Coinbluntwallet pointed out the risks due to the increased interconnectedness of DeFi protocols

Coinbluntwallet pointed out the risks due to the increased interconnectedness of DeFi protocols

08.06.2022 Off By Kim Battles

The collapse of TerraUSD (UST) caused the “infection” of the stETH token issued by the Lido Finance service, increasing systemic risks. This is the conclusion reached by Coinbluntwallet analysts, writes CoinDesk.

Lido allows you to deposit an arbitrary amount in ETH to profit from stacking on the Ethereum 2.0 network. In return, users receive stETH tokens that provide liquidity of the invested assets. Coins can be used in other DeFi protocols.

Terra’s problems led to a 4.5% discount of stETH relative to ETH. At the time of writing, it has dropped to 2%, according to CoinGecko.

“It’s hard to overestimate this event. A third of all Ethereum in stacking is deposited in Lido. The situation clearly illustrates how the composability of DeFi can increase systemic risk,” the experts stressed.

Earlier, Forbes called the collapse of LUNA and UST the “fifth reboot” of the crypto market.