stETH is the most integrated asset in DeFi after ETH and the stablecoins. Every major lending market accepts it, every DEX has depth in it, and its withdrawal mechanism has worked without incident since Ethereum enabled exits. For a holder who wants staking yield plus usable collateral, nothing else is close.
The concentration argument
Lido controls a share of Ethereum's staked ETH large enough that researchers have repeatedly warned about consensus implications. The concern is not that Lido will attack Ethereum; it is that a single governance token deciding who validates a large fraction of the network reintroduces exactly the permissioned layer proof-of-stake was meant to avoid. Lido's Community Staking Module opens operation to permissionless solo stakers, which is a genuine attempt at the problem, and its share of total operators has not shifted dramatically yet.
Mechanics
stETH rebases: your balance increases as rewards accrue, which is intuitive and causes friction in contracts that assume static balances. wstETH is the wrapped, non-rebasing version most DeFi protocols prefer. The protocol takes 10% of rewards, split between operators and the DAO treasury.
Risk assessment
Five years without a contract exploit, permissionless withdrawals functioning since Shapella, and a well-tested oracle set reporting validator balances. The realistic risks are governance capture, operator correlation, and the secondary-market discount that appears whenever exit queues lengthen and leveraged positions unwind at once.
Who should use it
Holders who want the most liquid, most usable staked-ETH position. Anyone who weights Ethereum's decentralisation should consider Rocket Pool or splitting across protocols instead.