Expanding the track beyond LSD? A detailed explanation of the Restaking Re-stake Protocol proposed by EigenLayer
EigenLayer's Restaking Re-stake Protocol proposes expanding the track beyond LSD. Here's a detailed explanation.
Author: MIX, MixWeb3 founder
The Restaking protocol has made Eigenlayer the most popular infrastructure project on Ethereum. The core team, EigenLabs, has raised $50 million in funding with Blockchain Capital leading the way and participation from well-known VCs such as Coinbase Ventures, Polychain Capital, Bixin Ventures, and Hack VC.
According to an official tweet on May 2nd, the first phase of the EigenLayer mainnet is about to go live, and it will support Liquid Restaking and Native Restaking. EigenLayer hopes to promote project innovation in the Ethereum ecosystem by providing additional staking opportunities for ETH holders who choose to join, thereby reducing the security cost of AVS. Restaking once again demonstrates the power of Web3’s composability.
What is Restaking?
Restaking was first proposed by Sreeram Kannan, founder of Eigenlayer. Eigenlayer is a decentralized trust market in the Ethereum ecosystem that aims to expand Ethereum’s trust network. Its core mechanism, Restaking, allows ETH that has already been staked on Ethereum to be staked again on another consensus protocol, sharing Ethereum’s almost impregnable economic security to ensure its own security launch and operation. ETH stakers can receive Restaking rewards provided by AVS in addition to Ethereum’s staking rewards.
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Essentially, Restaking is a shared security mechanism that allows the same asset to be staked on multiple “decentralized applications/blockchains” at the same time to provide security. Generally, new “decentralized applications/blockchains” will choose to join a blockchain ecosystem that has sufficient security and fits their own project by offering rewards to attract stakers to that blockchain. Stakers can re-stake assets that have already been staked to this new “decentralized application/blockchain” and receive a reward.
“The so-called shared security allows a blockchain to enhance its own security by sharing the value of the verification node of another blockchain. For example, Polkadot’s slot scheme, Octopus Network’s LPoS lease proof of stake, Cosmos’ Replicated Security, Avalanche’s “subnet,” and Polygon’s “SuperNET” are all players in the shared security field.”
Just a few months after Eigenlayer proposed the concept of Restaking, Octopus Network, a leading infrastructure project in the NEAR ecosystem, announced its Restaking service. Octopus Network allows $NEAR holders to Restake for application chains while staking on the NEAR public chain, providing security for the application chains and earning reward for staking.
It is believed that other Restaking projects on Layer1 public chains are also in the works. If there are official announcements from these projects, the author will research and share the information.
Why is Restaking highly anticipated?
As the narrative of multi-chain networks and application chains gradually gains popularity, providing lower-cost and more decentralized shared security services for blockchain security launch and operation becomes more important. Typically, there are three key stakeholders in all kinds of shared security solutions: “decentralized applications/blockchains,” “blockchains that provide shared security,” and “stakers.” The Restaking mechanism not only maximizes the interests of the three stakeholders, but also completely unifies their interests.
1. Decentralized applications/blockchains
Decentralized applications/blockchains represented by middleware chains and application chains require extremely high economic and time costs to achieve security launch and operation by building their own verification node networks. By choosing Restaking, they can first join an ecological chain that has sufficient security and is compatible with their own project. The community of this ecological chain has a large number of stakers who can provide security services. Decentralized applications/blockchains can use the existing security of the ecological chain, ranging from several billion dollars to tens of billions of dollars, and flexibly obtain and adjust the amount of staking and security level according to their different security needs in different development stages through incentive rewards. For example, the security level of the project in the early stage of launch can be relatively low, and the security level can be adjusted to a higher level through governance when the assets increase later.
At the same time, Restaking allows new projects to bind more closely with the selected ecological chain, which is helpful to obtain the support of the ecological chain.
2. Stakers
From the perspective of stakers, Restaking is the best choice. In addition to staking for the original blockchain and earning rewards, the Restaking mechanism allows the same staking token to be Restaked to other blockchains to provide security, and then to earn security rewards again. This compound income is the most capital-efficient staking method at present.
With a 7-second video that’s simple and catchy, Gabriel Haines describes the huge appeal of Restaking to stakers: “You take your staked ETH… and you stake it again.”
3. Providing a Blockchain That Shares Security
A blockchain that shares security will typically be a Layer1 public chain based on PoS.
First, Restaking solves the problem that the original blockchain’s encrypted economy security is difficult to pass on and expand to other protocols in the ecosystem: for example, Ethereum is the most secure blockchain, but the security level of various middleware protocols in its ecosystem is significantly lower than that of Ethereum.
Second, Restaking creates more economic value for already-staked tokens, and the size of the token staking market will be greatly expanded, with the value ceiling of staked tokens being unprecedentedly raised.
With the gradual increase of Restaking projects, the blockchain that provides shared security will become the hub-type blockchain with the highest security, the most stakers, the most application layer protocols, the most Web3 users, and the most encrypted assets, and the feedback effect of Restaking projects will further enhance the economic security and value capture ability of the blockchain.
The most wonderful thing is that the blockchain that provides shared security does not need to pay any additional costs.
The Growth Flywheel Built by Restaking
Each decentralized application/blockchain that uses Restaking is like a bond market with different degrees of productivity and yields. Part of its value will flow continuously into the blockchain ecosystem and be converted into the appreciation of staked tokens.
Stakers using Restaking bring higher returns, which not only increases the value of staked tokens, but also stimulates the motivation to continue staking. When stakers reinvest these returns into the staking pool, the entire Restaking shared security model forms a logical closed loop of value growth flywheel.
Of course, as a new thing, Restaking also has various potential risks, such as possible centralization risk, risk brought by high leverage ratio, cross-domain MEV, and how to establish the review market, which need to be continuously improved in innovation.
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