Restaking allows coins that are already staked to also contribute to the security of other applications

Restaking is riskier than staking, as it introduces additional points of failure. However, it also allows provides the opportunity to earn extra rewards

Restaking allows coins that are already staked to also contribute to the security of other applications. It is riskier than staking, but provides the opportunity to earn extra rewards that wouldn’t be achievable with staking alone.

The concept of restaking was introduced by EigenLayer, a protocol that taps into the economic security of the Ethereum network and extends it to other applications. Even though the concept of restaking was pioneered on Ethereum, it can also be applied to other blockchain platforms that use Proof-of-Stake consensus.

Key highlights:

How does restaking work?

In order to provide you with a general understanding of how restaking works, we will mostly be using EigenLayer as an example, as it is the largest restaking protocol by far and the one readers are most likely to interact with.

While many of the concepts we will be discussing also apply to other restaking protocols, it’s important to keep in mind that there can be different approaches to implementing restaking.

With EigenLayer, users can restake their ETH or liquid staking tokens such as stETH to provide security for applications in the EigenLayer ecosystem. These applications are referred to as Actively Validated Services (AVSs).

The EigenLayer network consists of Operators, which run validation tasks for AVSs. Users can delegate their restaked ETH or liquid staking tokens to Operators to earn a portion of the rewards collected by Operators.

The group of Operators securing an AVS is referred to as the AVS’s Operator Set. Each AVS assigns a set of tasks to be performed by its Operator Set, and can impose slashing penalties to Operators that don’t perform these tasks properly. An Operator that is found to be breaking the AVS’s rules will have a portion of their stake slashed (the slashed tokens are sent to a burn address).

Native restaking

Native restaking involves staking ETH and launching a validator node on the Ethereum mainnet, then using the staked coins on EigenLayer or another restaking protocol. This requires changing your Ethereum validator’s withdrawal credentials to a specific set of smart contracts.

This approach to restaking has a very high barrier to entry, as the requirement to launch your own Ethereum validator is 32 ETH. Given the current price of ETH, this is out of range for the majority of Ethereum holders. In addition, operating an Ethereum validator node requires some technical expertise.

Liquid restaking

In practice, most users will access restaking through liquid restaking. This approach involves depositing liquid staking tokens, for example stETH, into specific smart contracts. You can easily restake your liquid staking tokens using the EigenLayer Web App by connecting your wallet and depositing the tokens you want to staker.

However, there are also services such as Puffer and Ether.fi, which allow users to earn yield from restaking while retaining liquidity. These services issue LRTs (liquid restaking tokens) to represent tokens deposited by users. These LRTs accrue interest and can be freely transferred, so they can even be used in DeFi protocols to generate additional yield.

It’s important to keep in mind that these services introduce some additional risks alongside the higher rewards.

How to restake your coins?

The process of restaking your cryptocurrency will be different depending on which type of cryptocurrency you’re holding. Here are a few examples of the leading restaking protocols across a variety of blockchain platforms:

If you're looking to restake on Ethereum, here's a quick summary of the available options.

EigenLayer Web App

If you want to restake through EigenLayer, you can head over to the EigenLayer Web App, connect your wallet and deposit tokens.

Keep in mind that you won't be able to directly restake ETH from your wallet - you would need to have your own validator node to do that. If you want to earn restaking rewards in this way, you'll need to have some liquid staking tokens (for example stETH, rETH or swETH).

Liquid restaking services with LRTs

If you want to retain the liquidity of the tokens you're restaking, you'll have to use a service such as Puffer, EtherFi or Renzo. When you deposit tokens you want to restake into these services, you'll receive LRTs (liquid restaking tokens) that represent the tokens you restaked. You can use these tokens in DeFi protocols to earn additional yield.

Liquid restaking protocols provide advantages such as potentially higher yields, but also introduce additional layers of complexity to the restaking process. This added complexity increases risk, with the extent of that risk varying depending on the specific implementation and how you deploy your LRTs.

Kraken

If you're not comfortable with using your wallet and interacting with smart contracts, you can still benefit from restaking. The Kraken cryptocurrency exchange provides an ETH restaking service, which provides higher rewards than regular staking.

Please keep in mind that this is a centralized service - you'll have