What is Leveraged stETH?

Leveraged stETH, also known as xstETH, is a decentralized financial instrument designed as a leveraged long futures contract based on stETH. It aims to minimize liquidation risks and operates with a zero funding fee. The protocol maintains a reserve of a base token against which derivative tokens are minted. This includes a stable token and the volatile xstETH, ensuring the total market capitalization of both is aligned with the value of the reserve.

The price of the volatile token, xstETH, appreciates at a rate that is a multiple of stETH, typically ranging from 1.5x to 4x. In certain conditions, this multiple can reach up to 4.3x, though the protocol is structured to manage and limit this peak. The mechanism allows for the redemption of any derivative token for its corresponding share of the reserve at any time.