- 13 Nov 2025
- Elara Crowthorne
- 19
De-Pegging Risk Calculator
How Much Could You Lose During a De-Peg?
Liquid staking tokens like stETH can trade below their expected value. Calculate your potential losses during de-peg events based on current market conditions.
Note: This calculator shows potential losses during de-peg events. Real-world losses may be higher due to:
- Slashing events
- Low liquidity on DEXs
- Regulatory impacts
Never assume your liquid staking token is at a 1:1 peg with actual ETH.
When you stake your ETH or SOL, you lock it up to help secure the network and earn rewards. But what if you could earn those rewards without locking anything up? Thatâs the promise of liquid staking. Protocols like Lido, Rocket Pool, and others let you swap your staked tokens for derivative tokens-like stETH or rETH-that you can trade, lend, or use in DeFi apps. It sounds too good to be true. And in many ways, it is.
Liquid staking has exploded in popularity. By late 2023, over $14 billion was locked in these protocols. But behind the convenience lies a web of hidden risks that most users never fully understand. This isnât just about losing a few dollars in a bad trade. Itâs about losing access to your assets during a market crash, watching your stETH trade at 0.95 ETH when itâs supposed to be 1:1, or having your funds frozen because a smart contract gets hacked. These arenât hypotheticals. Theyâve happened.
De-Pegging: When Your Token Stops Being Worth What It Should
The biggest fear in liquid staking isnât hacking-itâs de-pegging. Your stETH is supposed to be worth exactly 1 ETH. But in reality, itâs just a promise. That promise can break.
During the 2022 Celsius collapse and the FTX crash, stETH dropped as low as 0.94 ETH on major DEXs. Why? Because the liquidity pools that let you swap stETH for ETH dried up. People panicked. No one wanted to buy stETH because they couldnât be sure theyâd get back full ETH value. The same thing happened on Curve Finance-pools emptied, and users were stuck.
Itâs not just a flash crash. CoinGecko data shows stETH traded below 0.99 ETH more than 15 times in a six-month period. Thatâs not a glitch. Itâs a design flaw. Liquid staking tokens arenât pegged by magic. Theyâre pegged by liquidity, trust, and market demand. If any of those vanish, your tokenâs value follows.
And thereâs no guarantee itâll bounce back. Some users reported waiting weeks just to get their ETH back, even after the market stabilized. If youâre counting on stETH to cover an expense or fund a DeFi position, a de-peg could ruin your plan.
Smart Contract Hacks: The Invisible Threat
Youâre not staking directly on Ethereum. Youâre trusting a smart contract-a piece of code running on the blockchain. That code could have bugs. It already has.
Stader Labs, Ankr, and others all admit their protocols are built on smart contracts that can be exploited. Audits help, but theyâre not foolproof. OpenZeppelin and Trail of Bits have audited top protocols, yet vulnerabilities still slip through. In 2023, users on Reddit and Discord reported discovering gaps in audit coverage-some protocols claimed multiple audits, but the public reports didnât match what was actually tested.
And itâs not just about code. If a protocolâs node operators lose their private keys, or if a malicious actor gains control of the contractâs upgrade function, your funds are at risk. Thereâs no customer service line to call. No bank to reverse the transaction. Once the code fails, your ETH is gone-or locked forever.
Unlike traditional finance, where a bankâs insurance covers losses, DeFi has no safety net. Youâre the only one responsible for checking if the code is safe. And most people donât even know how to look.
Slashing: You Pay for Someone Elseâs Mistake
When you stake ETH directly, youâre responsible for running a validator node. If it goes offline or signs conflicting blocks, you lose part of your stake-up to 1 ETH per slashing event. Thatâs scary, but at least you know the risk.
Liquid staking outsources that risk. But you still pay for it. If a validator in Lidoâs pool gets slashed, the loss gets distributed across all stETH holders. You didnât run the node. You didnât make the mistake. But you still lose money.
Galaxy Research confirmed this in 2023: slashing is a âfully exposedâ risk for liquid stakers. And unlike direct staking, where you can choose reliable operators, you have zero control over who runs the nodes in a pooled system. Lido alone controls about 32% of all staked ETH. That means if one of their 100,000+ validators messes up, youâre on the hook.
Thereâs no way to opt out. No setting to turn it off. You just accept it as part of the deal.
Centralization: The Systemic Threat to Ethereum
Liquid staking was supposed to make staking more accessible. But itâs making Ethereum less secure.
Lido dominates the market. With over $12 billion locked, they control roughly one-third of all ETH staked. Thatâs dangerous. Ethereumâs security relies on decentralization-if one entity controls too much of the network, it becomes a single point of failure. A hack, a regulatory crackdown, or even a bad governance vote could destabilize the entire chain.
And itâs not just Lido. Coinbaseâs cbETH and Binanceâs BETH are even more centralized. Theyâre custodial. That means those exchanges hold your keys. They can freeze your assets. They can change the rules. And if they go under-like Celsius did-you lose everything.
Even Rocket Pool, which tries to be more decentralized by requiring users to stake 8 ETH plus 2.4 ETH in RPL, still depends on a small group of node operators. The more people use liquid staking, the fewer people run their own validators. Thatâs a slow-motion attack on Ethereumâs core promise: decentralization.
