Every ETH0 is backed 1-to-1 by wstETH — Lido's wrapped staked ETH. This article shows what that means in practice and why it matters.
The short version
1 ETH0 = 1 wstETH in the vault. You can redeem at any time and receive your wstETH back.
Because wstETH is an ETH-denominated yield-bearing token, your ETH0 balance tracks ETH closely and grows in ETH terms as the underlying Lido validators earn staking rewards.
What is wstETH?
wstETH stands for "wrapped staked ETH" — it is a tokenized form of ETH that is staked with Lido, a liquid staking provider. Key facts:
Property | Value |
Asset | wstETH (ERC-20) |
Issuer | Lido Finance |
Underlying | ETH staked with Lido validators |
Native yield | ~3.0–3.5% APR |
Redeemability | Convert to stETH, then withdraw ETH via Lido (or swap on markets) |
TVL | One of the largest liquid staking tokens in DeFi |
When you hold wstETH, your balance stays constant but the amount of ETH per wstETH slowly increases over time. That accrued value is the staking yield.
Why Lido
Lido is chosen as the collateral provider for ETH0 because it is the largest, most liquid, and most battle-tested liquid staking protocol on Ethereum. Advantages:
Scale — billions of dollars in wstETH, deep liquidity across many markets
Security — extensive audit history, long track record
Composability — wstETH is accepted as collateral on major DeFi platforms
Validator diversification — Lido stakes through a large set of validators, reducing the impact of any single validator failure
How the 1:1 works
When you deposit wstETH, you receive ETH0 at a rate that reflects the current wstETH ↔ ETH exchange rate. As time passes and wstETH accumulates staking yield, 1 wstETH becomes worth slightly more than 1 ETH. Your ETH0 balance reflects this — 1 ETH0 tracks approximately 1 ETH, and the staking yield is captured in the underlying backing.
Redemption works in the opposite direction: 1 ETH0 gives you back 1 wstETH (subject to a small protocol fee and gas).
How to verify the backing
In the app — a real-time display of the wstETH reserves on the ETH0 page
On-chain — the wstETH balance held by the ETH0 collateral contract is public
In the docs — docs.usual.money tracks the live composition
The risks to watch
Risk | What it means |
Lido slashing | If Lido validators are slashed, wstETH loses a small amount of ETH value. Historically rare but possible. |
Lido smart contract risk | Lido contracts must work correctly. Lido is one of the most audited protocols in DeFi. |
Usual smart contract risk | The Usual ETH0 contracts must work correctly. 20+ audits have been performed. |
ETH market risk | ETH0 is ETH exposure. If ETH falls, your ETH0 balance falls in dollar terms. |
wstETH market peg | Rarely, wstETH can trade at a discount to its NAV on DEXs during stress events. |
Note: ETH0 exposes you to two protocol layers: Lido (for staking) and Usual (for the ETH0 wrapper). This is extra risk compared to holding ETH directly. In exchange, you get the USUAL coupon on top of the native staking yield.
Technical note (for DeFi users): The ETH0 contract holds wstETH as its only collateral type, in contrast to USD0 which holds multiple RWA collateral tokens. The redemption path calls into the wstETH contract to release the underlying token. The exchange rate used internally comes from Lido's on-chain stEthPerToken function. See the docs for the exact backing logic and the wstETH address.
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