After Staking (ETH) and Liquid Staking (stETH), DeFi birthed a new concept is Restaking pioneered by EigenLayer. It allows you to use staked ETH to secure multiple networks simultaneously. Yield increases, but risk stacks exponentially.

šŸ”ø Imagine your assets like nesting dolls:

  1. Layer 1 you buy ETH šŸ‘‰ Risk is ETH price drops.

  2. Layer 2 you stake ETH for stETH. šŸ‘‰ Added Risk is Lido smart contract bug or stETH depeg.

  3. Layer 3 you deposit stETH into EigenLayer to secure Actively Validated Services. Added Risk is AVS failure.

  4. Layer 4 you get ezETH or rsETH and collateralize it in DeFi.

    šŸ‘‰ This is Rehypothecation. One unit of capital bears 4 layers of liability.

šŸ”ø The multi layered structure of Restaking also entails Cascading Risk:

  • In normal Staking, if a Validator errs, you get Slashed a portion of ETH.

  • In Restaking, you commit to securing multiple services. If ANY of those services fault or get attacked, your underlying ETH gets Slashed.

  • You are picking up pennies in front of a steamroller. A small error at the top layer can collapse the entire foundation below.

šŸ”ø The Liquidity Nightmare:

  • When the market crashes, these LRT layers often lose liquidity first.

  • The Restaking Unbonding period can be 7 days or longer. You will be locked inside a burning house without an exit key.

šŸ”¹ Restaking is a great capital optimization tool for those who know the rules. But do not treat it as safe bank interest. Understand that you are trading the security of the Base Layer for a few extra % yield.

Are you building a solid concrete asset tower, or playing Jenga with your life savings?

News is for reference, not investment advice. Please read carefully before making a decision