What is Leveraged stETH?

The xstETH token, also referred to as leveraged stETH, is a decentralized leveraged long futures contract that interacts with stETH. It aims to maintain a low risk of liquidations and does not impose a funding fee. The mechanism involves holding a reserve of a base token, allowing for the minting of two types of derivative tokens: one stable and one volatile.

The volatile token, xstETH, is designed to have a price that increases at a multiple of the stETH value, typically ranging from 1.5x to 4x, with the potential to reach up to 4.3x under certain conditions. The total market capitalization of both tokens remains aligned with the reserve's value, and any token can be redeemed for a share of that reserve at any time.