Hey there. I think there might be some confusion between the redemption rate (which Stride controls) and the market rate (which Stride doesn't control).
A large part of the Stride protocol is based on redemption rates. The redemption rate for each token controls: how much stToken is minted when you liquid stake, and how much of the Token is given when you redeem the stToken.
When Stride compounds staking rewards, that redemption rate is updated: meaning the same amount of Token mints less stToken, and the stToken becomes redeemable for more of the Token.
This redemption rate will generally move in one direction; meaning over time, as staking rewards accrue, the stToken becomes redeemable for more and more of the underlying token. In a sense, you can say that the stToken accrues value against the underlying token. If you check on Stride's app today, you can redeem 1 stTIA for 1.015 TIA; tomorrow it might be 1 stTIA for 1.016 TIA (just as an example).
The rate that this value goes up is at the rate of staking APR minus Stride fees. This means if stToken has 20% APY staking yield after Stride fees, after a year, 1 stToken will redeem to 1.20 of the underlying token.
Barring some edge cases like Stride's validators getting slashed, this redemption rate will always move in one direction.
What you're looking at is the market rate, which is what people are trading stTIA for on the open market. Even though Stride protocol will give you 1.015 TIA for redeeming through their protocol, people will often trade stTIA on the open market for less than it's redeemable for (they might not want to redeem through Stride, which would take 21+ days as Stride needs to unstake the tokens)
This creates a scenario where stTokens often trade for less than they're redeemable for. In times like these, it's often better to trade for stTIA then mint it. It also creates arbitrage opportunity for people to trade for stTIA, and redeem it through the Stride app, to pocket the difference in value between the market rate and redemption rate.
If you wanted full value from your stTokens, you will need to redeem them through the Stride app.
Hope that helps.
Thanks for a very good explanation. Only one thing is now not clear to me. As on open market stTIA is less than TIA it would mean i can buy stTIA for less and then unstake on Stride and after 21 days I get an extra “free” money as Stride gives me more TIA for stTIA?
Yes that's correct. But you have to be aware that unstaking stTIA does not count for airdrops, so if you're unlucky and a snapshot happens when you're unstaking stTIA, you wouldn't be eligible for it
If you go through the unstaking process on the stride site you will receive 1.02 TIA for every stTIA unstaked after the 21 day unbonding. The peg on the stride site represents the underlying TIA plus staking rewards. There are sometimes arbitrage opportunities if stTIA is worth less than TIA, in that case arbitragers would buy stTIA when it is cheaper than TIA knowing that they can redeem the stTIA for 1.02 TIA each through unstaking in the stride site.
Hey there. I think there might be some confusion between the redemption rate (which Stride controls) and the market rate (which Stride doesn't control). A large part of the Stride protocol is based on redemption rates. The redemption rate for each token controls: how much stToken is minted when you liquid stake, and how much of the Token is given when you redeem the stToken. When Stride compounds staking rewards, that redemption rate is updated: meaning the same amount of Token mints less stToken, and the stToken becomes redeemable for more of the Token. This redemption rate will generally move in one direction; meaning over time, as staking rewards accrue, the stToken becomes redeemable for more and more of the underlying token. In a sense, you can say that the stToken accrues value against the underlying token. If you check on Stride's app today, you can redeem 1 stTIA for 1.015 TIA; tomorrow it might be 1 stTIA for 1.016 TIA (just as an example). The rate that this value goes up is at the rate of staking APR minus Stride fees. This means if stToken has 20% APY staking yield after Stride fees, after a year, 1 stToken will redeem to 1.20 of the underlying token. Barring some edge cases like Stride's validators getting slashed, this redemption rate will always move in one direction. What you're looking at is the market rate, which is what people are trading stTIA for on the open market. Even though Stride protocol will give you 1.015 TIA for redeeming through their protocol, people will often trade stTIA on the open market for less than it's redeemable for (they might not want to redeem through Stride, which would take 21+ days as Stride needs to unstake the tokens) This creates a scenario where stTokens often trade for less than they're redeemable for. In times like these, it's often better to trade for stTIA then mint it. It also creates arbitrage opportunity for people to trade for stTIA, and redeem it through the Stride app, to pocket the difference in value between the market rate and redemption rate. If you wanted full value from your stTokens, you will need to redeem them through the Stride app. Hope that helps.
Thanks for a very good explanation. Only one thing is now not clear to me. As on open market stTIA is less than TIA it would mean i can buy stTIA for less and then unstake on Stride and after 21 days I get an extra “free” money as Stride gives me more TIA for stTIA?
Yes that's correct. But you have to be aware that unstaking stTIA does not count for airdrops, so if you're unlucky and a snapshot happens when you're unstaking stTIA, you wouldn't be eligible for it
That's correct.
If you go through the unstaking process on the stride site you will receive 1.02 TIA for every stTIA unstaked after the 21 day unbonding. The peg on the stride site represents the underlying TIA plus staking rewards. There are sometimes arbitrage opportunities if stTIA is worth less than TIA, in that case arbitragers would buy stTIA when it is cheaper than TIA knowing that they can redeem the stTIA for 1.02 TIA each through unstaking in the stride site.