Created by Vitalik Buterin, the Ethereum network is crypto’s most dominant smart contract platform. The network’s transition to proof-of-stake has ushered in a new era for the network.
Proof-of-stake allows anyone to participate in securing the network by staking 32 ETH. This ETH is staked to validators, which confirm new transactions.
Liquid staking services have since emerged to lower the staking barrier and encourage broader participation. With liquid staking, investors can deposit as little as 0.01 ETH to earn staking rewards. Liquid staking protocols issue liquid staking tokens (LSTs) to users, representing their staked capital and accrued rewards.
As a result, more than 25% of ETH’s total supply has been staked to the network. This figure is set to grow as demand continues to rise. Impressively, more than 10 million Ethereum has been staked since April 2023 alone.
Restaking has been introduced to broaden staking utility by allowing dapps and other networks to utilize this pool of staked assets.
Restaking involves the reuse of staked ETH across multiple networks simultaneously. More than $50B in ETH is currently securing the Ethereum network, making it highly resilient.
However, this is not the case with other protocols. Allowing novel projects to harness ETH’s pool of staked assets empowers builders to innovate faster on more secure foundations.
By extending ETH’s pool of assets, new protocols can benefit from enhanced crypto economic security without needing to launch their own validation services. Furthermore, this design enhances capital efficiency by allowing ETH stakers to use their assets in new ways that compound staking rewards.
For instance, validators can sell pooled security to protocols via restaking. Conversely, protocols can buy pooled security to bolster their products. This approach empowers other protocols to harness Ethereum’s security while delivering increased rewards for restakers.
Restaking on Ethereum is conducted via a series of smart contracts.
First, users deposit their already staked ETH via a restaking platform, such as EigenLayer. Aside from ETH, users can deposit LSTs and LP positions. Restaking platforms act as a bridge between Ethereum and other protocols.
Once restaked, this ETH takes on a dual role. The assets continue to secure Ethereum’s mainnet. At the same time, these assets can also extend their security to other protocols. Users that restake ETH can choose which protocols to secure, giving optionality of rewards to users.
Restakers receive rewards in exchange for providing their ETH to multiple networks. These rewards are largely derived from a share of protocol fees across participating projects. Importantly, these rewards are higher than the norm as restakers incur elevated risk by extending their ETH to multiple networks.
EigenLayer has pioneered Ethereum restaking since launching in June 2023. The platform has done tremendous work to cultivate a decentralized trust network that harnesses the power of ETH’s security backbone.
EigenLayer’s restaking suite has seen impressive adoption across the Ethereum ecosystem. The protocol boasts more than $8 billion in total value locked, illustrating the growing demand for restaking products.
Users can choose from a number of methods when restaking assets via EigenLayer:
Native restaking allows users to restake ETH directly on EigenLayer. This approach carries reduced risks for users.
LST restaking empowers liquid staking token holders to restake their LSTs. EigenLayer currently supports many of the space’s most popular LSTs – stETH, rETH, OETH, and others. Note that at the time of writing, LST deposits on EigenLayer have been paused.
It’s important to be mindful of the systemic risks that come with restaking. Specifically, restaking increases the risk of slashing. Slashing is used to protect network security by forfeiting staked assets that violate network rules. Restaking amplifies this risk as the same assets are staked across multiple networks with their own sets of rules.
Restaking can be a highly rewarding exercise. The following steps outline all the key info needed to begin your restaking journey.
A Web3 software wallet allows you to interact with protocols across DeFi. Metamask is the most widely used Web3 wallet in crypto, boasting millions of active users. Install Metamask as either a Chrome extension or mobile app by visiting the download page and following the prompts.
Once your wallet has been created, you can deposit assets to the ERC-20 address listed at the top of the home screen. If you’ve already staked ETH, simply deposit the LST you received. Alternatively, you can buy LSTs like OETH on decentralized exchanges.
Next, visit app.eigenlayer.xyz to begin the restaking process. The portal displays an overview of assets on EigenLayer, as well as your active positions.
Connect your wallet by selecting the button at the top right of the page.
Select the asset you would like to restake from the list provided. Currently, only native ETH staking deposits are enabled. While it is possible to restake ETH directly, this method is best suited for validators running their own nodes.
Choose your preferred liquid staking token and input the desired restaking amount.
Once you're happy with the asset and amount you’d like to restake, confirm the deposit on the page. Follow the prompts in your wallet to confirm the transaction.
You can monitor and withdraw your assets at any time by visiting the app portal.
While restaking offers many clear benefits, reusing the same pool of assets across multiple networks carries additional risks. Restakers can be at higher risk of slashing due to increased exposure. Additionally, users may face less liquidity, as it takes 7 days to withdraw restaked ETH to become liquid. For instant liquidity, users may choose to swap into a liquid restaking token (LRT), such as primeETH.
However, protocols like EigenLayer are constantly innovating their products to minimize these risks for users. By conducting thorough research, users can also mitigate their risk while enjoying restaking rewards.
What Is EigenLayer?
EigenLayer is a restaking platform that allows other protocols to harness the power and security of Ethereum staking.
Is Restaking Ethereum Safe?
Restaking carries higher risks than traditional ETH staking. This is because the same pool of staked assets is being used across multiple networks. However, using an established protocol like EigenLayer can reduce these risks while offering a safe and robust restaking experience.
How Does Restaking Ethereum Work?
Restaking connects protocols with Ethereum’s large capital base of staked assets. Users who hold ETH or liquid staking tokens (LSTs) can supply these assets to other protocols to bootstrap their network security. In return, restakers receive additional rewards from their holdings.
