stETH

stETH is a liquid staking derivative issued by Lido Finance. It represents Ether that has been staked on the Ethereum 2.0 beacon chain while remaining as an ERC-20 token that can be traded, used in DeFi, or held like any other token. When a user deposits ETH into Lido, they receive stETH in return, with the value of stETH designed to reflect the staked ETH plus accrued rewards.

How it works: a user sends ETH to Lido’s staking contract. Lido then delegates that stake to a set of approved validator operators. The user receives stETH tokens, and staking rewards are earned on the underlying ETH. Those rewards are reflected in the stETH balance over time, allowing holders to gain exposure to ETH staking yield without locking assets in a traditional unbonding period. The market price of stETH can trade above or below ETH, so holders may experience slight deviations from the spot ETH price while still participating in staking rewards.

Uses and liquidity: stETH is widely tradable on Ethereum and is accepted across many DeFi platforms. It enables users to maintain liquidity while earning staking rewards, and it can be used as collateral or for yield-generating strategies in compatible protocols.

Risks and considerations: investing in stETH carries smart contract risk tied to Lido’s contracts and to the validator network, as well as risks related to centralized operator risk and potential slashing. A key caveat is the ability to withdraw staked ETH; as long as beacon-chain withdrawals are not enabled, redemptions for ETH are not straightforward, making stETH a derivative rather than a direct ETH claim. Price deviations between stETH and ETH, liquidity risk, and governance or regulatory factors also apply.