Restaking

Staking, the act of locking crypto assets up to support a proof-of-stake blockchain (mostly on Ethereum) in return for rewards, is among the most popular uses of crypto. Now, restaking is emerging as a new way to leverage staked tokens for other applications, with projects like EigenLayer spearheading these developments.

Restaking allows staked ETH to be used as security for other protocols outside of Ethereum in exchange for fees and rewards. New or smaller protocols can use this restaked ETH as a security layer, rather than building a host of validators—thereby significantly lowering costs. The payoff for stakers is that they receive even more rewards for their staked ETH.

The benefit of this mechanism is that it allows projects to build quickly without having to grow and develop a community to support the network through native staking. However, there are risks. Ethereum founder Vitalik Buterin has warned that restaking utilizes the network’s social consensus and could “increase the scope” of this consensus too far beyond Ethereum’s core rules. This could cause conflict for validators because of outside influence on votes and decisions, which would hamper the security benefits Ethereum is meant to provide.

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