Ethereum (ETH) prices have dropped by over 10% in the last 24 hours. Meanwhile, Lido’s staked ETH (stETH) toke price has also crashed in a similar manner. However, its deppeging has caused a panic in the cryptocurrency market.
ETH drops by over 10%
Lido has come up with a proposal to change its governance mechanism outlining LDO + stETH. The plan seeks to minimise governance in the protocol. It focuses on the associated risks that can be countered by aligning incentives among DAO and stakers.
stETH is a derivative token that is backed by the 1:1 value of Ethereum. However, ETH and stacked Ethereum has registered a price gap. The second largest crypto is trading at an average price of $1539. While staked Ethereum is trading at $1468. As per the report, Lido’s token has crashed for the second time in the month. Its collapse has increased the risk of staking derivatives’ liquidity.
Lido’s stETH leads to whale buying
Lido’s proposal mentioned that the worst case scenario can be capturing governance which can trigger the stakers. It will affect the ETH network also. The plan highlighted that the DAO and team do not have direct control over the validators.
The protocol added that they have control over stETH upgrade, Lido can upgrade the derivative contract. It will allow the staked Ethereum to burn and mint on an arbitrary address. It implies that DAO has no authority over Ethereum baking stETH. This can cause stolen funds from the users.
However, stETH’s collapse is triggered by its sell of in the secondary market. Ethereum whales have taken advantage of this selling. According to the Whalestate, the biggest ETH wallets have added more than $28 million worth of stacked Ethereum in the last 24 hours. Over 18.8k has been added by the whales. The biggest transaction recorded amounted to around $7.9 million. Meanwhile, a whale also bought wrapped ETH worth of over $1.1 million.