📝 Hi, I am 𝟏𝟎, this is the popular science series of #Blockchain Development History, this episode's content: Restaking.

Restaking was proposed by EigenLayer founder Sreeram Kannan. It allows staked Ether to serve multiple purposes, providing security for other protocols in addition to protecting the Ethereum network, simultaneously bringing a new narrative to the liquid staking derivatives track.

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1. What is Restaking?

Restaking is an innovative way to utilize already staked assets for other blockchains or protocols. It not only increases yield but also provides security support for new projects. You can continue to stake rewards earned from staked Ethereum or use liquid staked tokens (like LSD Token) to contribute security to more protocols while earning dual rewards.

Stakers can support multiple protocols through restaked assets, reducing risk and increasing yield. For new protocols, restaking simplifies development by directly utilizing staked Ether to enhance security, without needing to launch validators or issue new tokens.

EigenLayer is a pioneer in this field, with many projects exploring how to harness the potential of restaking. In summary, restaking is your secret weapon to make your assets more liquid and earn more.

2. How Restaking Works

Restaking refers to using already staked assets to support the security verification of multiple networks, not just the original network. This way, stakers can earn rewards from more than one network. For example, if you stake ETH on the Ethereum network and then restake it for other networks that support restaking, like Cosmos, you can earn rewards across multiple networks simultaneously.

Liquid Staking Tokens (LST) are tokenized versions of staked cryptocurrencies, allowing stakers to participate in staking without sacrificing liquidity. Liquid Restaking Tokens (LRT) are tokenized versions of restaked assets, addressing liquidity issues in restaking, enabling stakers to earn rewards across multiple networks simultaneously.

Restaking allows staked assets to serve multiple networks, improving capital efficiency and yield potential, but it also increases management complexity and risk. LST and LRT enhance liquidity, enabling stakers to earn more rewards across multiple platforms while addressing the liquidity issues inherent in traditional staking.

3. Benefits of Restaking

1. Yield Leverage: LRT allows you to earn multiple rewards from a single asset! For example, you can stake your assets and still increase your earnings through other means, without needing to put in more money.

2. Improved Capital Efficiency: You can continue to participate in other projects or engage in lending, minting stablecoins, etc., without withdrawing your staked assets. It's like renting out a car to earn money while still keeping your own car. This way, you protect the security of your original assets while earning more.

3. You can use staked ETH with different validators for further secondary staking or even participate in DeFi protocols with these synthetic assets for additional earnings.

4. Reducing Sell Pressure: Through restaking, the original assets gain more use, reducing selling pressure in the market. It's like everyone continues to invest money instead of rushing to cash out, making the market naturally more stable and healthy.

3. Risks of Restaking

1. Smart Contract Risks: LRT relies on multiple smart contracts, increasing the risk of security vulnerabilities that could lead to asset loss or theft.

2. Liquidity Risk: The staked assets are locked, especially in unstable markets, resulting in poor liquidity and potential liquidation risk.

3. High Educational Barrier: The operations of restaking are complex, and ordinary users may find it difficult to understand, needing to grasp mechanisms to maximize yields, which may discourage many from participating.

4. Capital Bubbles: Market FOMO can drive asset prices up dramatically, but bubbles are prone to bursting, increasing investor risk.

4. Examples of Restaking Projects

Restake Finance

A decentralized finance protocol that offers modular liquid staking solutions, specifically supporting EigenLayer.

Swell

A non-custodial ETH liquid staking protocol, users stake ETH and receive a liquid staking token called swETH to optimize returns. With the addition of restaking functionality, users can convert ETH to rswETH, avoiding limitations on EigenLayer LST allocations.

EigenLayer

A middleware protocol that transforms staked ETH into commodities for other protocols to rent, ensuring their security on Ethereum, achieving security in the crypto economy.

5. Conclusion

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