What Is Restaking?
Also known as: Restake, Liquid Restaking, LRT
In short
Restaking is the reuse of assets already staked on one network, or the liquid staking tokens that represent them, as collateral to secure other protocols and services in exchange for additional rewards.
The protocol that popularized restaking is EigenLayer, which runs on Ethereum. Users deposit their staked ETH, or liquid staking tokens such as stETH, into EigenLayer contracts and make this collateral available to secure 'actively validated services' (AVS) such as oracle networks, data availability layers, or bridges. Operators running these services earn additional rewards if they perform their duties properly.
This model lets new protocols benefit from Ethereum's economic security without having to build their own validator set and token economy from scratch. Liquid restaking tokens (LRT), which represent restaking positions, have also emerged and formed a separate category in DeFi. Similar ideas are being developed for other assets such as Bitcoin.
Restaking's risks are layered. When the same collateral is tied to multiple services, a bug or dishonest behavior in one of them can lead to losses through slashing. Smart contract risk, liquid tokens drifting from the value they are tied to (depeg), and the systemic contagion risk arising from many protocols depending on the same collateral are also among the main topics discussed.
Last updated: · This content is for information purposes only and is not investment advice.