- What is Staking?
- How Does Restaking Work?
- EigenLayer
- Actively Validated Services (AVS)
- Liquid Restaking
- Benefits of Restaking
- Risks of Restaking
- Use Cases for Restaking
- The Current State of Restaking
Restaking—the concept of using blockchain to secure other applications—has quickly become the biggest new investment trend in the crypto industry. In less than a year, Ethereum’s restaking giant, EigenLayer, has absorbed over $16 billion in ETH deposits—digital assets that, in theory, will be used to secure emerging cryptocurrency protocols.
New restaking startups are launching every week, and entire sectors, such as Actively Validated Services (AVS) and liquid restaking platforms, have seized the momentum, introducing their own solutions.
What is Staking?
To understand restaking, it’s important to first grasp the concept of staking. Staking is the process of holding cryptocurrency in a wallet or on an exchange to help maintain the blockchain’s operations. Crypto holders who participate in staking earn rewards for validating transactions and securing the network. This process is possible in blockchains that use the Proof-of-Stake (PoS) consensus mechanism.
How Does Restaking Work?
Now, let’s break down what restaking (re-staking) is. This innovative mechanism in the crypto world allows users to reuse their staked assets to enhance the security of multiple networks while earning additional rewards. In other words, the same assets can be used to secure multiple blockchain applications at the same time.
EigenLayer, the leading Ethereum restaking protocol, enables users to take ETH they have already staked in Ethereum and restake it through so-called Actively Validated Services (AVS). Currently, these AVS are primarily blockchain protocols that support Ethereum scaling solutions.
How Restaking Works:
• A user stakes their ETH in Ethereum.
• They can then restake this ETH, using it to secure other applications within the network.
• In return for this additional security contribution, the user earns extra rewards.
Proponents of restaking argue that it strengthens the security of smaller blockchain applications. These projects often struggle to maintain their own consensus-based security systems due to the high capital and active community participation required.
EigenLayer
EigenLayer is the protocol that first introduced the concept of restaking. It allows Ethereum validators to reuse their staked ETH to secure other decentralized applications, cross-chain bridges, and oracles. Validators participating in EigenLayer receive additional rewards in the form of tokens from the protocols they help secure.
EigenLayer’s founder, Sreeram Kannan, explained how it works using an analogy with 100 blockchain protocols, each secured by $1 billion in staking. “Instead of each protocol being protected separately with $1 billion in staking, imagine if $100 billion were collectively distributed across all 100 protocols,” Kannan said. “Now, to attack any one of these protocols, you would need $100 billion instead of just $1 billion.”
Actively Validated Services (AVS)
Actively Validated Services (AVS) are services that leverage restaked ETH to enhance their functionality. Examples of AVS include blockchain protocols that support Ethereum scaling solutions. EigenLayer allows users to choose which AVS they want to support, giving them flexibility in how they allocate their restaked assets.
Liquid Restaking
Liquid restaking is a more accessible way to participate in restaking through specialized services like Puffer, Ether.Fi, and Renzo. These platforms accept assets from users, stake them on EigenLayer, and, in return, provide Liquid Restaking Tokens (LRT). These tokens accrue interest and can be traded or sold for additional profit.
Benefits of Restaking
Enhanced Security
Restaking strengthens the security of smaller blockchain applications that may struggle to maintain their own security systems.
Additional Income
By restaking their staked assets, users can earn extra rewards, creating an additional source of passive income.
Efficient Capital Utilization
Restaking enables more efficient use of capital, as the same assets can be leveraged to secure multiple networks simultaneously.
Risks of Restaking
Slashing Risks
Validators may face penalties and asset losses if they violate the rules of additional protocols.
Cryptocurrency Volatility
Staked assets can decrease in value over time due to market fluctuations.
Over-Leveraging Crisis
If protocols allow users to stake tokens, restake them, and stake those restaked tokens again, it could lead to excessive leverage. A sudden market downturn, mass sell-off, or depegging event could trigger a cascading collapse across multiple protocols.
Use Cases of Restaking
Data Availability (DA). Restaking enables a scalable data availability layer with high speed and low costs, providing a reliable foundation for various applications, including rollups and cross-chain bridges.
Decentralized Sequencers. Restaking can be used to form a decentralized quorum of sequencers serving multiple rollups, improving MEV (Miner Extractable Value) management and resistance to censorship.
Light Client Bridges. Restakers can validate bridge inputs off-chain, ensuring secure and efficient cross-network transactions.
High-Speed Bridges. Restakers can verify ZK (Zero-Knowledge) proofs off-chain, significantly accelerating cross-chain transactions.
Oracles. Restaking can support the creation of oracles that anchor price information within Ethereum, providing a secure data source for DeFi applications.
The Current State of Restaking
While versions of shared security have existed for some time—particularly within the Cosmos blockchain ecosystem—the modern concept of “restaking” remains more theoretical than fully realized. Technically, EigenLayer was the first restaking protocol to launch on Ethereum’s mainnet, but it is still in a limited beta phase. While EigenLayer accepts deposits, most of its core features, including slashing mechanisms, were not yet operational at the time of publication. Additionally, AVS (Actively Validated Services) can register for the program but cannot yet actively use it.
So far, the primary incentive for both restaking and liquid restaking has been “points” awarded by EigenLayer and liquid restaking protocols. Contributors hope these points will later translate into airdropped digital assets.
Although points are not meant to have any inherent value, users have started buying and selling them directly, fueling speculative hype around restaking. Some fear this excitement is disconnected from economic fundamentals and could lead to disappointment and mass sell-offs in the future. This concern was underscored when EigenLayer and liquid restaking protocol Renzo sparked backlash last month by announcing token distribution plans that allocated fewer tokens to points holders than many contributors had anticipated.
