Staking is currently one of the largest segments of the DeFi market, with Liquid Staking Protocol Lido’s TVL at the top. It makes ETH holders more profitable and increases the decentralization and security of the Ethereum network.

Since integrating the Proof of Stake consensus mechanism into the Ethereum network, the demand for Staking ETH has exploded, leading to the development of Liquid Staking protocols. Since the adoption of Proof of Stake, Liquid Staking has existed for a considerable amount of time. Currently, a significant number of Blockchain platforms, including Ethereum, Near, BNB Chain, Avalanche, Cosmos, Sui, Aptos, etc., use the POS consensus mechanism. Therefore, we view the potential of the Liquid Staking market as enormous.

Why then use Liquid Staking? Liquid Staking solves the major issue of simplifying staking, not tying up liquidity, and improving network decentralization. And in the DeFi market, we pay close attention to not locking liquidity, i.e., protocols like Lido that allow users to Stake ETH and receive stETH of equivalent value, with the ability to transfer it to other exchanges in mind. operating within the DeFi marketplace.

ReStaking refers to one of the activities involving the reuse of Liquid Staking Token assets such as stETH to Stake into the Validators of a network or other Blockchain platform. This concept was initially introduced by the Eigen Layer project, which maximizes the use of Liquid Staking liquidity and paves the way for the development of numerous other applications.

What then is ReStaking? What is this segment’s potential? Together, we will discover additional information in the following sections!

What is ReStaking?

ReStaking is the act of bringing Liquid Staking Token assets to Stake into Validators in other networks and blockchains to earn more profit while still helping to bring the new network to improve security and good decentralization.

Restaking can also be understood as using a portion or all of the rewards received from Staking to continue depositing into that Node in order to increase future profits. However, the primary focus of this article is on the concept of staking LSD tokens on other networks.

With ReStaking, investors earn twice as much profit, once from the original network and once from the ReStaking network. Although ReStaking enables stakers to earn greater profits, it comes with the risk of Smart Contracts, and Validator stakes possess fraudulent behavior.

In addition to accepting the original asset, the ReStaking network also accepts other assets such as LSD tokens, LP tokens, etc., which increases the network’s security. And unlocks the infinite liquidity source of the DeFi market while still generating actual revenue for the protocol and its users.

The revenue of both the ReStaking network and the standard network is derived from the rental of security, validators, and fees from the dApps, protocols, and layers created on top. Staking participants on the network will receive a portion of the network’s revenue and may also receive an inflation reward from the network’s native token.

How ReStaking Works

In the “What is ReStaking?” section, you will also learn how the ReStaking network is similar to other networks, except that it accepts more assets with low volatility, low risk, and increased security. When the network’s Stake value is high, hackers have to acquire a majority stake, which requires many assets. In addition, ReStaking assists holders in increasing their profits.

Each ReStaking project will have a distinct objective and operating mechanism, but there is little difference between them.

Pros and Cons of ReStaking

Pros

• Liquidity of LSD and LP Tokens Unlocked: Staking LSD or LP Tokens into Validators increases the Stake of the originating asset on the native network and provides more options for liquid assets in the DeFi sector.
• Profit Enhancement: By having the asset approved on two networks, Stakers can earn twice as much. In addition, after staking assets in the second network, investors continue to receive representative assets that can be mortgaged to Mint to create Stablecoins and brought to the DeFi market to generate profits.
• Increased security for networks utilizing reStaking: As more assets are staked, the network’s value increases, making it more resistant to assaults and a trusted location for other decentralized applications, protocols, and platforms.
• Reduce dumping: ReStaking has made the original Token more applicable, therefore avoiding dumping, which results in a significant loss of value for the project and its investors.
• Increase the security of the native network: by creating an incentive for holders of the original asset to participate in staking. Increase the network’s security and decentralization.

Cons

• Risk of property loss: if Node engages in inappropriate behavior, your assets run the risk of being appropriated or fined, resulting in the partial or total loss of your assets.
• Smart Contract Risk: If the network is hacked, you risk losing all of your assets, but in theory, the networks of projects deploying ReStaking are extremely difficult to attack.
• Asset Bubble: The multiplication of an asset’s value through new Wrap Tokens or Tokens inflates the market, which no longer reflects its true value. In addition to the platforms, the continued use of assets representing the value locked in the network’s Validators can be mortgaged to Mint Stablecoins, multiplying the risk and rendering the original assets extremely liquidation-vulnerable.
• Too many Tokens on the market: When there are too many Tokens on the market, DeFi newcomers are easily confused and vulnerable to fraud. Especially low-quality projects that mint a large quantity of junk tokens will flood the Crypto market.

Compare ReStaking with Liquid Staking

Outstanding Projects in the ReStaking Sector

Eigen Layer

Eigen Layer Overview

Eigen Layer was developed by a reputable and experienced team in the Crypto market. The project received up to $64.5M in funding from notable backers, including Blockchain Capital, Coinbase Ventures, Polychain Capital, and Electric Capital.

Eigen Layer is the first initiative to develop and introduce the ReStaking model to the community. The project utilizes LSD ETH and LP ETH to Stake in Validators. Ethereum network nodes continue to participate in the Ethereum network validator.

