rewards without locking up crypto, but it comes with hidden dangers: de-pegging, smart contract hacks, slashing, and centralization risks. Here's what you need to know before you stake.
