Crypto Restaking - The Blockchain's Answer to Efficiency

As mass adoption draws closer, greater efficiency for the blockchain is a must. In comes ‘restaking’, a new discussion in the world of crypto staking.

So far revolutionizing the landscape of network validation. But how so? Let’s look into it in more detail!

An Introduction to Restaking

Imagine being able to make your staked crypto assets work even harder for you.?

That’s what restaking is all about. In Web3 and decentralized finance (DeFi), restaking lets you reuse your staked assets to generate extra yields. It’s a step beyond traditional staking, which involves locking up your cryptocurrencies to support network operations like transaction validation.?

With restaking, not only do you push your earning potential, but you also enhance the liquidity and efficiency of protocols and dApps on the blockchain.

How Restaking Works

Think of restaking as giving your staked crypto a double life.?

It improves the utility of your staked cryptocurrencies beyond their primary role of network security. This means better returns and the ability to participate in multiple network activities at once.?

By leveraging your existing staked assets, you can optimize your investments without needing additional capital.

At the heart of restaking is the concept of using your already staked assets more than once. Blockchain protocols issue secondary tokens or derivatives that represent your original staked assets. These secondary tokens retain the value and staking capabilities of your staked assets, offering more flexibility.?

For example, if you stake Ethereum, you might receive a derivative token that can be used for further staking or lending in the DeFi ecosystem.

EigenLayer: Leading The Restaking Narrative

EigenLayer allows Ethereum stakers to restake their assets, enhancing security and utility without the need for additional funds.?

They’re extending the functionality of staked crypto, allowing it to secure other protocols and dApps across the blockchain, increasing capabilities and resilience.

Staking can be quite expensive, especially when setting up your own nodes that cost a minimum of 32 ETH on most platforms. Restaking other crypto allows smaller organizations to reap the benefits of crypto staking without missing out due to lack of funds.

EigenLayer takes your staked Ethereum and allows it to secure additional decentralized applications and services.?

This way, you don’t need to unstake your ETH, maintaining the security of the Ethereum network while maximizing your assets’ potential.?

Here’s how EigenLayer is currently leading the restaking sector.

EigenLayer's total value (TVL) is locked at $20 billion as of June 2024. It has surpassed $20 billion and is currently the second-biggest DeFi protocol. In just six months, the TVL grew to this figure from $1.4 billion.

Type of Restaking Available

There are a few different ways that investors can get involved with staking.?

1. Native Restaking

Smart contracts are used to manage staked assets through a validator’s nodes. This helps to bolster security for a network or protocol. More rewards are generated for validators thanks to this process.

2. Liquid Restaking

This option allows you to use liquid staking tokens as a replacement for ordinary crypto assets. Staked crypto is exchanged for LSTs to then be used across different protocols for further rewards.

Other protocols have their own restaking solutions such as Osmosis. They have what is known as ‘Superfluid Restaking’. This involves staking LSTs on Osmosis in return for their native token being minted depending how much share they have in the pool.?

Challenges and Risks Associated with Restaking

Restaking’s complexity might be intimidating. It relies on intricate smart contracts and a solid understanding of blockchain technologies, which could limit its accessibility.?

Moreover, the involvement of multiple smart contracts raises the risk of bugs or vulnerabilities. Platforms like EigenLayer also depend on external protocols, adding another layer of risk.?

Despite these challenges, the potential benefits - like increased yields and improved liquidity - make restaking a promising innovation.

The Future of Restaking

The popularity and growth of restaking since the start of 2024 has been monumental. This gives a clear signal for great growth.

Increasing liquidity and utility of crypto is a must and luckily restaking solutions are creating these opportunities.?

Time will tell though! In the meantime be sure to follow us for weekly articles covering all things crypto.