Investment Guide: Why stETH Has Become a Top Choice for ETH Staking and DeFi

Why is ETH staking often overlooked?

After Ethereum transitioned to Proof of Stake (PoS), theoretically, ETH holders can earn network rewards through staking. However, to become a formal validator, you usually need to lock up 32 ETH and maintain a node yourself. This creates a barrier that is too high for most ordinary users; at the same time, locking up assets means you cannot use this portion of your assets flexibly.

As a result, many ordinary holders have given up staking — they do not want to lock up their assets and are unwilling to bear the technical complexity.

stETH — A new tool breaking the staking threshold

In order to lower the participation threshold and enhance flexibility, Lido has launched stETH (staked Ether) — a liquidity token representing staked ETH. As long as you deposit any amount of ETH into Lido, you will receive an equivalent amount of stETH. This way, you both participate in staking, earn rewards, and retain the liquidity of your assets.

No complicated operations, no need to maintain nodes yourself, and no need to lock up 32 ETH — this is a very user-friendly option for ordinary users and Decentralized Finance enthusiasts.

How to participate: the process from ETH to stETH

• Prepare ETH and connect to a wallet or platform that supports Lido.
• Deposit ETH into the Lido protocol.
• The protocol mints an equivalent amount of stETH to your account (1 ETH → 1 stETH).
• Holding stETH means you are participating in staking and enjoying staking rewards; at the same time, you can still trade, borrow, or participate in other Decentralized Finance protocols.

If you want to be compatible with more DeFi protocols, you can convert stETH to the wrapped version wstETH, which fixes its balance and makes it easier to use for lending, liquidity pools, and other purposes.

The multiple uses of stETH in Decentralized Finance

• Trading / Speculation: Because stETH is a liquid token that can be traded on exchanges like a regular cryptocurrency.
• Lending / Collateral: Use stETH (or wstETH) as collateral to borrow stablecoins or other tokens on the lending platform.
• Liquidity Pool / Yield Farming: Deposit stETH / wstETH into the liquidity pool to earn trading fees and additional rewards.
• Stake + Dual Yield from Liquidity: On one hand, you earn staking rewards, and on the other hand, your assets maintain liquidity, allowing participation in Decentralized Finance, enhancing capital efficiency.

This characteristic of dual returns + high flexibility makes stETH very popular among cryptocurrency investors and Decentralized Finance users.

Current Market Performance and Considerations (2025 Perspective)

By 2025, stETH remains an important representative in the liquid staking field, with high liquidity and ecological integration. Many DeFi protocols already support stETH or wstETH, making it easy to use in scenarios such as lending and liquidity pools.

However, it is important to note that although stETH is minted at a 1:1 ratio with ETH, its price in the secondary market may be discounted (decoupling) compared to ETH due to factors such as supply and demand, liquidity, and market sentiment. In other words, holding stETH does not mean you hold an equivalent ETH.

Therefore, if you need to exchange for ETH in the short term, you need to pay attention to the exchange rate difference between stETH and ETH; if you hold it for the long term or use it for Decentralized Finance, the impact of the discount may be smaller.

Usage Suggestions and Risk Control

• Suitable for long-term holders and DeFi users: If you plan to participate in staking and yield farming for the long term, stETH + wstETH is very suitable.
• Be cautious about discounts and market risks: do not convert all your ETH into stETH, diversify your assets, and avoid losses due to short-term market fluctuations.
• Note the risks of smart contracts & protocols: Liquidity staking relies on the security of smart contracts and protocols. It is recommended to use reputable, audited platforms and wallets.
• Understanding the staking mechanism and the complexity of DeFi: While stETH + wstETH are convenient, they also come with complex operations such as lending, liquidity pools, and contract interactions. It is recommended to understand in advance and operate with caution.

Future Trends: stETH and the Ethereum Ecosystem

With the development of the Ethereum ecosystem and the continuous maturation of DeFi, the applicability of stETH and its wrapped version wstETH is expected to become increasingly widespread. More and more lending protocols, liquidity pools, and yield aggregators will include them in their support.

In addition, as more people seek to earn staking rewards while maintaining liquidity, the liquid staking model may become mainstream — stETH will be an important vehicle for this trend.

For users who wish to pursue stable returns in the Ethereum world while not wanting to sacrifice flexibility, stETH is worth serious consideration.