Wrapped stETH (WSTETH) is a token that represents a stable version of staked Ether (stETH) without the rebasing mechanism, utilized in various decentralized finance (DeFi) applications. Created by Lido, a liquid staking platform, WSTETH is designed to facilitate integration with DeFi protocols by maintaining a constant balance, unlike stETH, which undergoes regular rebasing.^[1][2][3][4]

Overview

Lido introduced the WSTETH token on February 19, 2021, to address the challenges associated with using stETH in specific DeFi environments. While stETH is configured to rebase daily to reflect staking rewards, WSTETH maintains a static balance, making it more suitable for use in protocols that require consistent token balances, such as Uniswap and MakerDAO.

WSTETH represents a share of the total stETH supply but does not undergo daily balance adjustments. Instead, its value appreciates relative to stETH as staking rewards accumulate. This design allows WSTETH users to participate in DeFi activities while benefiting from staking rewards without the complications associated with rebasing tokens.^[1][2][3][4]

Functionality and Use Cases

WSTETH can be acquired by wrapping stETH through the Lido platform or through decentralized exchanges (DEXs) integrated with Lido. Once wrapped, WSTETH can be utilized across multiple DeFi protocols on various blockchains, including Ethereum, Arbitrum, and Optimism. It serves as collateral in lending platforms like Aave and can be used in liquidity pools on exchanges such as Uniswap and Balancer.

The primary utility of WSTETH lies in its compatibility with a broader range of DeFi applications. The static balance of WSTETH ensures smooth integration with protocols that may not be designed to handle fluctuating balances, thereby facilitating participation in activities such as yield farming and liquidity provision.^[2][1][3][4]

Bridging and Cross-Chain Integrations

To increase the accessibility of WSTETH, Lido has extended its availability across multiple blockchain networks. Support for bridging WSTETH to Arbitrum and Optimism was introduced on October 6, 2022. This was followed by the launch of a bridge to the Cosmos ecosystem via Neutron on September 28, 2023, along with subsequent deployments on networks such as BNB Smart Chain, Avalanche, Scroll, Mantle, Linea, and zkSync.

These bridging capabilities enable WSTETH to be used across various blockchain ecosystems, enhancing its utility within the DeFi landscape.

In summary, Wrapped stETH (WSTETH) serves as a rebase-free alternative to stETH within the DeFi ecosystem. Its design makes it easy to participate in a variety of DeFi activities while enabling the accumulation of staking rewards.^[1][2][3][4]

Lido Finance

Lido is a decentralized staking solution that facilitates the staking of assets on blockchain networks such as Ethereum and Polygon. Unlike traditional staking methods that often require assets to be locked up, Lido allows users to maintain liquidity. When users stake through Lido, they receive liquid staking tokens like stETH, which correspond to their staked assets. These tokens accrue staking rewards and can be utilized in various decentralized finance (DeFi) applications, offering both liquidity and the ability to participate in other on-chain activities. Lido functions by pooling user deposits and staking them with network validators, with the aim of simplifying the staking process and, at the same time, allowing the continuous generation of rewards and flexibility in the use of assets.^[1][2][3]