In this issue of Coin Metrics’ State of the Network, we map the landscape of tokenized versions of ETH and explain their emergence. We then focus on liquid staking tokens, analyzing their pricing mechanics, reward structures, and utility, while assessing liquidity conditions and the risks that shape their stability.
Key Takeaways
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Tokenized versions of ETH such as WETH, LSTs, and LRTs enable ERC-20 compatibility, greater interoperability, and improved capital efficiency on-chain.
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With roughly 24% of ETH staked via Lido, stETH and its wrapper wstETH have become widely used forms of DeFi collateral and are often employed in looping strategies to enhance returns.
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The pricing and reward mechanisms for these tokens vary, with some following a rebasing design while wrapped versions accrue value with a rising exchange rate to ETH.
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As these assets scale, monitoring validator queues, secondary-market liquidity and the LST premium/discount to ETH will be important to gauge redemption and liquidity risk.
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