CandleFocus

Staked Ether Is Creating a Benchmark for the Crypto Economy, Says ARK Invest

Author: Content Editor
Staked ether (stETH) is becoming a benchmark for the entire on-chain economy and is comparable to sovereign bonds, according to a new report from ARK Invest. The report states that the yield on staked ether is a gauge for smart contract activity and economic cycles in the digital asset space, similar to the role the fed funds rate plays in traditional finance. Staked ether differs from traditional bonds in several ways, including the absence of default risk and the fact that it can be destroyed through network slashing. However, staked ether is highly volatile and carries unique risks related to network security and smart contract bugs. The use of staked ether in decentralized finance (DeFi) protocols is growing, with stETH tokens replacing ETH as the collateral of choice. The widespread use of staked ether in DeFi is causing the rest of the crypto financial ecosystem to reorganize itself, as projects must convince investors that their assets can offer higher risk-adjusted returns than staking ether. The demand for staked ether has also put pressure on DeFi protocols in the lending stablecoins business, as users prefer to lend stETH and borrow stablecoins rather than lend stablecoins directly.

Related News