What is Restaking?

The crypto markets have kicked off 2024 with a bang, and as prices continue to rise, market participants are keen to find exciting investment opportunities within DeFi. Among new protocols and DeFi primitives, EigenLayer has been attracting a lot of attention with its introduction of Ethereum restaking.

Restaking through EigenLayer allows Ethereum stakers to earn additional yield by simultaneously securing third-party Actively Validated Services (AVSs) while also validating the Ethereum network. Users can participate either by natively restaking Ether or by depositing Liquid Staking Tokens (LSTs) like Lido’s stETH.

This reuse of staked ETH enables users to participate in multiple ecosystems with the same assets, thereby improving capital efficiency for stakers. New projects can leverage EigenLayer to secure themselves instead of spending resources to spin up their own validator sets.

Demand for EigenLayer exposure has spawned a liquid restaking sector, with protocols such as Ether.fi, Swell and Restake Finance enabling investors to retain their restaking exposure while also getting a liquid token that can be deployed across DeFi to earn additional rewards.

EigenLayer’s token is presumed to launch before the end of 2024, and its impressive $7.9 billion TVL is proof of investors’ excitement around its launch.

Restaking offers an option for users that can increase capital efficiency across the entire DeFi space. These primitives allow for security sharing while mitigating opportunity costs for the stakers, validators, and services.

Critics remain concerned about such a significant sum of Ether controlled by a single entity. However, the potential success of large-scale restaking could allow for a more flexible and scalable DeFi ecosystem.