Read this carefully. It’s not easy to grasp on the first try.

a bunch of people staked their ETH on the Ethereum blockchain to earn yield, except they didn't want their capital to be locked up, so they actually staked with a liquid staking protocol called $LDO who provided them a liquid staking receipt token called stETH, except they decided to juice their yield further by depositing their stETH receipt tokens into a restaking protocol called $EIGEN , except they didn't want to lock up their capital, so they actually restaked with a liquid restaking protocol called KelpDAO who provided them with a liquid restaking receipt token called rsETH, except they decided to juice their yield further by depositing their rsETH tokens into a lending protocol called Aave so that they could open a leveraged looping position that borrows ETH against the rsETH collateral and restakes the ETH into rsETH which is then deposited as collateral, except it turns out rsETH used a cross-chain bridge called LayerZero that was hacked by north koreans causing rsETH to become undercollateralized and now these looping positions are stuck and unprofitable, and everyone is pointing fingers at each other,

This is exactly the kind of nonsense people get into when they can’t—or don’t know how to—simply trade or invest in spot. That’s where all these ridiculous liquidity games begin.

Imagine you deposit money in a bank at an annual interest rate. At the same time, you take out a loan using your real estate as collateral for the same amount. Then you use that loan to start a business. While the business isn’t generating income yet, you rent out its equipment just to cover costs. To pay taxes and salaries, you take out another loan—and suddenly you’re deep in some kind of financial surrealism.

That’s a simplified example. But now imagine the multi-layered strategies of people who can’t just buy Ethereum and hold it in their wallets.

If people didn’t get involved in things like farming, yielding, and staking, DeFi would be much simpler. #ETH