Curriculum·J305 Staking, Restaking, and Yield Architecture·about 32 min
Native staking and LSTs
By the end of this lesson you can
- →Distinguish what native staking pays from what a liquid staking token pays
- →Count the parties standing between you and the underlying staked asset
- →Compute the fee stack and the cost of exiting through a market rather than a queue
- →Identify who holds the withdrawal keys, which is the question the wrapper hides
Junior · enrolled learners
This lesson opens with StakeHound and Fireblocks, 2021.
- What happened
- StakeHound issued a liquid staking token backed by ether staked in the Ethereum deposit contract, using Fireblocks for key management. In March 2021 a Fireblocks machine holding half of StakeHound's BLS signature in cold storage failed. StakeHound was informed on 2 May 2021 that the keys required to withdraw the staked ether could not be recovered, and alleged that Fireblocks had failed to generate the private keys in a production environment, failed to include in the backup the private keys needed to decrypt its two key shares, and had lost both. The affected position was 38,178 ETH, worth about $74.4M at the time. Proceedings began in the Israeli High Court on 22 June 2021. Fireblocks disputed the claims, stating it was not contractually obliged to store part of the keys and that they had been generated and stored outside its platform.
- The decision point
- The staking itself never failed. The validators ran, the consensus rewards accrued, and the deposit contract held the ether exactly as designed. What failed was a key ceremony at a custodian, two parties removed from anybody holding the token. A liquid staking token is a claim on assets whose withdrawal is controlled by keys somebody else holds, and per F107 the property that matters about a key is not who holds it but whether the recovery has ever been tested.
- Recorded loss
- $74,400,000
What you will be able to answer
- →What does native staking actually pay?
- →What is a liquid staking token?
- →What does the fee stack cost?
- →What are the two exit routes and their prices?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://www.theblock.co/post/109277/staking-company-serves-fireblocks-with-a-lawsuit-over-private-keys-to-over-75-million-in-eth
- https://www.forbes.com/sites/emilymason/2021/06/23/fireblocks-ceo-denies-negligence-in-75-million-ether-loss/
- https://stakehound.com/blog-post/fireblocks-eth-2-key-management-incident/
- https://www.coindesk.com/business/2022/06/29/nansen-casts-blame-for-steth-de-peg-on-terra
Confidence high·Volatility medium·Reviewed 2026-08-06·Owner unassigned
Contested
The StakeHound and Fireblocks dispute was litigated and the parties' accounts differ materially on who was responsible for storing which key material. This lesson describes the allegations and the disputed defense, and its argument does not depend on which side was right: the position was inaccessible either way, and the reader's exposure was to a key ceremony they could not inspect.
Ethereum's withdrawal mechanics, exit queue behavior and slashing parameters have changed across upgrades and continue to. The structural points about layers, fees and exit routes are durable; any specific queue duration is not, and should be checked rather than assumed.