Staked Eth Derivative

Definition ∞ A staked Eth derivative is a token representing a claim on Ether (ETH) that has been locked in a staking protocol. When users stake their ETH to support the Ethereum network’s proof-of-stake consensus mechanism, they receive a liquid derivative token in return, such as Lido’s stETH or Rocket Pool’s rETH. These derivatives maintain the value of the underlying staked ETH while providing liquidity, allowing holders to use their staked capital in other decentralized finance (DeFi) applications. They accrue staking rewards and can be traded on secondary markets.
Context ∞ Staked Eth derivatives are a rapidly expanding sector within decentralized finance, frequently discussed in news related to Ethereum’s transition to proof-of-stake and the growth of liquid staking. Reports often cover the market capitalization of these tokens, their peg stability to ETH, and the associated risks, including smart contract vulnerabilities or de-pegging events. These derivatives play a significant role in the overall liquidity and composability of the Ethereum ecosystem.