Are you wondering whether you can earn extra returns by using the same crypto assets for more than one purpose? This article explains what “restaking” is, how it differs from regular staking, and why recent market data shows that the extra yield many hoped for has largely vanished.
What is restaking?
Staking, in the simplest terms, means locking up a cryptocurrency—most commonly Ether (ETH)—to help secure a blockchain network. In return, the network rewards you with a small percentage of newly minted coins or transaction fees. This reward is often called a staking yield and is paid continuously as long as your funds remain locked.
Restaking takes the concept a step further. After you have staked your ETH on the base layer (Ethereum), a second protocol can “rent” that same security to provide protection for other services, such as oracle networks, data‑availability layers, or roll‑up chains. The second protocol—most notably EigenLayer—pays a fee for using the security, and that fee is passed on to the original staker. In theory, the staker earns two streams of income from a single pool of ETH: the original staking reward plus the restaking fee.
Because the underlying ETH remains locked only once, restaking does not increase the total amount of security that the network needs. Instead, it re‑uses the existing security to support additional services, creating what many called a “double‑dip” opportunity.
How liquid restaking tokens fit in
Most users do not want to keep their ETH permanently locked, because they may need to trade or use it as collateral elsewhere. To solve this, projects issue liquid restaking tokens. These tokens represent a claim on the underlying staked ETH and its associated restaking rewards. Holders can trade the token, use it as collateral in DeFi, or move it between platforms without having to unstake the original ETH.
Examples of liquid restaking tokens include weETH from ether.fi and similar tokens built on other platforms. The token’s price should track the combined value of the base staking reward and any additional restaking fees earned.
Real‑world example: ether.fi’s exit from EigenLayer
In August 2024, ether.fi announced that it would remove the automatic restaking of its token weETH on EigenLayer. By the end of that quarter, less than 1 % of ether.fi’s assets remained restaked, and the protocol planned to delete the remaining structural link entirely by year‑end. The company’s CEO, Mike Silagadze, said the move was driven by “risk” and the lack of “meaningful yield” from restaking.
Data from that period illustrate the shift. While restaking secured roughly $10 billion of ETH across the ecosystem, it generated only $99,977 in fees over a single week. By contrast, plain liquid staking earned about 53 times more per dollar secured. The five largest liquid restaking tokens together made $953,350 in gross profit in the most recent quarter, down sharply from $2.18 million three quarters earlier.
What this means for you
If you were attracted to restaking because it promised “double‑dip” yields, the recent numbers suggest that the extra income is now marginal. The primary source of profit in most restaking setups comes from the fees paid by services that rent the security. When those services are few or the fees are low, the restaking layer adds little to the overall return.
Moreover, restaking introduces additional risk. The second‑layer protocol could suffer a bug, be hacked, or experience a governance change that affects fee distribution. Because your ETH remains locked on the base chain, any failure in the restaking protocol could jeopardize the extra rewards while still leaving your original stake exposed to the same market volatility.
How to evaluate a restaking opportunity
- Fee yield vs. base staking yield: Compare the annualized percentage yield (APY) from restaking fees to the APY you would earn from plain staking. If the restaking APY is only a fraction of the base yield, the extra complexity may not be worth it.
- Protocol security and audit status: Check whether the restaking protocol has undergone independent security audits and whether any major incidents have been reported.
- Liquidity of the receipt token: Ensure the liquid restaking token you would receive has sufficient trading volume and can be used as collateral on reputable platforms.
- Withdrawal flexibility: Understand the process for moving your assets out of the restaking layer. Some protocols require a separate token or a waiting period.
- Risk tolerance: Assess whether you are comfortable with the added smart‑contract risk and the possibility that restaking fees could drop to near zero.
FAQ
Is restaking safe?
Restaking adds an extra layer of smart‑contract risk on top of the underlying staking risk. While the base stake remains secured by the main blockchain, a bug or exploit in the restaking protocol could result in loss of the additional fees or, in worst cases, affect the staked assets themselves.
Can I earn the same return without restaking?
Yes. Plain liquid staking already provides a predictable yield based on network rewards. If the restaking fees are low, the total return from restaking may be only marginally higher, if at all.
Do I need a special token to restake?
Most restaking services issue a liquid receipt token that represents your staked ETH plus any restaking rewards. Some platforms, like ether.fi after August 2024, require you to opt into a separate token if you still want to restake.
What happens if the restaking protocol shuts down?
If the protocol ceases operations, the extra fees stop flowing, but your original ETH remains staked on the base chain. You would simply revert to earning the base staking yield, assuming you can withdraw or convert the receipt token back to the original stake.
This article references reporting from coindesk.com.
