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If there is a large drop in the US dollar value of ETH over a substantial period, one can assume that people will be deterred from staking ETH because they could lose money (USD) on the stake.

Is there any mechanism in Ethereum proof-of-stake which maintains the incentive to stake under such circumstances?

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Well, to be a bit more precise nobody loses USD or and fiat by staking ETH. You only lose if you exchange with a worse ratio than what you bought with.

If you are into trading (especially fast-paced) you probably shouldn't be staking your assets as they would be locked for a period. Active trading and stuff like staking don't work together.

However if you're not into active trading then you're probably more into hod...holding. In that case your ETH is simply laying in your wallet without accumulating any interest or possible profit. It's a bit like having an heirloom gold coin in your drawer - its fiat value goes up and down but you don't really care as you're not selling it. So why not stake the asset?

So no, I don't think there is any system to prevent losing fiat value.

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There is not, and it should not be.

If you are stacking Ethers to be a node, it is because it is assumed that you are a person who believes in the Ethereum universe so much to be able to put an amount there to affermate that it is a good idea to hodl ethers!

If you do not believe in it, avoid to stack!

You are, at the same time, node of the network, shareholder of the project, ambassador of the very true words in the cryptos world!

No safety mechanism for you, they are not needed (if you trust in it...) 😉

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