Staking in the Ethereum ecosystem refers to the act of depositing (i.e. staking) a certain amount of ETH in order to power validator software which drives the Ethereum consensus mechanism together with other validators on the network. In exchange for these services, the network rewards the participating validators with extra ETH for securing the Ethereum blockchain.
What are liquid staking tokens?
Liquid staking tokens (or LSTs for short) are a group of tokens created and issued by different staking protocols and providers, such as Lido (stETH, wstETH), Rocketpool (rETH) and Coinbase (cbETH). These tokens are issued to users depositing ETH into the mentioned staking protocols and/or services and represent their proof of deposit.
Where does the yield in liquid staking tokens come from?
All of the mentioned liquid staking tokens (wstETH, rETH, cbETH) have a built-in mechanism for accruing staking rewards, either through value accrual against ETH (wstETH, rETH, cbETH) or through rebalancing mechanisms (stETH). The yield received through liquid staking tokens comes from staking rewards issued by the Ethereum network to validators participating in securing the network, as well as rewards collected from tips paid by Ethereum users paying for their transactions to be executed.
What is leveraged staking?
Leveraged staking is a popular strategy for amplifying yield earned from ETH staking by leveraging liquid staking tokens such as (w)stETH, rETH and cbETH against ETH, which usually has a relatively low borrowing APY, using lending protocols such as Compound, Aave and Morpho.
What types of risks should I consider with leveraged staking?
There are multiple types of risk to consider with leveraged staking strategies, including, but not limited to, liquidation risk, risk of value loss, as well as protocols risk. Specifically, liquidation risk can become likely either if the used LST(s) lose their value correlation (or peg) to ETH, or if the used lending protocol(s) decide to change parameters relating to collateral factors and liquidation thresholds of used LST(s). Moreover, value loss can potentially happen if the user accepts bad swap rates when entering or exiting any of these positions, as well as in cases where ETH borrowing rates grow too high for these positions to maintain a positive net APY. Finally, protocols risk should be considered for the staking protocols and providers, lending protocols, as well as the ETH Saver platform itself.
How does ETH Saver work and what is its role?
ETH Saver is a fully non-custodial application for creating and managing leveraged staking positions in various DeFi lending protocols that support such positions. All positions created using ETH Saver are fully separate with no asset pooling or position overlap of any kind happening, meaning there’s no shared economic risk across any positions opened using ETH Saver.
How are APYs and profit estimates calculated?
Any net APYs and profit estimates shown throughout the app should be considered strictly as estimates and in no way a guarantee of any potential profit. While we try our best to always have fresh, most current data shown in the app, one should keep in mind that there are a number of variables that affect potential yield. This includes, but is not limited to, varying staking rewards and changing pool utilisation or, consequently, ETH borrow rates in the used lending protocol(s).
Are there fees in ETH Saver for creating or exiting these positions?
ETH Saver uses a performance based fee model which means that there are no service fees of any kind charged when entering any of the available positions, but there is a performance fee taken when exiting the position(s). The performance fee works as a percentage charge on the amount earned on top of your deposited capital and is currently at 10% across all positions available at ETH Saver.
Are there any costs that are not immediately noticeable?
ETH Saver only takes a performance fee. However, depending on your position, there might be other costs you want to take into account. The biggest one is trade size impact - a difference in market price and objective value of the assets. This is more prominent the larger the position and the higher the leverage level is. Take a look at the dedicated help page for more details and common pitfalls for large positions.