Wrapped stETH

What is Wrapped stETH (WSTETH)?

Wrapped stETH (WSTETH) is a derivative token of stETH (Staked Ether), which itself is a representation of ETH staked on the Ethereum 2.0 Beacon Chain through the Lido staking protocol. WSTETH serves as an ERC-20 compliant wrapped version of stETH, offering improved compatibility with DeFi protocols while maintaining the staking benefits of the underlying stETH.

How Does Wrapped stETH (WSTETH) Work?

WSTETH functions as a wrapper token for stETH, with a key difference in how it handles staking rewards. While stETH balances increase over time as staking rewards accrue, WSTETH maintains a constant balance. Instead, the exchange rate between WSTETH and stETH increases, reflecting the accumulated staking rewards.

The conversion mechanism is straightforward:

• Users can wrap stETH to receive WSTETH
• Users can unwrap WSTETH back to stETH at any time
• The conversion ratio between WSTETH and stETH continuously increases as staking rewards accumulate

This design makes WSTETH particularly useful for DeFi applications where rebasing tokens (like stETH) might cause complications.

Staking and Mining with Wrapped stETH (WSTETH)

WSTETH does not offer direct staking or mining opportunities in the traditional sense. However, it inherently represents staked ETH and automatically accrues staking rewards through its value appreciation relative to stETH.

Here's how staking works with WSTETH:

1. ETH is initially staked through the Lido protocol, converting it to stETH
2. This stETH can then be wrapped to create WSTETH
3. Staking rewards from the Ethereum 2.0 network flow to stETH holders
4. WSTETH holders receive these same rewards through appreciation in the WSTETH/stETH exchange rate

It's important to note that WSTETH does not support mining as Ethereum transitions away from Proof of Work to Proof of Stake.

What is Wrapped stETH (WSTETH) Used For?

WSTETH serves several important functions in the Ethereum ecosystem:

• DeFi Compatibility: WSTETH works seamlessly with DeFi protocols that aren't designed to handle rebasing tokens
• Improved UX for Yield Strategies: The non-rebasing nature makes it easier to track yields and perform calculations
• Collateralization: WSTETH can be used as collateral in various lending protocols
• Liquidity Provision: WSTETH can be paired with other tokens in AMMs and liquidity pools
• Yield Optimization: The token enables users to earn staking rewards while still utilizing their assets in DeFi

Distribution of Wrapped stETH (WSTETH)

Unlike many cryptocurrencies, WSTETH didn't have a traditional token launch or distribution event. Instead, WSTETH is created on-demand whenever a user wraps their stETH. The total supply of WSTETH is dynamic and depends entirely on user demand for wrapping stETH.

This means there was no pre-mine, no ICO, no airdrops, and no team allocations. The WSTETH supply grows organically as more users choose to wrap their stETH tokens.

Additional Information about Wrapped stETH (WSTETH)

Here are some additional key points about WSTETH:

• Smart Contract Security: The WSTETH contracts have undergone multiple security audits by reputable firms
• Gas Efficiency: For frequent interactions with DeFi protocols, WSTETH can be more gas-efficient than stETH
• Liquidity: WSTETH has significant liquidity across major DEXs like Uniswap and Curve
• Governance: While WSTETH itself has no governance, users indirectly participate in Lido governance through the underlying staked ETH
• Risk Factors: WSTETH inherits the same risks as stETH, including smart contract risks and potential delays in ETH unstaking after the Ethereum merge

WSTETH represents an innovative solution for ETH stakers who want to maximize the utility of their staked assets while maintaining exposure to staking rewards on the Ethereum network.

Trading Wrapped stETH (WSTETH) with Cryptohopper

Investors and traders can easily trade WSTETH on various cryptocurrency exchanges using Cryptohopper's automated trading bot. Cryptohopper provides a seamless trading experience for Wrapped stETH (WSTETH) and many other cryptocurrencies, allowing users to implement custom trading strategies without the need for constant market monitoring. Whether you're looking to accumulate WSTETH for its staking benefits or trade it for short-term gains, Cryptohopper's platform offers the tools needed to execute your strategy efficiently across multiple exchanges.