Key Takeaways

Restaking allows users to redeploy staked assets like ETH or Liquid Staking Tokens (LSTs) across multiple protocols, enhancing security for decentralized applications while earning additional rewards.

Restaking is categorized into three types. Native Restaking requires running an Ethereum node and staking 32 ETH, suited for advanced users. LST Restaking uses liquid staking tokens from platforms like Lido, offering a more accessible option. Liquid Restaking provides flexibility by maintaining liquidity through Liquid Restaking Tokens (LRTs), ideal for DeFi users.

EigenLayer pools Ethereum’s security to provide “security-as-a-service,” boosting validator revenue and ecosystem growth. Jito Labs enhances Solana’s ecosystem by maximizing staked SOL returns with flexible restaking options and VRTs.

Restaking provides additional yield opportunities, leverages LSTs and LRTs in DeFi, and offers potential airdrops from platforms like KyrosFi and Fragmetric. Evaluating risk vs. reward, liquidity, and APY is essential when selecting restaking methods.

While restaking enhances blockchain security and efficiency, risks like slashing, liquidity concerns, and potential strain on consensus require consideration. Its transformative potential makes it a cornerstone of the next-generation staking revolution.

Primer

At the start of 2024, the restaking narrative began gaining traction. Despite facing a moderate downturn mid-year and a sharp drop in November, the market quickly rebounded, repeatedly breaking ATH recently. Now peaking at $27 billion—a remarkable 20x increase from $1.3 billion at the start of the year—restaking has evolved from an emerging concept to a robust business model.

Its potential is undeniable, but the critical question is: how do we leverage this trend to increase improve our performance? The answer lies in understanding its inner workings—how it enhances Ethereum’s ecosystem and drives innovation in DeFi. In the discussions ahead, we’ll unpack why restaking is becoming a cornerstone of DeFi evolution and explore strategies to seize the opportunities it presents.

What is Restaking and Why is it Needed?

Before diving into the concept of restaking, it’s important to first understand staking. Staking is a core process in Proof-of-Stake (PoS) blockchain consensus mechanisms, where users pledge their tokens as collateral to become validators, helping secure the network. The more tokens staked, the higher the likelihood of being chosen to validate transactions and earn rewards. However, validators also face risks—if they act maliciously or fail to perform their duties, they may lose a portion of their staked tokens through a penalty known as “slashing.”

As the number of blockchain projects grows, each requiring users to stake tokens for security, competition for limited user funds intensifies. This dynamic drives projects to offer higher staking yields, which can introduce additional risks and inefficiencies. Restaking has emerged as a solution to address this fragmented blockchain security landscape. By introducing a shared staking pool, restaking allows users to stake their assets multiple times, securing various applications beyond the primary blockchain.

For example, EigenLayer, a leading restaking protocol, enables staked assets to secure Actively Validated Services (AVS) — services built on top of it — with a larger pool of capital. This significantly increases the Cost of Corruption (CoC), thereby enhancing the overall security of the ecosystem.

Restaking enables users to redeploy their staked assets—such as Liquid Staking Tokens (LSTs) or native tokens—on additional protocols. This allows projects to tap into the security of larger chains, like Ethereum, without needing to build their own costly and complex security frameworks. EigenLayer enables Ethereum stakers to repurpose their staked ETH to secure other applications. In return, stakers earn additional yield but are exposed to extra slashing risks tied to the applications they secure.

Restaking can be categorized into three main types:

1. Native Restaking: This involves users directly staking their assets with a restaking protocol, such as EigenLayer. However, native restaking on EigenLayer requires users to operate an Ethereum node and stake at least 32 ETH on the Beacon Chain, making it accessible primarily to more advanced users. 2. LST Restaking: For those who do not meet the requirements of native restaking, liquid staking protocols like Lido provide an alternative. These protocols allow users to stake their ETH and receive a liquid staking token (LST), which can then be used to participate in native restaking on EigenLayer.

3. Liquid Restaking: Liquid restaking protocols offer a more flexible option, enabling users to participate in restaking while retaining liquidity. Users deposit their ETH or LSTs into a liquid restaking protocol, which handles the restaking process on their behalf. In return, users receive a liquid restaking token (LRT), which can be used in DeFi to generate additional yield.

Below is a comparison of different restaking methods, with EigenLayer serving as an example of both native restaking and LST restaking:

Now that we understand how restaking works, let’s explore how to get involved. Staking native ETH directly requires 32 ETH and running your own node, which can be both expensive and technically demanding. Thankfully, more accessible options allow anyone to stake any amount of ETH through third-party platforms:

1. Centralized Exchanges (e.g., Binance, Coinbase): Platforms like Binance and Coinbase handle staking for you, making it easy to start earning rewards. However, since these are centralized, your ETH is subject to platform risks like insolvency or withheld assets. 2. Staking Pools (e.g., Staked.us, Figment): Staking pools let you delegate ETH to professional node operators, who manage the technical side and share rewards after deducting fees. This option is popular with institutions but still involves some centralization. 3. Liquid Staking Protocols (e.g., Lido, Rocketpool, Frax): Liquid staking protocols offer flexibility and liquidity. By staking ETH through these platforms, you receive liquid staking tokens (LSTs) that represent your staked ETH and its rewards. LSTs can also be used in DeFi to earn additional yields, making this a versatile option.

