What is Restaking?

What is Restaking?

Restaking involves staking an LST (such as stETH) on a different network or protocol. By doing so, users maximize rewards beyond native staking returns while enhancing the security of the network they’re contributing to. Restaking provides flexibility, liquidity, and the ability to optimize capital efficiency by extending trust to new protocols. It empowers users to compound their yield and actively participate in the evolving blockchain landscape, all while maintaining control over their assets.

What is EigenLayer?

Restaking as a new primitive in crypto-economic security was pioneered by EigenLayer. EigenLayer enables restaking through a collaborative and innovative approach that leverages Ethereum’s existing stakers and node operators.

Here’s how EigenLayer achieves this:

Collaboration and Trust EigenLayer fosters collaboration between innovators, Ethereum stakers, and node operators. Even parties that don’t inherently trust each other can work together effectively.

Decentralized Trust Module EigenLayer simplifies the utilization of Ethereum’s “decentralized trust” module. This module promotes open innovation by eliminating the need for protocols to build their validator sets. Instead, they can tap into Ethereum’s computing and financial resources seamlessly.

Actively Validated Services (AVS) EigenLayer Operators run AVS software, acting as AVS nodes. These nodes validate AVSs, enhancing network security and correctness.

Ecosystem

There are 4 pillars of Eigenlayer’s ecosystem:

Actively Validated Services (AVS): AVS are decentralized services that inherit Ethereum’s security. They support various networks, including sidechains and data layers. By leveraging Ethereum’s pooled resources, EigenLayer enhances security for activities like middleware services, block building, and transaction ordering.

$ETH Stakers: Within EigenLayer, Ethereum stakers play a crucial role in securing multiple networks. They achieve this by restaking their $ETH, effectively using their existing capital to support various networks through smart contracts. While this strategy offers additional yields, it also introduces the risk of slashing if stakers fail to meet the conditions set by the services they choose to support.

Node Operators: EigenLayer relies on node operators who provide computational resources to run essential services. These services include decentralized applications (DApps), oracles, and bridges. Node operators have the autonomy to select the services they work for and implement recommendations from the AVS.

Eigenlayer Protocol: At the core of EigenLayer lies its protocol, implemented through Ethereum smart contracts. These contracts enable trustless collaboration between stakers, node operators, and services. Users can restake their assets, delegate them to node operators, and interact with on-chain service modules. Each service module has predefined conditions for rewards and slashing, ensuring smooth interactions across the ecosystem