Ethereum restaking technologies are becoming increasingly complex and confusing. Since it’s one of the trending narratives, let’s break it down to understand the differences between the layers and compare the technologies.
Ethereum Native Staking
The first layer is Ethereum native staking. To become a staking validator, you need 32 ETH, a dedicated computer and a strong internet connection. Unlike Proof of Work mining (bitcoin), The hardware does not have to be powerful. The security is guaranteed by the staked 32 ETH. The validator will run specific software and be penalized for downtimes and malicious behavior.
Pooled Staking
If you don’t have 32 ETH, you have the option to delegate your ETH to a trusted validator. The validator will distribute the rewards and retain a commission. Typically, you will need to manually claim your rewards. Your tokens still belong to you since they are locked in a smart contract, and only you can initiate the withdrawal. However, you will need to trust the validator on multiple levels:
- You need to trust that the validator’s smart contract is free of bugs and has undergone audits.
- You must ensure that the validator will not experience downtime, as your ETH is also at risk of being slashed.
- It’s important to note that it usually takes a few days for your tokens to be available after unlocking them.
Liquid Staking (LST)
Liquid staking is an advanced form of pooled staking. Instead of your tokens being locked, they are sent to a common pool within the smart contract. You receive a liquid version of ETH (LST token, for example, eeth), representing your share in the pool. You can unstake at any time by sending your LST back to the smart contract and receiving your original ETH in return. There is a short unlocking period, but if you don’t want to wait, you can swap your LST for ETH on a DEX. The main advantage is that your tokens, although staked, remain liquid. You can reuse them in DEFI.
A commission of the rewards is kept by the protocol, and the rest is sent to the common pool. This means you don’t have to claim your reward and pay network fees; the rewards accrue directly in the value of your LST. Over time, the value of 1 LST becomes greater than 1 ETH. Most LSTs are available on layer 2 networks, which helps you save on network fees.
Top LST platforms:
- Ether.fi
- Kelpdao
- Puffer
- Lido You can stake on Linea using routernitro on this page
- Mantle Eth: They have a new campaign going on in 3 days!
Restaking (LRT):
Restaking involves reusing the Ethereum validator infrastructure and resources to simultaneously secure new networks. Validators use custom software to secure multiple networks, earning additional yield using the same hardware and power. New decentralized blockchains seeking a stable and secure network for their proof of stake needs can utilize this service for a modest fee, as opposed to establishing their own network of validators from scratch. So we can view restaking as a shared security layer.
By restaking your ETH, you receive a token in return (Liquid restaked token – LRT) and earn additional yield from the new protocols in addition to your native Ethereum restaking. Most LST providers automatically restake your initial staked ETH, allowing you to benefit from restaking advantages. LST providers may collaborate with various restaking providers to optimize your yields.
Top LRT platforms:
- EigenLayer Eigenlayer is the first restaking protocol. For now, it only supports the Ethereum mainnet and allows you to restake ETH, most established LSTs as well as its governance token EIGEN.
- Symbiotic: Symbiotic is a direct competitor to Eigenlayer. It accepts different tokens as a collateral and offers networks seeking security the choice of different vaults, each vault having its own security strategy. Mellow finance partnered with Lido to create vaults on symbiotic to compete directly with Eigenlayer. If you want to participage in Symbiotic airdrop, you can check Ether.fi’s super symbiotic vault.
- Karak is an emerging competitor with strong backing. It supports many chains including Layer2s and a full basket of tokens. You can use the following referal codes (absd6, Egi8A, XNC6A, PXmRT)
Mitosis
Mitosis is neither an LST nor an LRT. This may be confusing because when you deposit your LST (Etherfi eETH), you receive miweETH in return (Mitosis LST). However, Mitosis will not use your LST for restaking (security layer) purposes. Instead, Mitosis functions as a liquidity layer (Ecosystem-owned liquidity). It acts as a vault and seeks out opportunities in DEFI to maximize profits. With substantial liquidity, it can access custom deals that regular users cannot. Additionally, users can participate in governance to vote on future proposals for strategies.
Zircuit
We will talk briefly about Zircuit since it might be confused as and LRT. Zircuit in fact is a Layer2 solution (AI based) and when you restake your LST with Zircuit, it’s for the purpose of securint the Zircuit network.
Risks
Projects are evolving rapidly, with new concepts emerging daily. Protocols are teaming up to stay ahead of the curve and all this might be confusing for the average user. It’s important to consider the risks associated with each project before getting involved. The risk is very real – at the end of the day, you are giving up your ETH for some LST which is nothing but an ERC20 “pegged” to ETH based mostly on trust. While you can unstake and receive your original ETH back, there’s a possibility of a smart contract bug locking your deposit or the value of LST decreasing on the secondary market for various reasons. So if you use your LST in DEFI you might be at risk of liquidation. A lot can go wrong, so conducting thorough research is crucial.