Liquid Restaking

Restaking is a new way to get more use out of crypto. 

Instead of staked assets sitting in one place earning rewards, restaking allows them to support additional protocols at the same time. This works through a process called rehypothecation, the reuse of the same collateral across different systems so crypto can “work twice.”

What is liquid restaking?

Liquid restaking builds on the concept of liquid staking. When crypto is staked through a liquid staking platform, the staker receives a liquid staking token (LST). This token represents the staked assets but can still be used or traded, even though the original assets remain locked.

Liquid restaking takes that LST and allows it to be restaked on another platform to earn additional rewards. In return, the platform gives the staker a liquid restaking token (LRT), which shows their position and can be used in many different crypto applications, such as lending or trading.

In simple terms:

Risks to keep in mind

Smart contract risk

Restaking adds more moving parts. Each layer—staking, liquid staking, and restaking—runs on smart contracts. If any layer faces a disruption, your funds could be affected. 

Systemic risk

Because the same collateral is used across multiple protocols, one failure can ripple through others. A problem in a restaked protocol could impact any platform connected to the same assets.

EigenLayer:

The Pioneer Powering Restaking

EigenLayer is the project that introduced restaking on Ethereum.

It lets people use their staked ETH or liquid staking tokens, like stETH, to help secure other services (things like data storage layers, oracles, and cross-chain tools). Instead of every new project building its own security from scratch, they can just tap into Ethereum’s existing validator network.

EigenLayer secures more than $20 billion in restaked ETH and has over 100 new services being built on top of it. By allowing Ethereum’s security to be reused, EigenLayer has become a major reason restaking has grown so quickly in DeFi.