What is StakeWise Staked ETH (osETH)? A Simple Guide to Liquid Staking on Ethereum

osETH isn’t a new cryptocurrency you buy to speculate. It’s a digital receipt - a token that proves you’ve staked Ethereum (ETH) and are earning rewards, while still being able to use your stake in DeFi apps. Think of it like a coupon that pays you interest every day, but you can also trade it, lend it, or use it as collateral - all without waiting for your ETH to unlock.

How osETH Works: Staking Without Locking Up

When you stake ETH directly on Ethereum’s network, your coins get locked for months. You can’t move them, trade them, or use them in DeFi. That’s a problem for people who want rewards but still need liquidity. osETH solves that.

StakeWise lets you deposit ETH into a smart contract. In return, you get osETH tokens - one for every ETH you stake. These tokens are ERC-20, meaning they work everywhere Ethereum does: Uniswap, Aave, Curve, and more. While your original ETH is being used to validate transactions on Ethereum (earning staking rewards), your osETH keeps growing in value. You don’t get more tokens - your existing osETH becomes worth more ETH over time.

Why Overcollateralization Matters

Not all liquid staking tokens are built the same. Lido’s stETH, for example, tracks ETH 1:1 but passes on slashing risks directly to holders. If a validator goes offline or misbehaves, your stETH loses value. osETH is different.

StakeWise uses something called overcollateralization. For every osETH you mint, the system holds more than 1 ETH in reserve - often 1.1 ETH or even more. This extra ETH acts as a safety cushion. If a validator gets slashed (penalized for downtime or fraud), the loss is absorbed by the extra collateral before it touches your osETH balance.

There are two types of Vaults in StakeWise V3:

• 90% LTV Vaults: These are backed by 10% extra ETH. Safe for most users.
• 99.99% LTV Vaults: These are high-efficiency, low-collateral Vaults. To protect users, the operator must lock up 5 million SWISE tokens as a bond. If something goes wrong, those tokens are used to cover losses.

This structure means your osETH doesn’t drop in value just because one validator fails. It’s a major upgrade in security compared to other liquid staking options.

How to Get osETH

You have two ways to get osETH:

1. Stake ETH directly through the StakeWise interface. Connect your wallet (MetaMask, Coinbase Wallet, OKX), deposit ETH, and receive osETH instantly. Your ETH goes into a Vault, and your osETH balance starts growing with rewards.
2. Buy it on a DEX. You can trade ETH, USDC, or other tokens for osETH on decentralized exchanges like Uniswap or SushiSwap. This is useful if you don’t want to go through the staking process.

The process is non-custodial. StakeWise doesn’t hold your keys. You control your wallet. The smart contracts handle everything else.

Redeeming osETH for ETH

Want to turn your osETH back into ETH? It’s not always instant.

StakeWise uses Oracles to track the real-time value of staked ETH. When you redeem:

• If there’s enough unbonded ETH available (from validators that have already exited), you get ETH immediately.
• If not, the system starts a validator exit request. This can take hours or days - the same delay as staking directly on Ethereum.

This is a trade-off. You gain liquidity while staking, but full redemption still follows Ethereum’s 18-24 hour exit window. It’s not magic - it’s just better than being locked up entirely.

How osETH Compares to stETH and rETH

Here’s how osETH stacks up against the two biggest competitors:

Comparison of Liquid Staking Tokens

Feature	osETH (StakeWise)	stETH (Lido)	rETH (Rocket Pool)
Collateral Model	Overcollateralized (1.1x+ ETH per osETH)	1:1 (no buffer)	Partially collateralized (via rETH node operators)
Slashing Risk	Buffered - holders protected	Direct - holders absorb loss	Shared - node operators bear most risk
APY (approx.)	~3.5-4.2%	~3.2-4.0%	~3.8-4.5%
Market Cap (late 2023)	$941M	$10B+	$1.8B
DeFi Integration	Good - works on major DEXs and lending protocols	Excellent - widest adoption	Good - growing
Restaking Support	Yes - via EigenLayer	Yes - via EigenLayer	Yes - via EigenLayer

osETH trades slightly lower yield for higher safety. If you’re risk-averse or managing institutional funds, that buffer matters. If you’re chasing maximum yield and trust the network, stETH might suit you better.

Restaking with osETH and EigenLayer

One of the biggest upgrades for osETH came in late 2023 with integration into EigenLayer. Restaking means you can use your staked ETH (via osETH) to secure other protocols beyond Ethereum - like decentralized oracles, bridges, or rollups.

Here’s how it works:

1. You deposit your osETH into EigenLayer.
2. You choose an operator (like Everstake) to validate for other networks.
3. You earn extra rewards - often in tokens from those protocols - on top of your Ethereum staking yield.

This turns osETH from a passive staking token into an active yield generator. It’s one reason why institutions are watching StakeWise closely - it’s not just about staking anymore. It’s about earning across the entire Ethereum security ecosystem.

Who Should Use osETH?

osETH isn’t for everyone. But it’s perfect for:

• ETH holders who want rewards but can’t afford to lock up their assets.
• DeFi users who need liquidity to participate in lending, yield farming, or trading.
• Risk-averse investors who don’t want to be exposed to slashing.
• Institutional players looking for audited, non-custodial staking with insurance.

If you’re new to crypto and just want to “stack sats,” stick with ETH directly. But if you’re already in DeFi and want to earn more without giving up flexibility, osETH is one of the smartest moves you can make.

Future Outlook and Risks

StakeWise is still small compared to Lido or Rocket Pool. But its focus on security and overcollateralization could make it a favorite as regulations tighten. The SEC has signaled interest in staking services - platforms that protect users from slashing may be seen as more compliant.

Future updates include:

• Expanding to other blockchains (not just Ethereum).
• More DeFi integrations for osETH.
• Improved redemption speed through better oracle systems.

The biggest risk? Ethereum’s success. If ETH loses its dominance, osETH loses its value. But as long as Ethereum remains the leading smart contract platform, osETH will keep evolving as one of its most secure liquid staking tools.