Token Models: Rebasing vs. Reward-Bearing-And Why It Matters
Not all liquid staking tokens are the same. Some are rebasing. Others are reward-bearing. The difference affects your taxes, your accounting, and even how your wallet shows your balance.
Rebasing tokens (like some early versions of stETH) automatically increase your token balance as rewards accrue. So if you start with 10 stETH, you might end up with 10.05 after a week. Sounds simple. But your wallet doesnât update in real time. You might think you still have 10, but you actually have more. That breaks tax software and DeFi integrations.
Reward-bearing tokens (like current stETH and rETH) keep your balance the same but increase the tokenâs value. So 1 stETH is worth 1.005 ETH after rewards. This is cleaner for wallets and taxes-but itâs why de-pegging hurts more. If the value drops from 1.005 to 0.98, you lose 7% of your purchasing power. And you canât just âsell your balanceâ to avoid it.
Most users donât even know which model theyâre using. But if youâre filing taxes or using your LST in a yield farm, this detail can cost you hundreds-or thousands-of dollars.
Regulatory Risk: The SEC Is Watching
On August 5, 2025, the U.S. Securities and Exchange Commission issued a formal statement on âCertain Liquid Staking Activities.â Thatâs not a warning. Itâs a red flag.
The SEC is considering whether LSTs like stETH and rETH are unregistered securities. If they are, exchanges could be forced to delist them. Protocols could be shut down. Your stETH could become untradeable overnight.
Thereâs no precedent for this. No legal clarity. And no way to predict what will happen. If youâre in the U.S., this isnât just a crypto risk-itâs a legal one. Holding stETH could mean youâre holding an unregistered security. Thatâs not something you want to explain to a regulator.
How to Protect Yourself
Thereâs no perfect way to eliminate these risks. But you can reduce them.
- Diversify your LSTs. Donât put all your ETH into stETH. Use Rocket Poolâs rETH, Originâs OETH, or even cbETH-but spread it out. That reduces exposure to any single protocolâs failure.
- Check liquidity. Before staking, look at the trading volume on Uniswap or Curve. If the pool is shallow, avoid it. Low liquidity = high de-peg risk.
- Verify audits. Go to the protocolâs website. Look for audit reports from OpenZeppelin, Trail of Bits, or Quantstamp. If theyâre missing or outdated, walk away.
- Understand your token model. Know whether youâre holding a rebasing or reward-bearing token. Use tools like DeFiLlama or Etherscan to track your actual balance and value.
- Donât over-leverage. Never borrow against your LSTs unless youâre prepared to lose everything if the price dips. DeFi loans can liquidate you in seconds during a de-peg.
And most importantly: never assume 1:1. Treat your stETH like a volatile asset, not cash. If you need stable value, hold ETH directly. Liquid staking is a high-risk tool. Use it like one.
Whatâs Next?
Liquid staking isnât going away. Itâs too convenient. Too profitable. Too deeply woven into DeFi.
But the next big crash will test it harder than ever. If Lidoâs governance votes to expand into riskier chains, or if a major protocol gets hacked, the fallout could ripple across the entire crypto market. Institutional players like Fireblocks are already supporting stETH, which means more money is flowing in-but also more exposure to systemic risk.
By 2025, liquid staking could represent half of all staked ETH. Thatâs a massive concentration of power. And power, in crypto, is dangerous.
The real question isnât whether you should use liquid staking. Itâs whether youâre ready for what happens when it breaks.
Can stETH ever lose its peg permanently?
Yes, stETH can lose its peg permanently if the underlying protocol fails, liquidity vanishes, or Ethereumâs staking mechanism breaks. While it has always recovered from past dips, thereâs no guarantee it will in the future. If a major hack occurs or if regulators shut down Lidoâs operations, stETH could trade at a permanent discount-or become untradeable.
Is liquid staking safer than staking directly?
No. Direct staking gives you full control and no counterparty risk. Youâre only exposed to slashing and network downtime. Liquid staking adds de-pegging, smart contract, and centralization risks. Itâs more convenient, but not safer. Only use it if you need liquidity for DeFi and understand the trade-offs.
What happens if Lido gets hacked?
If Lidoâs smart contracts are exploited, all stETH holders could lose part or all of their staked ETH. Unlike centralized exchanges, thereâs no insurance or recovery process. Your only recourse would be a hard fork or community-driven rescue-which is never guaranteed. Lidoâs DAO governance might vote on a fix, but it could take weeks or months.
Are liquid staking tokens taxable?
Yes. In most jurisdictions, staking rewards are treated as income when received. For rebasing tokens, each increase in token balance may trigger a taxable event. For reward-bearing tokens, the increase in token value is taxable when you sell or trade. Many users get audited because their wallets show unexpected gains. Always track your LST transactions and consult a crypto-savvy accountant.
Can I withdraw my ETH from liquid staking anytime?
