Re-staking and Liquidity Re-staking: Unlocking New Opportunities for Ethereum Staking

Re-staking and liquidity re-staking have recently received widespread attention, with many users hoping to further enhance ETH returns based on the favorable conditions brought by ETH ETF. According to DeFi Llama, the TVL growth of these two categories is rapid, ranking fifth and sixth among all DeFi categories. Before delving into the additional benefits of re-staking and liquidity re-staking, let's first take a look at their basic principles.

Overview of Staking and Liquidity Staking

Ethereum staking refers to the investment of ETH to secure the network and earn additional ETH rewards. However, staking ETH also faces the risk of being penalized, as well as liquidity issues due to the unavailability of selling ETH immediately because of the unbonding period.

Becoming a validator requires 32 ETH, which is too high a threshold for many people. Therefore, some pooled staking services have emerged, allowing multiple users to combine ETH to meet the minimum staking requirement.

Although these services allow staking any amount of ETH, the staked ETH is still not immediately accessible and requires a few days of unbonding period. Liquidity staking has emerged to mint liquidity tokens that represent the user's staked ETH, and these tokens can be used for DeFi activities to increase earnings. Lido is a pioneer in liquidity staking, and later similar services were launched by Rocket and Stader. These solutions not only lower the staking threshold but also enhance investors' flexibility and potential returns.

The Rise of Re-staking

Restaking was initially proposed by EigenLayer. It utilizes staked ETH to secure modules that cannot be deployed or verified on the EVM, such as sidechains, oracle networks, and data availability layers. These modules typically require their own tokens to provide security guarantees and face challenges such as needing to establish independent security networks and having lower trust levels. Restaking addresses this issue, as security can be derived from Ethereum's large validator set, making the cost of attacks higher.

Although EigenLayer is the first re-staking protocol, other competitors have emerged later. They all aim to leverage re-staked assets to provide security, but there are some differences in their specific implementations.

Comparison of Re-Staking Protocols

The main re-staking protocols currently include EigenLayer, Karak, and Symbiotic. They have some differences in supported assets, security models, execution layers, etc.

EigenLayer only supports ETH and ETH liquidity staking tokens (LST), while Karak and Symbiotic support a wider range of assets.

EigenLayer adopts a high security model and only accepts ETH-like assets with low volatility. Karak and Symbiotic provide more flexible security options.

The core smart contracts of EigenLayer and Karak are upgradable and managed by multi-signature. The core contract of Symbiotic is essentially immutable.

EigenLayer and Symbiotic primarily operate on Ethereum, while Karak supports deposits on 5 chains.

The number of AVS built on EigenLayer is the highest, including EigenDA, AltLayer, and others. Karak collaborates with Wormhole to develop a validation network, while Symbiotic partners with Ethena to develop cross-chain asset transfer.

Liquidity Re-staking Overview

The liquidity re-staking protocol provides liquidity tokens based on re-staking, mainly including EtherFi, Renzo, Puffer, Kelp, Eigenpie, Swell, and Mellow.

They differ in terms of liquidity and staking token types, supported deposit assets, DeFi integration levels, Layer 2 support, and so on. Some protocols offer basket-based LRT, aggregating various LSTs; some provide native LRT, accepting only ETH deposits; and others offer independent LRTs, issuing specific tokens for specific deposits.

Most protocols have been integrated with mainstream DeFi platforms, supporting various Layer 2 networks. They were initially built mainly on EigenLayer and later began collaborating with Karak and Symbiotic.

Re-staking Growth Trend

The recent re-staked deposits have increased significantly, and the liquidity re-staking ratio has exceeded 70%. However, Eigenlayer and Pendle experienced a noticeable outflow of funds at the end of June, which may be related to the upcoming token distribution. Some funds may flow to other protocols such as Karak and Symbiotic.

Overall, with more AVS launches and new token distributions, the re-staking protocol may attract more capital inflow. Currently, the ratio of re-staking to liquid staking is about 35.6%, close to the ratio of liquid staking ETH to total staked ETH. As re-staking platforms expand to more assets, it is expected to attract more capital in the future.