Re-staking and liquidity re-staking: A new paradigm for breaking through staking yields

Recent discussions on staking and liquidity staking have sparked heated debates in the crypto market, attracting many users who hope to enhance their ETH returns based on the positive outlook of the ETH ETF. According to DeFi Llama, the TVL growth of these two types of services has been rapid, ranking fifth and sixth among all DeFi categories. Before diving into the additional benefits brought by staking and liquidity staking, let's first understand their basic principles.

Overview of Staking and Liquidity Staking

Ethereum staking refers to users putting in ETH to secure the network and earn additional ETH rewards. While it can generate returns, staking also carries the risk of being penalized, as well as the risk of insufficient liquidity due to the inability to immediately sell ETH because of the unstaking period.

Becoming a validator requires a large upfront investment of 32 ETH, which is a high threshold for many people. Therefore, pooled staking services have emerged, allowing multiple users to combine their ETH to meet the minimum staking requirement.

Nevertheless, the staked ETH remains in a "locked" state and cannot be used immediately. Liquidity staking has emerged, which mints liquidity tokens for users' ETH deposits. These tokens can be used to participate in DeFi activities to increase returns. Platforms like Lido are pioneers of this innovation.

Rise of Re-staking

Re-staking was initially proposed by EigenLayer, aiming to use staked ETH to secure modules that cannot be deployed or verified on the EVM, such as sidechains and oracle networks. These modules typically require their own tokens to provide security, which leads to issues like high costs of establishing a secure network and low trust levels. Re-staking addresses this problem by drawing security from the Ethereum validator set.

In addition to EigenLayer, other re-staking protocols have also emerged. They all aim to provide security by utilizing re-staked assets, but there are differences in their specific implementations.

Comparison of Re-staking Agreements

The main re-staking protocols currently include EigenLayer, Karak, and Symbiotic. They each have their own characteristics in terms of TVL, supported assets, security models, and more:

EigenLayer only supports ETH and its derivatives, with higher security; Karak and Symbiotic support a wider range of assets, with more flexible security.

EigenLayer and Karak use upgradeable smart contracts managed by multi-signatures; the core contract of Symbiotic is immutable, which can eliminate governance risks.

EigenLayer and Symbiotic mainly accept assets on Ethereum, while Karak supports deposits across 5 chains.

Each protocol is striving to establish partnerships and build services on its infrastructure. In the long run, platforms that can continuously collaborate with large participants may have an advantage.

Overview of Liquidity Staking

The liquidity re-staking protocol provides users with liquidity-wrapped tokens, mainly including the following categories:

• Native LRT: such as EtherFi, Puffer, etc., only accept native ETH deposits
• Basket LRT: such as Renzo, Kelp, etc., accepting deposits of various assets
• Independent LRT: Such as Eigenpie, Mellow, etc., issue specific LRT for specific deposits.

These protocols each have their own characteristics in terms of DeFi integration, Layer 2 support, etc. Most have integrated with Eigenlayer and Karak, while some are collaborating with Symbiotic.

The growth trend of re-staking

Recent deposits for re-staking have increased significantly, with re-staking liquidity accounting for over 70%. However, after the Eigenlayer airdrop, some funds have flowed out, possibly towards other protocols such as Karak and Symbiotic.

As more protocols launch tokens and airdrops, as well as increase deposit limits, users may continue to seek yield opportunities on these platforms.

Conclusion

Currently, approximately 13.4 million ETH has been staked through liquidity staking platforms, accounting for 40.5% of all staked ETH. The ratio of re-staking to liquidity staking is about 35.6%.

With the launch of new services and the improvement of the reward mechanism, the re-staking platform is expected to attract more capital inflow. Although there may be fluctuations in the short term due to airdrops, in the long run, yield seekers may still be attracted. The development of the re-staking ecosystem will bring more value appreciation opportunities for ETH holders.