As more investors stake Ethereum and hold liquid-staked ETH tokens like stETH (from Lido Finance) or rETH (from Rocket Pool), demand has grown for lending platforms that let you deposit these tokens — either to earn interest or borrow against them.
In this article, I highlight the top DeFi platforms that are compatible with ETH + LSTs, and analyze their benefits, trade-offs, and ideal use cases.
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🔧 What to Look for: Criteria for “Good for Liquid-Staked ETH”
Before I list the platforms, here are the criteria I used to select them:
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Supports stETH / rETH / other LST tokens as collateral or depositable assets.
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Has sufficient liquidity and TVL (total value locked) to support large deposits/borrows.
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Good reputation, security audits, and history of reliability.
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Competitive interest/yield rates or borrowing terms.
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Active user base and strong protocol maintenance (not risk of abandonment).
With that in mind — here are the top picks.
✅ Top DeFi Lending Protocols for ETH & Liquid-Staked ETH
Aave
Why Aave stands out
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Aave supports liquid-staked ETH tokens (such as stETH or wrapped wstETH) as collateral on many markets including Ethereum mainnet, and — via V3 — other networks like Polygon, Arbitrum, and Optimism. (Lido Help)
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You can deposit stETH/wstETH to earn interest, or borrow against them — while still receiving staking rewards from Lido. (Lido Help)
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It remains one of the largest and most audited lending protocols in DeFi; its massive liquidity and long-standing presence make it a relatively safe option. (CoinGecko)
Best for: Investors who hold LSTs and want to borrow stablecoins or other assets without unstaking — or just lend out stETH for yield.
Considerations: As with any over-collateralized borrowing, liquidation risk exists if ETH price drops sharply — use conservative loan-to-value (LTV) ratios.
Morpho (Morpho Blue / Vaults)
Why Morpho matters
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Morpho recently announced support for stETH markets under its “Morpho Blue” initiative — enabling liquid-staked ETH holders to access lending markets with optimized rates and capital efficiency. (Morpho Interface)
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As a "peer-optimized" lending network, Morpho tends to offer competitive rates for both lenders and borrowers, often improving on base-protocol yields. (CoinGecko)
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Morpho’s modular architecture and growing adoption make it a strong contender if you want modern, efficient DeFi lending beyond traditional protocols. (Wikipedia)
Best for: Users seeking optimized lending/borrowing yields, especially if they want to use stETH as collateral or earn interest while keeping liquidity.
Considerations: As a newer/rapidly evolving protocol, it involves more risk relative to legacy platforms — do due diligence and avoid over-leveraging.
Liquid-Staking + Lending via LST-Friendly Ecosystem (e.g., Lido + Lending Platforms)
Why this combination matters
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Platforms like Lido — which issued stETH / wstETH — aim to integrate with money-market and lending protocols to maximize utility of liquid-staked ETH. (lido.fi)
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When you stake ETH via Lido you continue earning staking yield; then, on lending platforms that accept stETH/wstETH, you can also earn interest or borrow against it — effectively layering yield/staking + lending. (lido.fi)
Best for: Long-term ETH holders who want to maximize returns by combining staking income + DeFi lending rewards or liquidity.
Considerations: Smart-contract risk, depeg / liquidity risk for stETH derivatives — monitor carefully and avoid over-collateralization.
⚠️ Risks & What to Watch Out For
While lending or using stETH/rETH in DeFi offers attractive flexibility, there are several risks you should be aware of:
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Liquid-staking & derivative risk: stETH/rETH prices or peg stability can be impacted during market stress, affecting your collateral value or withdrawability. (Coin Bureau)
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Smart-contract risk: Even major platforms are built from complex code; bugs or exploits can compromise funds — always diversify and avoid putting all assets in a single protocol.
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Liquidation risk (if borrowing): If the value of your collateral drops (e.g. ETH price crash), loans may be liquidated. Use safe LTV ratios.
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Protocol-specific risk & market conditions: Yield rates vary, platform activity changes, and liquidity can fluctuate — never treat high APY as guaranteed long-term.
🎯 Which Platform is Best for Which Use-Case
| Your Goal | Recommended Platform | Why |
|---|---|---|
| Safe, large-scale lending / collateralized borrowing with stETH | Aave | Largest liquidity, well-audited, wide asset support |
| Yield-optimized lending / borrowing with stETH; peer-to-peer rate improvements | Morpho | Competitive rates, modern architecture, stETH support |
| Layered staking + lending for maximum yield | Lido (stake) + LST-friendly lending | Earn staking yield + lending interest or borrowing flexibility |
| Risk-averse staking-only strategy | Lido (stake only) | Lowest complexity, avoid lending/borrowing risks |
✅ Final Thoughts: How to Use stETH & rETH in DeFi Lending Safely
If I were managing a portfolio today with ETH and liquid-staked ETH, here’s what I’d do:
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Stake ETH via Lido to receive stETH — earn staking rewards passively.
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Use a reputable lending protocol like Aave or Morpho to deposit stETH as collateral — giving optional liquidity or borrowing flexibility while still earning staking yield.
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Maintain conservative loan-to-value (LTV) ratio — avoid over-leveraging.
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Diversify across protocols to reduce smart-contract & platform risk.
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Monitor market conditions and stETH derivative peg value — especially during high volatility.
For many users, this setup offers the best balance between yield, liquidity, and safety — leveraging staking + lending power without sacrificing flexibility.
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Disclaimer: The above content is for informational and educational purposes only and does not constitute financial or investment advice. Always do your own research and consider consulting with a licensed financial advisor or accountant before making any financial decisions. Panaprium does not guarantee, vouch for or necessarily endorse any of the above content, nor is responsible for it in any manner whatsoever. Any opinions expressed here are based on personal experiences and should not be viewed as an endorsement or guarantee of specific outcomes. Investing and financial decisions carry risks, and you should be aware of these before proceeding.
About the Author: Alex Assoune
Alex Assoune (MS) is a global health and environmental advocate. He founded Panaprium to inspire others with conscious living, ethical, and sustainable fashion. Alex has worked in many countries to address social and environmental issues. He speaks three languages and holds two Master of Science degrees in Engineering from SIGMA and IFPEN schools.
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