Introduction
The restaking market has gained significant traction in 2024, transitioning from an emerging narrative to an innovative reality. Ethereum restaking currently dominates this space, largely due to EigenLayer's pivotal role within the Ethereum ecosystem.
While EigenLayer remains the most mature project in restaking, other initiatives are expanding the concept across multiple chains—including Solana (Picasso), Bitcoin (Babylon), and Cosmos. This report delves into the fundamentals of restaking, key projects, and liquidity restaking protocols (LRTs).
Restaking Fundamentals
What Is Staking?
At its core, staking involves locking native tokens to secure a blockchain network. In Proof-of-Stake (PoS) systems, validators:
- Propose and validate new blocks.
- Earn rewards in native tokens and fees.
- Risk slashing for malicious behavior.
Staking enhances security by making attacks economically prohibitive (e.g., controlling 51% of staked tokens).
How Does Restaking Work?
Restaking enables users to reuse staked assets to secure additional protocols beyond their native chain. For example:
- EigenLayer allows Ethereum stakers to delegate their ETH to secure AVSs (Active Validation Services).
- Validators earn extra yield but face additional slashing conditions.
Key Problems Restaking Solves
- Fragmented Security: New protocols often struggle to bootstrap their own security. Restaking pools existing security (e.g., Ethereum’s) for shared use.
- Capital Efficiency: Avoids the need for projects to issue new tokens solely for security.
Key Projects
EigenLayer
Overview:
EigenLayer aggregates Ethereum’s staked ETH to provide "security-as-a-service" for AVSs like DA layers, oracles, and bridges.
Mechanics:
- Restakers: Delegate LSTs or native ETH to secure AVSs.
- Node Operators: Run EigenLayer software, earning fees from AVSs and Ethereum.
- AVSs: Services that rent security from EigenLayer (e.g., EigenDA).
Milestones:
- Phase 1 (Live): Focused on restaker onboarding.
- Phase 2 (2024): Operator integration (testnet live).
- Phase 3 (2024): Full AVS onboarding.
TVL: Surpassed $7.5B, with 2.6M ETH restaked.
Babylon (Bitcoin Restaking)
- Leverages Bitcoin’s security for PoS chains via timestamping and slashing mechanisms.
- Eliminates bridging by locking BTC natively.
Picasso (Solana Restaking)
- Introduces IBC compatibility to Solana via a guest blockchain.
- Supports SOL and LSTs (e.g., jitoSOL) for restaking.
Liquidity Restaking Protocols
Top LRT Platforms
| Protocol | LRT | TVL | Supported Assets |
|-------------|---------|-----------|------------------------|
| Ether.fi | eETH | $1.2B | Native ETH |
| Puffer | pufETH | $1B | stETH |
| Kelp DAO| rsETH | $490M | ETH, stETH, ETHx |
| Renzo | ezETH | $350M | ETH, stETH, wBETH |
How LRTs Work:
- Users deposit ETH/LSTs into the protocol.
- Receive LRTs (e.g., eETH) representing restaked positions.
- Use LRTs in DeFi for extra yield.
FAQs
1. What are the risks of restaking?
- Slashing: Validators face additional penalties for misbehavior.
- Overleveraging: Some users may borrow ETH to restake, amplifying risks.
2. How do AVSs differ from traditional dApps?
AVSs are modular services (e.g., DA layers) that rent security from restakers rather than bootstrap their own.
3. Which chains support restaking beyond Ethereum?
- Bitcoin: Babylon.
- Solana: Picasso.
- Cosmos: Native integration discussions.
👉 Explore more about restaking strategies
Conclusion
Restaking represents a paradigm shift in blockchain security, offering capital efficiency and shared security. With EigenLayer leading and LRTs gaining traction, the ecosystem is poised for rapid evolution.
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