If you have been following cryptocurrency news in early 2024, you have probably heard the term “restaking” thrown around alongside eye-popping numbers like 3.7 million ETH. With Bitcoin at $69,700 and Ethereum at $3,505 as of April 1, 2024, according to CoinMarketCap data, understanding restaking has become essential for anyone holding Ethereum and looking to maximize their returns. But what exactly is restaking, and is it right for you?
The Basics
To understand restaking, you first need to understand staking. When you stake Ethereum, you lock your ETH in the network to help validate transactions and maintain blockchain security. In return, you earn rewards — currently around 3-4% annual yield for ETH staking. This is similar to earning interest in a savings account, but instead of a bank holding your money, the blockchain network uses it to stay secure.
Restaking, introduced by a protocol called EigenLayer, takes this concept one step further. Instead of just securing Ethereum, your staked ETH can also be used to secure other blockchain applications and services — called Actively Validated Services, or AVSs. Think of it like this: if staking is renting out your house to one tenant, restaking is renting out each room to different tenants, multiplying your income from the same property.
Here is the key insight: Ethereum’s proof-of-stake system secures over $420 billion worth of ETH (based on current prices). That is an enormous pool of economic security. EigenLayer’s innovation is making that security available to other projects that need it, rather than requiring each new blockchain application to build its own security from scratch.
Why It Matters
Restaking matters for three important reasons. First, it allows ETH holders to earn additional rewards on top of their base staking yield. If you are already staking your ETH, restaking offers a way to generate more income without purchasing additional tokens.
Second, restaking solves a major problem for new blockchain projects. Building a secure network from scratch requires attracting thousands of validators and billions of dollars in staked assets — a chicken-and-egg problem that has delayed or killed many promising projects. By tapping into Ethereum’s existing security through EigenLayer, new projects can launch with robust security from day one.
Third, restaking creates a more interconnected and efficient blockchain ecosystem. Rather than having dozens of isolated security pools — one for each blockchain application — restaking concentrates security where it is needed most, making the entire ecosystem more resilient.
The numbers demonstrate the market’s enthusiasm. By early 2024, over 3.7 million ETH had been restaked through EigenLayer, representing billions of dollars in value. This rapid adoption reflects both the yield opportunity for stakers and the demand from new projects seeking established security infrastructure.
Getting Started Guide
If you want to try restaking, here is what you need to know to get started. First, you need to already be staking ETH. This can be done through a validator node (requiring 32 ETH), a liquid staking protocol like Lido or Rocket Pool, or through an exchange that offers staking services.
The easiest entry point for most users is through liquid staking tokens. When you stake ETH through a protocol like Lido, you receive stETH — a token that represents your staked ETH plus accumulated rewards. This stETH can then be restaked through EigenLayer without unstaking from Ethereum.
Here are the basic steps: First, acquire ETH and stake it through a liquid staking protocol to receive a liquid staking token such as stETH, rETH, or cbETH. Second, connect your wallet to the EigenLayer platform. Third, deposit your liquid staking token into EigenLayer’s restaking pool. Fourth, choose which AVSs you want to support — each one offers different rewards and carries different risks. Fifth, monitor your positions and collect rewards.
Important note: EigenLayer has implemented a cap system that limits the total amount of ETH that can be restaked at any given time. These caps have been periodically raised as demand increases, but you may encounter periods when the restaking pool is full.
Common Pitfalls
The biggest risk of restaking is something called “slashing.” If the AVS you are supporting experiences a security failure attributed to validators, a portion of your restaked ETH could be confiscated as a penalty. This is the trade-off for earning additional rewards — you are taking on additional risk.
Smart contract risk is another concern. EigenLayer is a relatively new protocol, and like any DeFi application, it could contain bugs or vulnerabilities that could result in loss of funds. While the protocol has undergone security audits, the possibility of an exploit cannot be eliminated entirely.
Liquidity risk should also be considered. While liquid restaking tokens can generally be traded, extreme market conditions could make it difficult to exit your position at a fair price. If many users try to withdraw simultaneously, you may face delays or unfavorable exchange rates.
Next Steps
Before restaking, take time to research the specific AVSs available on EigenLayer and understand their risk profiles. Not all restaking opportunities carry the same level of risk, and the highest-yielding options often come with the greatest danger of slashing. Start with a small amount to familiarize yourself with the process before committing more capital. Keep an eye on EigenLayer’s governance proposals and protocol updates, as the restaking landscape is evolving rapidly. Join community forums and discussion groups where experienced restakers share insights and strategies.
Disclaimer: This article is for educational purposes only and does not constitute financial advice. Staking and restaking involve risks including potential loss of funds. Always conduct your own research and consider consulting a financial advisor before making investment decisions.
3-4% base staking yield plus AVS rewards sounds great until your ETH gets slashed because some AVS you opted into gets exploited
The article explains restaking well but underplays the correlation risk. If multiple AVSs share the same validator set, one failure cascades.
shared validator sets across AVSs is the systemic risk nobody prices in. one slashing event could cascade through the entire restaking stack
Anika J. is right about systemic risk. one slashing event across shared validators and the contagion would make FTX look contained
Priya G. the FTX comparison is apt. restaking is fractional reserve banking with extra steps and better branding
3.7m ETH restaked and counting. people are treating this like free money when its actually leveraged risk on top of staking
^ this. its basically rehypothication dressed up in crypto terminology. works until it doesnt
audit_mole_ rehypothication is exactly the word. works great in a bull market until suddenly it doesnt and 3.7M ETH is locked in cascading liquidations
Good beginner explanation. Would add that you should check which AVSs you are opting into, not just blanket enable everything.
blanket enabling all AVSs is how you wake up slashed on 5 different protocols at once. pick your exposure carefully or stick to base staking
validator_life_ picking AVSs individually is table stakes. the real risk is most stakers just click enable all because the UI makes it frictionless