What is restaking?

Restaking is a mechanism that allows assets already staked on Ethereum's proof-of-stake consensus layer to simultaneously secure additional protocols, services, or networks. Pioneered by EigenLayer (launched on Ethereum mainnet in 2024), restaking extends Ethereum's economic security, the value at risk if validators misbehave, to a broader set of applications called Actively Validated Services (AVSs).

The core concept is straightforward: Ethereum validators stake 32 ETH and agree to have that stake slashed (partially confiscated) if they misbehave on Ethereum. With restaking, validators can opt in to additional slashing conditions imposed by AVSs. In return, they earn additional rewards from those services. AVSs can include data availability layers, oracle networks, bridges, keeper networks, and any system that benefits from economic security guarantees. Rather than bootstrapping their own validator set and token, these services can borrow Ethereum's battle-tested security.

Liquid restaking extends this further. Liquid restaking tokens (LRTs) represent claims on restaked positions, similar to how liquid staking tokens (like Lido's stETH) represent claims on staked ETH. LRTs allow restaked positions to remain liquid and composable within DeFi, enabling holders to use them as collateral, trade them, or provide liquidity in pools while simultaneously earning staking and restaking yields.

The primary risk of restaking is cascading slashing. If a validator is simultaneously restaked across multiple AVSs and misbehaves (or a bug triggers slashing conditions) on one, the same underlying stake absorbs the penalty, potentially affecting security guarantees for other AVSs. There is also concentration risk: if a small number of large restaking operators secure most AVSs, a coordinated failure could propagate across the ecosystem. Additionally, the layered yield structure (base staking yield plus restaking rewards plus LRT DeFi yields) creates complex risk profiles that participants may not fully understand, echoing concerns about leverage stacking in traditional finance.