Each approach has trade-offs in terms of accessibility, security, and decentralization, so choose what best fits your needs.

Below, we will introduce two restaking projects, along with the applications built on top of the platform, and provide potential profit strategies to help users maximize returns.

EigenLayer

EigenLayer, described as a ‘restaking collective for Ethereum,’ serves as a marketplace for decentralized trust and offers ‘security-as-a-service.’ It enables the pooling of Ethereum’s substantial security, making it available to other applications built on top of its framework. A significant part of EigenLayer’s potential lies in its ability to aggregate and extend cryptoeconomic security through restaking, as well as validate new applications being developed on Ethereum. Additionally, it is supported by renowned investors, including A16Z, Coinbase Ventures, Polychain, and others.

Since its launch, the TVL has risen to $23.8 billion. The price of $EIGEN stands at $3.899, reflecting a +2.71% increase over the last 24 hours. The trading range for the day has been between $3.728 (low) and $4.051 (high). The 24-hour trading volume is $96,367,426, indicating active market participation. The market capitalization is ranked #120, with a fully diluted valuation (FDV) of $6.6 million, highlighting significant liquidity in the market.

The platform is structured as a marketplace involving:

Restakers: Those who stake their assets (liquid staking tokens or $ETH) to enhance the security of other network applications. Restakers receive additional yield but face higher slashing risks.

Node Operators (Validators): Run EigenLayer's software and earn fees from both Ethereum proof-of-stake consensus and from securing other protocols through staked assets.

Actively Validated Services (AVSs): Applications built on EigenLayer, including new blockchains, data availability layers, or oracle networks. AVSs pay fees for security and validator services.

Through this system. EigenLayer introduces two novel concepts:

1. Pooled Security via Restaking: Restaking allows new modules to be secured using restaked $ETH, reducing the need for separate tokens.

2. Free-Market Governance: Validators can freely determine their risk/reward preferences and choose the modules they wish to secure, creating an open marketplace.

The EigenLayer ecosystem comprises over 40 AVSs, including Ethereum sidechains, oracles, and bridging layers. Next, we delve into the EigenLayer ecosystem to explore AVS opportunities. Below are the introduction of top four AVSs ranked by their Restaked ETH.

Lagrange

Lagrange is a Zero-Knowledge Coprocessing protocol that enables verifiable computations at big data scale across various blockchains. Its unique ZK Coprocessing approach involves a decentralized network of nodes that execute computations off-chain and generate ZK proofs of the results to submit on-chain, in a hyper-parallel manner, thereby unlocking significant efficiency and cost gains. By providing hyper-scalable proving, Lagrange opens the door for innovations in cross-chain interoperability and applications requiring complex computations over big data.

In May 2023, Lagrange Labs secured $4 million in funding, led by 1KX. Other investors included Maven11, Lattice Fund, CMT Digital, and Daedalus Angels. Approximately a year later, the company raised an additional $14 million, with funding led by Founders Fund, Mantle Network and more capitals.

Eoracle

Eoracle is an Ethereum-native oracle built on EigenLayer, offering a modular and programmable data layer secured by Ethereum. It bridges off-chain data—like NBA scores, weather, and stock prices—to blockchain, providing decentralized applications with native security and off-chain compute capabilities. Instead of building its own network of validators, Eoracle leverages EigenLayer’s operators to verify, agree on, and record accurate data on-chain, backed by restaked ETH and Ethereum’s decentralized validator network. With its streamlined approach, Eoracle presents a compelling alternative to established solutions like Chainlink, aiming to redefine blockchain connectivity.

Witness Chain

Witness Chain is a DePIN Coordination Layer (DCL) that transforms unverified physical attributes, such as location and network capacity, into verifiable digital proofs. These proofs enable DePIN projects to build new services, optimize resources, and foster innovation while connecting decentralized infrastructure into an end-to-end supply chain.

With over 20 DePIN projects integrated, Witness Chain ensures state validation through EigenLayer Operators and strengthens core infrastructure capabilities like targeting, security, and network roaming. It also provides decentralized monitoring for AVSs, acting as the first line of defense for optimistic rollups.

EigenDA

EigenDA, the first AVS launched on EigenLayer, is a data availability solution designed to lower transaction costs and boost throughput for rollups. Delivering 15 MB/s write throughput—far exceeding Ethereum’s current 83.33 KB/s—EigenDA is built on scalability, security, and decentralization. Adopted by projects like Mantle, Polymer, and Movement Labs, and integrated into RaaS platforms like Caldera and AltLayer, EigenDA empowers rollup deployment with seamless one-click integration. It enhances Ethereum rollup efficiency, supports data-heavy applications like gaming and social media, and ensures trustless operations with cryptographic guarantees using KZG polynomial commitments.

