What is restaking?

Restaking in plain English

In network staking, ETH is economic collateral securing Ethereum. Validators following the rules earn rewards; serious violations can reduce their stake.

Restaking also uses that staked position as collateral for additional services, such as data availability, bridges, oracles or other systems needing economic security. Instead of creating a new validator set and security token from scratch, a service can use participating Ethereum stake and operators.

EigenLayer is the best-known example on Ethereum. It calls these additional systems Actively Validated Services, or AVSs. Participants opt into services, each of which can introduce its own tasks, payments and penalties.

Staking and restaking compared

The same collateral is used for more duties. This can improve capital efficiency, but the obligations and dependencies increase as well.

How restaking works

1. ETH is staked directly or represented by a supported liquid staking token.
2. The position is deposited into or linked with a restaking protocol.
3. You delegate restaking power to an operator.
4. The operator opts into one or more additional services.
5. The operator performs tasks required by Ethereum and those services.
6. Eligible rewards are distributed after protocol and operator fees.
7. Exiting may require several queues or settlement steps.

The precise route matters. Directly restaking validator withdrawal credentials is different from depositing a token into a liquid restaking protocol.

Native and liquid restaking

Native restaking

In native restaking, an Ethereum validator changes its withdrawal configuration so that the restaking protocol can enforce additional conditions. The validator remains active on Ethereum while an operator may perform work for other services.

This route is mainly relevant to validator operators. It requires infrastructure, key management and an understanding of both Ethereum and the additional services.

Liquid restaking

In liquid restaking, a protocol pools deposits and issues a liquid restaking token, or LRT. ether.fi issues eETH and its wrapped form weETH, for example. The token represents a layered position and can often be transferred or used in DeFi.

The token simplifies access but adds protocol governance, contracts, operators and market liquidity. It may trade below the value of its underlying assets when many holders want to exit.

LST and LRT are not the same

A liquid staking token, or LST, represents ordinary network staking. stETH from Lido and rETH from Rocket Pool are examples.

A liquid restaking token represents a position also used for restaking. eETH and weETH from ether.fi are examples.

Read liquid staking explained for how stETH, rETH and weETH process rewards.

Where do restaking rewards come from?

The base reward still comes from Ethereum staking. Additional services may pay for validator work or economic security. Funding can come from usage fees, protocol budgets or another token.

A displayed APY may combine:

• variable Ethereum staking rewards;
• live payments from additional services;
• points or expectations concerning a future token;
• a temporary protocol incentive;
• rewards in a token with limited liquidity;
• a rate before operator and protocol fees.

Points are not realised return, and an announced reward is not a payment. Check which component is already live, the token used and when it can be transferred. Also compare APR and APY on the same basis.

Main restaking risks

Additional penalties

The validator remains subject to Ethereum rules. Additional services can impose their own conditions. Operator errors or provable violations may activate another loss mechanism. Implementation and loss allocation vary by protocol and service.

Slashing is network-specific. Do not confuse a missed reward with a slash, and identify which event can actually reduce principal.

Smart contract risk

Restaking uses contracts for deposits, delegation, operator registration, rewards and withdrawals. A vulnerability, bad upgrade or compromised administration key can affect the position. Audits do not eliminate undiscovered faults.

Operator and service risk

Operators run the technical software. Misconfiguration, downtime, duplicate signing or custom-code errors can cost rewards or trigger penalties. Every additional service adds its own code, governance and economic assumptions.

Correlated loss

Many participants may use the same software, cloud provider or service. One failure can therefore affect multiple validators at once. Reusing economic security is efficient but can concentrate dependencies.

LRT liquidity and price risk

An LRT can trade below its protocol value. During stress, liquidity may fall while many holders want to sell. Direct withdrawal can depend on the restaking protocol, settlement of active obligations and the Ethereum exit queue.

DeFi, governance and changing terms

Using an LRT as collateral adds oracle and liquidation risk. Protocols can also change quickly. Check who can upgrade contracts, change parameters, admit operators and activate emergency controls. A decentralised interface does not prove decentralised control.

Restaking is not lending

In restaking, a staked position acts as collateral for validation work. In crypto lending, a borrower or provider uses assets and pays interest.

Products can combine activities. A platform may accept an LRT as collateral for a loan, or a vault may deploy it through several DeFi protocols. Trace the complete route rather than relying on the word restaking.

Who should consider restaking?

Restaking is mainly relevant to people who already understand Ethereum staking and deliberately want to assess additional protocol risk. It is not required to stake ETH. If you only want Ethereum network rewards, you do not need additional services or an LRT.

Before participating, ask:

1. Is this native or liquid restaking?
2. Which operators and services are attached to the position?
3. Which events can cause a penalty or loss?
4. Who bears that loss: operator, protocol or token holder?
5. Which displayed rewards are live and withdrawable?
6. Which tokens pay the rewards?
7. Which protocol and operator fees apply?
8. How does exit work and which queues apply?
9. Who can change contracts or conditions?
10. Does using the LRT elsewhere add liquidation risk?

The Ethereum staking comparison also contains offers without restaking, which makes it possible to compare the added layer with simpler alternatives. The wider article on crypto staking risks helps place the additional protocol layer in the context of price, validator and custody risk.

Sources and further reading

• Ethereum.org: restaking
• EigenLayer whitepaper
• Ethereum.org: pooled staking
• EBA and ESMA: staking, restaking and lending