Is stETH the same price as ETH?

Usually within a fraction of a percent. Short-term dips below peg happen during rush-to-exit events but tend to close as arbitrage and redemptions catch up.

Do I lose value if the token depegs?

Only if you sell during the dip. Holders who wait for the redemption path to clear typically recover the peg. Selling into a depeg locks in the loss.

Why does rETH cost more than one ETH?

rETH is reward-bearing. Its exchange rate rises as staking rewards accrue, so one rETH steadily represents more ETH. The token amount stays fixed instead of the balance growing.

Can a liquid staking token go to zero?

In theory, yes — a catastrophic smart-contract bug or mass slashing event could destroy most of the backing. In practice the top protocols have not had that failure, but the risk is real.

How long does redemption take?

Anywhere from hours to a couple of weeks, depending on Ethereum's validator exit queue and the protocol's internal buffers.

Do I pay tax on rebases?

Tax treatment varies by country. Many jurisdictions treat each rebase or exchange-rate accrual as taxable income. Ask a local accountant.

Which design is safer, rebase or reward-bearing?

Neither is safer by design. The risk sits in the contract, the operator set, and the redemption path — not the accounting style.

How Liquid Staking Tokens Keep Their Value Over Time

Buy a liquid staking token today, and a year later it should still be worth roughly what your ETH is worth — plus the staking rewards that piled up in between. That's the whole promise. But how does a token printed by a smart contract actually stay tied to the price of the coin it stands for? The answer is a mix of plain accounting, market pressure, and a redemption switch that almost nobody uses but everybody relies on.

This piece walks through the mechanics without the marketing gloss. Numbers here are approximate; real yields and peg moves shift constantly.

Two designs, one goal

Every liquid staking token has to answer the same question: how do rewards reach the holder? There are two common answers.

Rebase tokens like Lido's stETH. Your balance grows a tiny bit each day. One stETH still trades near one ETH; you just end up with more of them.
Reward-bearing tokens like Rocket Pool's rETH and Coinbase's cbETH. Your balance stays fixed. Instead the exchange rate rises — one rETH today might redeem for 1.09 ETH, next year 1.13 ETH.

Both track the same underlying stack of staked ETH. The difference is bookkeeping. Our liquid staking explainer covers the split in more depth.

The peg is really a redemption right

People say "the token pegs to ETH" as if it were a stablecoin. It isn't. What actually holds the value is the right to redeem the token for real, unstaked ETH via the protocol's withdrawal queue. If one stETH ever traded much below one ETH's worth of value, someone could buy it cheap on the market, redeem it through Lido, and pocket the difference. That arbitrage is what pulls prices back in line.

The catch: redemption takes time. Ethereum's exit queue can be days or weeks when demand spikes. During those windows the market price can drift below the redemption value, which is what a short depeg looks like.

Why the peg wobbles

A few forces push and pull:

Pressure	Direction	Typical cause
Rush to exit	Price falls below peg	Market panic, protocol scare, big holder selling
Rewards accruing	Value rises slowly	Normal validator income compounding
Arbitrage	Pulls price back to peg	Redemption profit closes the gap
Withdrawal delays	Peg gap widens temporarily	Validator exit queue is full

The June 2022 stETH episode is the textbook case. Celsius and other big holders needed liquidity, and staking withdrawals weren't live on Ethereum yet. stETH traded around 0.94 ETH for a stretch. Once withdrawals shipped in 2023, the mechanism was complete and the same pressure would resolve faster today.

Reward math in plain numbers

Take an illustrative 3.5% APY. In rebase form: deposit 10 ETH, get 10 stETH. A year later your balance shows roughly 10.35 stETH. In reward-bearing form: deposit 10 ETH, get about 9.17 rETH at a 1.09 rate. A year later, at maybe 1.13, that same 9.17 rETH redeems for around 10.36 ETH. Same yield, different notation. Compounding does the same work either way. See how staking rewards actually get paid for the underlying source of that yield.

The real risks that can break the peg

Value tracking doesn't mean value protection. Things that can genuinely dent a liquid staking token's price:

Slashing. If a batch of validators misbehaves, the pool loses ETH. Token holders share the loss. Big historic events have been small; a hypothetical worst case is not.
Smart-contract bugs. The contract that mints, tracks and redeems the token is the whole trust surface. Audits reduce risk without erasing it.
Withdrawal queue exhaustion. A stampede of exits with limited daily exit slots pushes the market price down until things calm.
Exchange failures. If a venue where the token trades collapses, on-venue prices can dislocate from the redemption value for a while.
Price drop of ETH itself. Perfect peg still means the token loses dollar value if ETH does.

None of that is a reason to avoid liquid staking. It's a reason to size positions the way you would any other risky asset. Our staking risks guide covers each of these in more depth.

What actually keeps liquid staking tokens tied to ETH

Strip away the marketing and it comes down to three things: honest accounting of the ETH sitting behind the token, a working redemption path back to that ETH, and enough traders willing to close small price gaps for a small profit. When all three work, the peg holds within pennies. When one breaks — usually the redemption path, briefly — the peg wobbles until the queue drains. Understanding that little machine is more useful than any glossy dashboard promising a stable number. Run any yield you see through the rewards calculator before you commit, so the illustrative APY becomes a real dollar figure over your holding period.