stETH Depeg Liquidation Simulator: Interactive CDP Risk Analysis Tool

Interactive simulation demonstrating how stETH depeg events affect CDP (Collateralized Debt Position) protocols. Shows that LST (Liquid Staking Token) collateral requires different risk parameters than traditional ETH collateral.

Scenario: This simulation isolates the depeg component of the May 2022 Terra collapse, where stETH depegged from ETH due to withdrawal demand, causing liquidation cascades in CDP protocols even while ETH price remained stable. The 48-hour timeline shows the accelerating depeg progression that led to widespread liquidations.

Key Design: ETH price is held constant at $3,200 throughout the simulation to isolate the depeg risk. This demonstrates that LST liquidations can occur due to depeg events alone, even when the underlying ETH price is stable. In contrast, ETH collateral would have zero liquidations in this scenario since ETH/ETH ratio is always 1.0.

System Health: The simulation shows the total collateral value vs. total borrowed amount for remaining CDPs after liquidations. This reveals whether the protocol has sufficient collateral to cover outstanding debt. If collateral value exceeds debt, the system can continue operating. If debt exceeds collateral value, the protocol faces insolvency risk.

Core Message

Traditional CDP parameters don't work for LST collateral - depeg events create liquidation cascades even when ETH price remains stable.

Target Users

DeFi protocol developers, risk managers, crypto researchers, and potential CryptoEconLab clients evaluating LST collateral strategies.

Simulation Scope

48-hour depeg isolation scenario (May 2022) with 1000 CDPs, $1.6B total debt, and realistic stETH depeg progression based on historical data.

CDP Distribution

Balanced: 50 risky, 400 normal, 450 conservative, 100 very safe positions.

Risk Comparison: LST vs ETH Collateral

Current Scenario: stETH Collateral

• stETH/ETH Ratio: Variable (depegs to 8.0% max)
• ETH Price: $3,200 (held constant)
• Liquidations: Driven by depeg, not ETH price
• Risk: Withdrawal demand → depeg → liquidations

Baseline: ETH Collateral

• ETH/ETH Ratio: Always 1.000 (no depeg)
• ETH Price: $3,200 (held constant)
• Liquidations: 0 (no depeg risk)
• Risk: Only ETH price drops trigger liquidations

Key Insight

This simulation isolates depeg risk by holding ETH price constant. In reality, LST liquidations can occur even when ETH price is stable, which is why LST collateral requires different risk parameters than ETH collateral.

Current Time:Hour 0/48
Progress:
0%

stETH Depeg Liquidation Cascade

ETH Price: $3,200 (held constant) | stETH depegs due to withdrawal demand (isolated depeg component)

System Status: HEALTHY
048Hours since event start0.9000.9250.9500.9751.000stETH/ETH Ratio03610Liquidations/HourHealthyWarningCritical
stETH/ETH Ratio
Liquidations/Hour
Timeline Cursor
1.0000
Current Ratio
0
Liquidations (This Hour)
0
Total Liquidations
202.9%
System Collateral

Protocol Design

130%200%
Liquidation Ratio: The collateral ratio at which CDPs become eligible for liquidation. Lower values (closer to 130%) make the system more vulnerable to liquidations during price volatility, while higher values provide more safety but reduce capital efficiency.
0%5%
Depeg Tolerance: The maximum acceptable deviation from the 1:1 peg before the system considers stETH to be depegged. Lower values make the system more sensitive to small price movements, while higher values allow for normal market fluctuations.
Oracle Type: How the system determines the stETH/ETH price. Instant DEX prices are more responsive but vulnerable to manipulation, while moving averages provide stability but may lag during rapid price movements.

Collateral Asset

Properties:

• Max Depeg: 8.0%
• Volatility: ±0.5%
• Liquidity: High
• Withdrawal: 1-7 days
• Depeg Risk: Medium

CDP Distributionⓘ

Current Distribution:

RiskyNormalConservativeVery Safe
Risky (150-170%)50 CDPs (5.0%)
Normal (160-210%)400 CDPs (40.0%)
Conservative (200-300%)450 CDPs (45.0%)
Very Safe (300%+)100 CDPs (10.0%)
Total CDPs:1,000

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