As blockchain technology expands, new mechanisms emerge to enhance security, scalability, and financial opportunities within decentralized networks. These advancements allow you to actively participate in shaping the future of finance and earn rewards while supporting cutting-edge systems.
This guide will explain what restaking is, how it differs from staking, and its purpose in cryptocurrency. It will also cover liquid restaking tokens, safety concerns, and top protocols besides EigenLayer.
What Is Restaking in Crypto?
Restaking in cryptocurrency means you can use your staked tokens to secure additional blockchain protocols. In proof-of-stake systems like Ethereum, you need to lock tokens to validate transactions and earn rewards. With restaking, you apply these staked assets to support other networks at the same time. Platforms like EigenLayer lead this innovation. Here, you enhance blockchain efficiency without unstaking your original holdings.
How Does Restaking Work?
Restaking functions through two approaches: native and liquid restaking. In native restaking, you operate an Ethereum node and add software to stake your tokens on secondary protocols. This demands technical skills and acceptance of slashing risks, where networks penalize your funds for violations.
Liquid restaking streamlines the process. You can stake crypto assets with a validator and receive liquid staking tokens (LSTs) representing your stake. You then restake these LSTs on platforms like EigenLayer to secure other services, keeping your assets liquid.
Smart contracts manage these transactions for safety and speed. You have to choose actively validated services (AVSs), like Oracle networks or sidechains, to support and earn rewards based on your contribution.
Restaking also improves network security and gives you more rewards. It lets other networks use Ethereum’s security and helps you earn more from the same crypto.
Why Is Restaking Important?
Restaking increases trust, security, and returns in the blockchain ecosystem.
- Higher Rewards – You can earn more by restaking without needing new tokens.
- Better Security – It helps secure new blockchain services.
- Capital Efficiency – It uses the same tokens for many purposes.
- Network Growth – It supports more projects without needing new validators.
Types of Restaking
1. Native Restaking
In native restaking, you directly manage your staked assets to support additional networks. You need to run an Ethereum validator node, which requires technical skills to set up and maintain. You have to install specialized software, such as EigenLayer’s, to extend your staked tokens to secure other protocols, like sidechains or data availability layers. This process keeps your original stake on Ethereum intact while earning rewards from secondary networks.
Some restaking platforms that support this are Solayer, Solv, BounceBit, and Swell. They let you restake your assets across multiple services and earn rewards by helping secure different parts of the blockchain ecosystem.
2. Liquid Restaking
Liquid restaking offers a simpler, more accessible approach. You stake your assets with an Ethereum validator and receive liquid staking tokens (LSTs), which represent your staked tokens. These LSTs remain tradeable, giving you flexibility. You then restake these LSTs on platforms like EigenLayer to secure actively validated services (AVSs).
Some liquid restaking platforms include Ether.fi, Kelp DAO, and Renzo. They allow you to restake LSTs and earn more from the same staked assets.
Top Restaking Protocols
1. EigenLayer
EigenLayer is a leading restaking protocol built on Ethereum, allowing you to restake your staked ETH or liquid staking tokens (LSTs) to secure additional applications called Actively Validated Services (AVSs).
You can earn extra rewards by extending Ethereum’s cryptoeconomic security to sidechains, oracles, or rollups. You can participate via native restaking, running a validator node, or liquid restaking, using LSTs like stETH.
2. Solayer
Solayer is the first restaking protocol native to Solana. It enables you to restake your SOL tokens to secure various applications and services. Solayer supports both endogenous AVSs (built within Solana) and exogenous AVSs (external services). By restaking, you can earn yields from multiple incentive layers.
3. Babylon
Babylon is a restaking protocol integrating Bitcoin’s security into proof-of-stake (PoS) blockchains. You stake BTC to secure PoS networks, rollups, or appchains, earning yields without wrapping or bridging assets. Babylon uses a Cosmos-SDK-based protocol, emphasizing user control and liquidity.
4. Ether.fi
Ether.fi is a liquid restaking protocol on Ethereum, letting you stake ETH and receive eETH, a liquid restaking token. You restake eETH on platforms like EigenLayer or Symbiotic to secure AVSs and earn compounded rewards.
5. Symbiotic
Symbiotic is a permissionless restaking protocol on Ethereum, supporting any ERC-20 token, unlike EigenLayer’s ETH focus. You restake assets like stETH or stablecoins to secure customizable networks, choosing operators and slashing conditions. Its modular design and non-upgradeable contracts enhance decentralization and reduce governance risks.
How to Restake ETH and Other Cryptocurrencies?
Step 1: Pick a staking platform
Start by choosing the best crypto staking platform where you can stake your crypto, like ETH or others. For ETH, EigenLayer or Ether.fi are good options because they give you liquid tokens, like stETH, that you can use for restaking.
Step 2: Set up a crypto wallet
Next, get a wallet that works with your chosen platform. For ETH, MetaMask is popular because it’s secure and connects easily to most staking and restaking sites. If you’re using other coins, you might need Phantom for Solana or Keplr for Cosmos-based chains.
Download the wallet, write down your private keys, and store them safely—never share them. Add a small amount of crypto to cover transaction fees, like gas on Ethereum.