After Ethereumâs Shanghai upgrade in April 2023, withdrawals are possible-but not instant. Thereâs a queue for validator exits, and it can take days or weeks to get your ETH back. During high demand, the queue grows. If you need liquidity fast, you can sell your stETH on a DEX, but you risk a de-peg. You canât rely on quick access.
Should I use Lido, Rocket Pool, or another protocol?
Lido offers the most liquidity and ease of use but carries the highest centralization risk. Rocket Pool is more decentralized but requires more ETH and technical knowledge. OETH has better peg stability but less liquidity. For most users, diversifying across two or three protocols reduces risk. Avoid custodial options like cbETH or BETH if you care about decentralization.
19 Comments
stETH trading at 0.94 ETH during FTX isn't a glitch-it's a feature of trustless systems. You think you're getting liquidity but you're just trading one risk for another. No bank FDIC, no recourse. If the pool dries up, you're stuck holding a promise.
so you're telling me i can't just use my stETH to buy a pizza without doing a 37-page risk assessment?
the SEC is watching because they know this is a trap. they've been waiting for this moment to shut down DeFi forever. lido controls 32% of staked eth? that's not decentralization that's a cartel. they're gonna come for your wallet next. mark my words.
diversifying across rETH, oETH, and cbETH makes sense but you still have to trust someone's code. even rocket pool's 8 ETH requirement doesn't fix the fact that node operators can be compromised. the real solution is running your own validator. inconvenient yes but it's the only way to truly own your stake.
why do people think rebasing tokens are simpler? they're not. your wallet shows 10 stETH but your balance increased by 0.05? now your tax software is screaming. and if you're using it in a yield farm? you're gonna get audited. nobody tells you this until you owe 12k in capital gains
you think this is bad? wait till the next black swan hits. when the whole thing collapses and your stETH is worth 0.7 ETH and you can't withdraw because the queue is 6 months long and the devs are MIA. i'm not scared of hacking. i'm scared of the quiet collapse. the kind no one talks about until it's too late.
how can anyone with a brain still use lido? it's not even a protocol anymore-it's a cult. people worship stETH like it's digital gold. but it's just a promissory note signed by a team that doesn't even disclose their node operator list. if you're not using rocket pool you're just funding a central bank in crypto clothing
i staked 5 eth with lido last year. got stETH. used it in aave. earned yield. everything seemed fine. then one day i tried to swap it for eth on uniswap and the price was 0.98. i panicked. i thought i lost 10%. turned out the market just had a hiccup. but it took me 3 days to calm down. i don't sleep well anymore when i check my portfolio. it's not just about money. it's about peace of mind.
the real danger isn't the tech. it's the people who think this is free money. they see 5% APY and don't read the 12-page risk disclosure. they treat stETH like cash. then when it dips, they scream on twitter. but no one taught them how to read a smart contract audit. or what slashing means. education is the missing piece.
just wanted to say thanks for writing this. i was about to stake all my eth with lido. read this and paused. checked rocket pool. realized i needed more eth than i thought. ended up staking 2 eth with rETH and keeping 3 in eth. still earning but sleeping better. you saved me from a bad move
think about this: if liquid staking becomes the norm and 80% of eth is staked through protocols like lido then who's really securing the network? it's not the individual users. it's a handful of centralized operators with massive influence. ethereum was built to remove middlemen. now we've created the ultimate middleman. and we call it innovation
the philosophical flaw in liquid staking is the assumption that liquidity equals value. it doesn't. liquidity is a temporary state. value is anchored in trust and scarcity. when you tokenize a staking right you're commodifying trust. and trust is not fungible. it's fragile. it's emotional. it's human. and code cannot replicate it.
in india we have a saying: jiska ghar jhuggi hai uski chabi bhi jhuggi hai. if your house is a shack your key is a shack too. liquid staking is a shack with gold paint. looks nice but one storm and it collapses. and who pays? the guy who didn't know better
the market will fix this... eventually... maybe... i mean look at the price of stETH now it's 0.998 so it's fine right? right? đ
if you're using stETH in a yield farm you're playing with fire. one de-peg and your entire position gets liquidated. i've seen people lose 40% in minutes because their collateral dropped and the loan got called. you think you're earning 20% apy? you're actually paying 20% insurance premium for volatility you didn't ask for
the fact that you have to check liquidity on curve and uniswap before staking is insane. this isn't finance. this is a survival game. and the rules change every week. i'm out. i'm going back to holding eth. simpler. dumber. safer.
the real question isn't whether liquid staking is risky. it's whether we've forgotten how to be responsible with money. we used to save. we used to wait. we used to understand what we owned. now we chase yield like it's a game show. and we wonder why everything breaks.
while i appreciate the depth of this analysis, i must respectfully note that the systemic risks outlined herein are not unique to liquid staking protocols per se, but rather reflect broader structural vulnerabilities inherent in all decentralized financial architectures. the solution lies not in rejection, but in iterative governance, improved oracle mechanisms, and community-driven risk mitigation frameworks. one must not conflate novelty with danger.
you guys are overthinking this. just stake small. keep most of your eth in cold storage. use stETH for fun stuff like yield farming. if it crashes? you lose a little. if it wins? you win big. crypto isn't supposed to be safe. it's supposed to be exciting. go get it