Below is a summary of four metrics used to evaluate the four AVSs:

JitoSOL

Jito Labs launched the Jito (Re)staking protocol on Solana in November 2022, enabling users to maximize returns from their already staked SOL assets while potentially qualifying for airdrops. Users can restake their SOL through three providers—Renzo, Fragmetric, and Kyros—each offering different levels of risk, liquidity, and potential rewards. Its current TVL has reached 14 million $SOL, equivalent to 3.3 billion USD.

The Jito restaking framework consists of two primary components:

1. Restaking Program: This program manages the creation of Node Consensus Operators (NCNs), which function similarly to Active Validation Services (AVSs) in EigenLayer. These operators are crucial for validating transactions and maintaining network integrity. The program also oversees user selection mechanisms, as well as the distribution of rewards and penalties. 2. Vault Program: The vault program serves as the primary interface for users, managing Liquid Restaking Tokens (VRTs), which are Jito’s version of liquid restaking tokens (LSTs). Through this program, users can stake any SPL token and receive VRTs in return. The vault program facilitates the minting, burning, and delegation of these tokens, representing a user’s stake across various assets. This enables users to easily delegate their tokens, effectively manage rewards, and engage with a broader range of assets within the ecosystem.

Currently, Jito supports 3 vaults:

Renzo

Renzo is a cross-chain liquid staking protocol designed to enhance the staking experience for users. It allows individuals to stake a variety of assets, including ETH and other liquid staking tokens, across multiple platforms such as Ethereum, Arbitrum, and BNB Chain. Renzo has garnered significant support from renowned VCs, including Galaxy Ventures, BH Digital, Binance Labs, OKX Ventures and so on.

Fragmetric

Fragmetric is a native liquid restaking protocol on the Solana, aimed at enhancing the security and economic potential of the Solana ecosystem. The protocol's innovative approach includes the introduction of $fragSOL, the first liquid restaking token on Solana, designed to optimize yield while addressing challenges related to reward allocation and slashing. More details about its background and team can be viewed here. When users deposit SOL or LSTs into Fragmetric, they receive $fragSOL in return, managed through the Normalized Token Program. Deposited assets are pooled and efficiently allocated across restaking protocols and NCN/AVS, with partner validators ensuring economic security. Earnings from these allocations are distributed to $fragSOL holders. Fragmetric bridges users and restaking protocols, serving as both a liquidity layer and portfolio manager.

KyrosFi

KyrosFi is a liquid restaking protocol on Solana supported by SwissBorg and powered by Jito. $KySOL is the liquid restaking token combining Solana staking rewards, MEV rewards, and restaking rewards in a single token.

Below is the summary of the features and we try to discuss which may stand out as a better vault to invest:

When choosing which vault to utilize, the most important factor is finding a balance between risk and reward. All three providers currently have similar levels of risk due to the limited number of Node Consensus Operators (NCNs) and the early stage of development. However, Renzo and Kyros may have slightly lower liquidity risk since they only accept JitoSOL, which has better liquidity than some of the other liquid staking tokens accepted by Fragmetric.

The anticipated APY for each vault is expected to be similar. Renzo and Kyros may have slightly higher APYs since they only utilize JitoSOL.

Airdrop potential is another key consideration when selecting a vault. Since Renzo already has a token, the potential for airdrop rewards is relatively low, even though restaking may yield some future airdrop points. Both Kyros and Fragmetric do not have tokens, so they have higher airdrop potential.

All in all, KyrosFi stands out as the most promising project among three vaults. KyrosFi may be more attractive than Fragmetric because it is supported by SwissBorg, which should make it easier to distribute $kySOL. Kyros may also utilize a fair launch method. Lastly, since Kyros has maintained a relatively low profile, its potential airdrop rewards may be more appealing.

Conclusion

Restaking has rapidly become a key innovation in blockchain infrastructure, growing from $1.3 billion to $27 billion in 2024. Platforms like EigenLayer and Jito Labs highlight its potential to enhance blockchain security, drive efficiency, and foster decentralized innovation.

EigenLayer, a “restaking collective for Ethereum,” and Jito Labs, a similar platform for Solana, leverage their respective networks’ security to offer “security-as-a-service.” EigenLayer pools staked $ETH and liquid staking tokens (LSTs), enabling projects to reduce capital costs, generate validator revenue, and grow Ethereum-based applications. Jito Labs optimizes staked SOL returns with flexible restaking options, enhancing Solana’s ecosystem and driving fee-based revenue. Both platforms exemplify the transformative potential of restaking to support network security, foster innovation, and expand blockchain ecosystems.

When evaluating restaking opportunities, striking a balance between risk and reward is crucial. For example, factors such as liquidity risk, token acceptance, and anticipated APYs play a significant role in vault selection. Additionally, ecosystem support, such as KyrosFi’s backing by SwissBorg, can add value by improving token distribution and introducing fair launch mechanisms.

While the insights and recommendations provided in this report are designed to offer guidance, they should be treated as references rather than definitive solutions. Readers are encouraged to leverage the information and tools presented here (e.g., SoSoValue for token information and Due Diligence, Staking Rewards for metrics on staking assets, and official websites for each protocol) to conduct analyses, aligning decisions with personal objectives and risk tolerance. As always, DYOR to navigate the dynamic and rapidly evolving world of restaking effectively.