Wrapped Staked Ether

Definition ∞ Wrapped Staked Ether, often denoted as WstETH or similar, is a liquid staking derivative that represents Ether (ETH) that has been staked on the Ethereum beacon chain. It allows users to retain liquidity and composability for their staked ETH, which would otherwise be locked. This token accrues staking rewards and can be used in other decentralized finance protocols. It provides a means to participate in staking while maintaining asset flexibility.
Context ∞ Wrapped Staked Ether plays a significant role in the decentralized finance ecosystem by enabling users to leverage their staked ETH for additional yield generation across various protocols. It addresses the illiquidity of native staked ETH, allowing for greater capital efficiency. However, it introduces additional smart contract risk and potential de-peg risk if the derivative loses its value parity with staked ETH. The market for liquid staking derivatives continues to expand, offering both opportunities and considerations for participants.