Restaking is one of the most discussed trends in the Ethereum ecosystem in recent years. It emerged as an evolution of native staking* and liquid staking*, offering investors potentially higher yields. However, along with additional profit, risks also increase.
* Native staking is the process of participating in maintaining a blockchain network by locking your own (native) cryptocurrency directly into the protocol. A user deposits base tokens (for example, ETH on the Ethereum network) and receives rewards for participating in the consensus mechanism. Such tokens are usually locked for a period and cannot be used freely until they are unlocked.
* Liquid staking is a way to participate in staking without actually “freezing” funds. The user deposits tokens into a specialized liquid staking protocol (for example, Lido or Rocket Pool) and receives a derivative token (LST). This token can be freely used in DeFi while the underlying assets continue to participate in staking and generate income.
* Staking is the process of locking cryptocurrency in networks that use the Proof-of-Stake (PoS) consensus algorithm to validate transactions and secure the blockchain. In return, staking participants receive rewards in the form of newly issued tokens or network fees.
According to analytical services, a significant share of the ETH supply—tens of millions of coins—is currently staked. The average staking yield fluctuates around 3–4% annually, making this instrument attractive for long-term investors.
However, native staking has limitations:
assets are locked and cannot be freely used;
running your own validator* requires a minimum of 32 ETH (approximately $66,000);
technical knowledge and infrastructure are required.
* A validator is a participant in a blockchain network who verifies transactions, creates new blocks, and maintains the correct operation of the blockchain protocol. In PoS-based networks, a validator must provide collateral in the form of the native cryptocurrency. For proper operation, the validator receives rewards, and for violations, may be penalized (through the slashing mechanism).
To solve the problem of frozen liquidity, liquid staking protocols such as Lido and Rocket Pool emerged. They allow users to deposit any amount of ETH and receive derivative tokens (LST) in return, which can be used in DeFi. The next stage of evolution was restaking.
What is restaking
Restaking is a mechanism for reusing already staked assets. Simply put, a user can:
Stake ETH (directly or via liquid staking).
Receive an LST token (for example, stETH).
Deposit this token into a restaking protocol and earn additional yield.
Thus, the same assets begin to “work” on several levels simultaneously.
How the restaking mechanism works
Technically, the restaking process looks as follows:
The user deposits ETH or LST into the smart contract of a restaking protocol.
In return, they receive a restaking token (LRT).
Restaking income is generated by reusing the collateral to secure additional services or networks.
Example
An investor deposits ETH into Lido and receives stETH with an annual yield of, for example, 2.3%.
Then stETH is sent to EigenLayer, where an additional ~2.1% is added.
The total yield reaches 4.4% annually (excluding fees and rate changes).
* Farming is an earning strategy in the DeFi space in which a user deposits their tokens into protocols (e.g., lending protocols) and receives additional rewards. Essentially, the user’s assets temporarily “work” within the service, generating interest income or bonus tokens.
It is important to understand that restaking yields are not fixed—they change dynamically depending on market conditions.
Main risks of restaking
Despite the attractiveness of the “double yield” idea, restaking increases the complexity and risk profile of investments.
Technological risk
Technological risk in restaking is associated with greater infrastructure complexity than in regular staking. With native staking, a user interacts directly with the network protocol, for example, Ethereum. In restaking, several additional layers are introduced: a liquid staking protocol, a restaking protocol, and potential integrations with other DeFi services.
Each of these layers is built on smart contracts, and any error in their code may introduce vulnerabilities. Even if the base network operates stably, a bug at the level of a third-party protocol, a failure in yield accrual logic, or an error in governance mechanisms may result in partial or complete loss of funds. The more intermediate links between the user and the base asset, the greater the overall attack surface.
Liquidity concentration
The risk of liquidity concentration arises because major restaking protocols accumulate significant volumes of assets. When a substantial share of staked tokens is concentrated among a limited number of operators or platforms, this can weaken the actual decentralization of the network. Such participants gain greater influence over governance processes and the distribution of validator power.
In addition, systemic risk emerges: if a major provider faces technical issues, regulatory pressure, or an attack, the consequences may affect not only its users but also other DeFi protocols that use derivative tokens as collateral.
Market volatility
Market volatility represents a separate layer of risk. ETH and other crypto assets are traditionally subject to sharp price fluctuations. Under restaking conditions, an investor may be less flexible in managing their position because assets are involved in multiple protocols simultaneously.
During periods of stress, derivative tokens such as LST or LRT may trade at a discount to the underlying asset. This means the user faces not only a drop in the price of ETH itself but also an additional decrease in the value of derivative instruments. In situations of mass withdrawals, the liquidity of such tokens may shrink, making it harder to respond quickly to market changes.
“Cascading” slashing risk
The risk of “cascading” slashing stems from the fact that the same collateral is used to secure multiple service layers. In Proof-of-Stake networks, a validator may be penalized for rule violations—for example, double-signing a block or prolonged downtime. In regular staking, the consequences are limited to a reduction of the deposited collateral.
However, in restaking, the same collateral may also serve as security for additional protocols. If a penalty occurs at the base level, losses may indirectly affect other layers of capital usage. In the event of a systemic failure or validator error, the consequences become more significant, as a single incident can affect several interconnected mechanisms.
Key restaking protocols
EigenLayer
The first large-scale restaking protocol on the Ethereum network.
One of the largest DeFi projects by total value locked (TVL)*.
Supports ETH and several other assets, including LST.
* TVL (Total Value Locked) is the aggregate value of all assets locked in a specific protocol or in the DeFi sector as a whole. The indicator reflects the scale of the project and the level of user trust.
Babylon Protocol
The first restaking protocol for the Bitcoin ecosystem.
Allows BTC to be used as restaking collateral.
Offers moderate yields compared to Ethereum-based solutions.
Symbiotic
One of the largest alternative restaking protocols in the Ethereum ecosystem.
Yields vary depending on the chosen strategy and token.