What led to the Ethereum crypto crash? Explained here

Ethereum, the second-largest cryptocurrency by market cap on a freefall. The cryptocurrency has crashed over 15.68 per cent in the last 24 hours and is still plummeting. 

  

What is stETH? 

Staked Ether, or stETH is a cryptocurrency pegged to Ether, the cryptocurrency native to the Etehreum blockchain at a 1:1. stETH represents the Ether that is locked on the Ethereum 2.0 beacon chain. It acts as collateral to borrow more ETH on DeFi platforms. 

What happened to stETH? 

The stETH cryptocurrency de-pegged from Ether. As per data from CoinMarketCap, stETH is trading at $1,172 whereas Ether is trading at $1240. 

How is this causing a crash in the markets? 

After the de peg of stETH, positions that had borrowed Ether using stETH are being liquidated.  

This event is causing a panic selling in cryptocurrency markets, especially in that of Ethereum 

What is DeFi?

Decentralized Finance (DeFi) is a financial system built on blockchain. DeFi financial services use smart contracts to record transactions and transmit funds rather than relying on centralised middlemen such as banks, stock exchanges, or brokers. 

What is Ethereum? 

Ethereum is an open-source decentralised blockchain technology with its own coin, Ether. ETH serves as a platform for a variety of different cryptocurrencies as well as the execution of decentralised smart contracts. 

What are smart contracts? 

Smart contracts are essentially programmes that run when certain criteria are satisfied and are stored on a blockchain. They are often used to automate the implementation of an agreement so that all participants can be certain of the conclusion immediately, without the involvement of an intermediary or time lost.  

They can also automate a workflow by automatically activating the next activity when certain circumstances are satisfied. 

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