What is the difference between wstETH and stETH?

Both represent the same staked ETH in Lido Finance. stETH rebases — your balance grows daily as rewards arrive. wstETH keeps a fixed balance and instead becomes worth more ETH over time. Same value, different accounting.

Should I hold wstETH or stETH?

Hold stETH if you simply want to watch rewards accumulate in your wallet. Hold wstETH if the token will touch a smart contract — lending markets, liquidity pools, vaults or an L2 bridge — because those systems usually cannot handle a rebasing balance.

Why is wstETH more expensive than ETH?

Because one wstETH represents more than one ETH of stake. The extra is accumulated rewards baked into the exchange rate rather than into the balance. A higher price is not a premium; it is compounding.

Does wrapping stETH into wstETH stop rewards?

No. The underlying stake keeps earning. Wrapping only changes how the reward is expressed — exchange rate instead of balance.

Comparison

wstETH vs stETH

Both tokens represent exactly the same staked ETH inside Lido Finance. The only real difference is where the reward shows up: stETH grows your balance, wstETH grows the value of each token. Pick the wrong one for the job and you can strand rewards inside a DeFi contract — so the choice matters more than the similarity suggests.

Two tokens side by side comparing wstETH and stETH from Lido Finance

	stETH	wstETH
Balance behaviour	Rebases daily — number of tokens grows	Fixed — balance never changes
Where rewards show	In your token balance	In the exchange rate vs ETH
Best for	Holding in a wallet, simple tracking	DeFi collateral, LPs, L2 bridging
Price vs ETH	≈ 1:1	Above 1 and rising over time
Conversion	Wrap to wstETH anytime	Unwrap to stETH anytime
Tax bookkeeping	Many small reward events	One gain realised on disposal

How stETH rebasing works

stETH is a rebasing token. Once a day the Lido Finance oracle reports what the validator set earned, and every holder's balance is scaled up proportionally. You do not claim anything and you do not pay gas: the number in your wallet is simply larger than it was yesterday. This is the friendliest possible experience for a passive holder, because the position reads as "X stETH ≈ X ETH" forever and the growth is visible without any mental arithmetic.

How wstETH accrues instead

wstETH is the wrapped, non-rebasing form. Wrap 10 stETH and you receive slightly fewer than 10 wstETH — because each one is already worth more than one ETH — and that balance then never moves again. Rewards accumulate in the wstETH/stETH exchange rate. A year later you still hold the same token count, but unwrapping returns more stETH than you put in. Nothing was lost; the accounting simply moved from quantity to price.

Why DeFi almost always wants wstETH

Most lending markets, AMMs and vaults record the balance you deposited and assume it stays put. Hand a rebasing token to a contract that was not written for one and the growth can accrue to the contract rather than to you, or be silently ignored. That is why lending markets, L2 bridges and liquidity pools list wstETH: a fixed balance is trivially safe to account for. If your token is going anywhere other than your own wallet, wrap it first. The DeFi usage guide covers the patterns in detail.

Tax and bookkeeping differences

Rebasing produces a steady stream of small balance increases, which in some jurisdictions is a stream of income events to record. wstETH produces none of that until you sell or unwrap, at which point there is a single gain. Which is preferable depends entirely on local rules, and treatment has changed repeatedly in several countries — this is bookkeeping context, not tax advice.

Which should you hold?

Passive holder in a self-custody wallet: stETH, for the simplest possible mental model. Anyone supplying collateral, providing liquidity, bridging to an L2 or using a vault: wstETH, every time. Wrapping and unwrapping is a permissionless contract call in either direction, so the choice is reversible for the cost of gas. Before either, it is worth understanding how Lido Finance works and what risks it carries.

Quick answers

What is the difference between wstETH and stETH?: Both represent the same staked ETH in Lido Finance. stETH rebases — your balance grows daily as rewards arrive. wstETH keeps a fixed balance and instead becomes worth more ETH over time. Same value, different accounting.
Should I hold wstETH or stETH?: Hold stETH if you simply want to watch rewards accumulate in your wallet. Hold wstETH if the token will touch a smart contract — lending markets, liquidity pools, vaults or an L2 bridge — because those systems usually cannot handle a rebasing balance.
Why is wstETH more expensive than ETH?: Because one wstETH represents more than one ETH of stake. The extra is accumulated rewards baked into the exchange rate rather than into the balance. A higher price is not a premium; it is compounding.
Does wrapping stETH into wstETH stop rewards?: No. The underlying stake keeps earning. Wrapping only changes how the reward is expressed — exchange rate instead of balance.