Step 3: Stake your crypto
Now, use the platform to stake your crypto. On Lido, for example, you connect your wallet, choose how much ETH to stake, and confirm the transaction. In return, you get liquid tokens, like stETH, that represent your stake. This step is key because these tokens are what you’ll use for restaking. Make sure you understand any lockup periods or risks before staking.
Step 4: Find a restaking protocol
After staking, look for a restaking protocol to earn extra rewards. For ETH, EigenLayer is a common choice, letting you use stETH to support other networks.
Step 5: Deposit to the restaking platform
Once you’ve chosen a protocol, deposit your liquid tokens to start restaking. In EigenLayer, for instance, you connect your wallet, select your stETH, and approve the deposit through a transaction. Check the terms, like how APYs are paid or if there are withdrawal limits. This step activates your restaking, letting your tokens earn more across multiple networks.
Step 6: Track your stake
Finally, keep an eye on your restaked funds. Most platforms have a dashboard showing your rewards and any risks, like validator problems that could cost you. Log in regularly to see how your stake is doing and if you need to claim rewards manually.
What Are the Benefits of Restaking?
- Higher Rewards: Restaking lets you earn extra income by using the same staked crypto, like Ethereum, across multiple blockchain networks. For example, you might get 3-4% from Ethereum staking plus 1-5% from restaking on protocols like EigenLayer.
- Saves Capital: Instead of locking up new funds for each network, restaking reuses your existing stake. This frees up money for other investments, which is especially helpful for those with limited funds.
- Strengthens Networks: By restaking, you help secure smaller or newer blockchains, making them harder to attack. Stronger networks grow in value, potentially boosting your staked tokens.
- More Flexibility: Liquid restaking gives you tradeable tokens for your staked assets. Unlike traditional staking, where funds are often locked, you can sell or use these tokens anytime.
Risks of Restaking
- Smart Contract Bugs: Restaking often relies on complex smart contracts. If there’s a coding error, your staked assets could be lost or stolen. For example, hacks in DeFi protocols have led to billions in losses.
- Slashing Penalties: If validators you’re tied to misbehave or go offline, you might lose a portion of your stake. In Ethereum, slashing can cost 1-100% of staked funds, depending on the violation.
- Market Volatility: Restaked assets, especially liquid tokens, can fluctuate in value. A market crash could wipe out your staking rewards or reduce your principal, even if the protocol works perfectly.
- Overexposure Risk: Restaking the same assets across multiple networks increases your reliance on one crypto. If that asset—like Ethereum—drops sharply, your losses multiply across all protocols.
- Protocol Failure: Smaller networks you restake on may fail due to low adoption or technical issues. If they collapse, your rewards or staked funds tied to them could vanish.
Future of Restaking
The future of restaking seems bright as blockchains become more connected, but it’ll depend on making rewards worth the risks and keeping things stable as more people join in. As platforms like EigenLayer grow, restaking could change how decentralized finance works, but its success depends on how well it scales, how many people embrace it, and how risks are handled.
Restaking will make blockchains work better together. You’ll secure different systems – like sidechains, rollups, or data networks – with a single stake, connecting them smoothly. This builds a shared security system, letting Ethereum’s strong foundation help newer projects. You’ll help small startups launch faster since they won’t need to create their own validator groups, sparking more creative apps.
Still, there are hurdles to clear. Bugs in smart contracts or penalties for faulty validators can spook people, so we’ll need tighter security, like better checks or safety nets, to keep trust high. If those problems stick around, some might shy away. The rise of tradeable restaking tokens is exciting because they let you cash out or reinvest without being stuck, and those will probably grow.
Conclusion
In a nutshell, Restaking transforms cryptocurrency by letting you use staked tokens to secure multiple blockchain networks, boosting efficiency and rewards. With protocols like EigenLayer, Solayer, Babylon, Ether.fi, and Symbiotic, you can access native or liquid restaking to support diverse applications, from oracles to rollups.
FAQs
What Is the Difference Between Staking and Restaking?
Staking involves locking in your cryptocurrency, like ETH, to validate transactions on a proof-of-stake blockchain and earn rewards. Restaking builds on this by letting you use those staked tokens to secure additional networks, like sidechains or oracles.
You don’t unstake your assets; instead, you extend their utility. Staking supports one blockchain, while restaking supports multiple simultaneously.
Is Restaking Crypto Safe?
Restaking crypto carries risks and isn’t 100% safe. You face slashing, where networks penalize your funds for validator errors or downtime. Smart contract bugs or protocol failures can also threaten your assets.
What Are Liquid Restaking Tokens?
Liquid restaking tokens (LRTs) represent your staked assets in restaking protocols. You stake ETH with a validator and get LRTs, like eETH, which stay tradeable. You restake LRTs to secure other networks while keeping liquidity. LRTs let you earn rewards without locking funds.
What Is the Purpose of Restaking?
Restaking aims to maximize your staked assets’ efficiency. You secure multiple blockchain networks with one stake. This boosts your rewards without extra investment. Restaking also strengthens new projects by sharing Ethereum’s security.
What Are Other Restaking Protocols Besides EigenLayer?
Besides EigenLayer, Solayer supports Solana-based restaking for on-chain protocols. Babylon lets you restake Bitcoin to secure proof-of-stake networks. Ether.fi offers liquid restaking with tradeable eETH tokens.
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