The primary business model of Eigen Layer is security leasing and validation. Customers may be dApps, Layer 2 protocols, or Bridge protocols. Depending on their requirements, they may employ high- or low-security authenticators. Multiple consumers can be authenticated through a single validator.

The protocol that employs the network generates revenue for Eigen Layer. A significant portion of this asset will be awarded to stakers. Users will not obtain a second token when staking assets on the Eigen Layer network. In addition, users must select reputable validators to ensure the safety of assets. If the validator misbehaves, the network administers a penalty consisting of a partial or complete asset seizure. Consequently, those who authorized the validator will also lose their assets.

Advantages and disadvantages of Eigen Layer

Advantages

• As the foundation for numerous other dApps, protocols, Layer 2, Layer 3, and clients.
• With the structure of attaching Validators to a single layer, the network’s value is multiplied many times over. By penalizing validators for poor behavior, the risk of being hacked is minimized.
• Nodes on Ethereum can earn additional income by participating in the Eigen Layer network. Additionally, a single validator is capable of validating multiple clients.
• Maximize profits for holders of LSD ETH and LP ETH assets and their applicability.
• Due to the increased security of the Ethereum network and the high profits, staking ETH attracts a lot of people.

Disadvantages

• Smart Contract risk, when the network is hacked, you risk losing all of your assets, but in theory, networks of projects utilizing ReStaking are extremely difficult to attack.
• Possible penalty when the node has inappropriate behavior, your assets run the risk of being confiscated or fined, resulting in the permanent loss of a portion or all of them.
• When a Fork occurs or a problem arises, it may divide the Ethereum community. Eigen Layer reuses ETH assets and validators on Ethereum, as Vitalik recently stated.
• Eigen Layer must develop an ecosystem and customer base of sufficient size. And if the incentive is issued with the project’s token, or if there is no incentive, the profit is no longer appealing to those who choose to stake.

Tenet

Overview of Tenet

Tenet is Blockchain Layer 1 of the Cosmos ecosystem, and it was created with the Cosmos SDK toolkit. The project was developed by the same individuals who developed the largest Liquid Staking ANKR project in the BNB Chain ecosystem and the Cosmos ecosystem.

Tenet and other blockchain platforms employ the Proof of Stake consensus mechanism, integrating the project’s governance Stake Token into the Validators in order to secure the network. Tenet is more advanced than networks like Ethereum, BNB Chain, Cosmos, Cardano, Polygon, Avalanche, and Polkadot that accept LSD Token assets.

Investors who participate in the staking of assets are accepted into Tenet and issued a tLSDToken token. This asset is accepted as collateral for Mint Stablecoin LSDC to continue to profit from the DeFi market.

Tenet’s business model involves charging the network and then compensating Validators. In addition, the network offers TENET, a governance token, as a reward for each generated block. Rewards will be proportional to stakes. TENET will always have a weight of 1, while the DAO will decide what other assets’ weights should be and they will all be less than 1.

When borrowing LSDC, borrowers only pay a one-time fee calculated on a percentage of total assets ranging from 0.5% to 5%. Or convert LSDC on TENET; users only bear a one-time swap fee of 0.5% to 5%. All these fees will depend on the conversion activity on the network; if the activity is low, the fee is cheap, and vice versa, to ensure the value of LSDC keeps the peg at 1 USD.

Staking TENET receives veTENET, can participate in project governance, share revenue, and receive extra rewards.

Tenet’s creation of a revenue-generating ecosystem large enough to attract investors is still the most essential factor. If network activity is slow, without users using TENET tokens as a reward for each newly generated block, the network will not develop.

Advantages and disadvantages

Advantages

• Accept multiple native tokens from other blockchains.
• After Stake receives the tLSDToken Token as collateral, Mint Stablecoin LSDC is able to participate in the DeFi market and generate greater profits.
• Interest-free LSDC loan, with a 0.5% to 5% Mint fee based on network activity.
• When conversion activity is high, the fee is also high, and vice versa. This mechanism helps to maintain the LSDC price.
• The veToken model with the TENET governance token is excellent when veTENET holders can both participate in the index and partake in the revenue. Voting activity for accepted assets on the network in order to receive rewards, preventing Token TENET dumping.

Disadvantages

• Smart Contract risk and risk of original asset liquidation when borrowing Stablecoin LSDC.
• Inflation TENET Tokens are awarded for every newly created Block.

Projections About ReStaking

Currently, the DeFi industry’s largest market is Staking, with a total value of roughly $20 billion (TVL). Especially now that numerous Blockchain platforms are undergoing development and the size of the crypto market is progressively expanding. As a result, the ReStaking market will have numerous growth opportunities.

As Staking and ReStaking contribute to the expansion of the DeFi market, the underlying Blockchains become more secure, and investors earn greater passive income. In addition, the development of these two markets will pave the way for the growth of other markets, such as AMM, Lending, and Farming.

With the current market, there are numerous opportunities for ReStaking to grow and become an indispensable segment of DeFi. In addition to increased profits, ReStaking also increases the participants’ exposure to risk.

Conclusion

By the end of 2022, roughly half a year after ReStaking’s inception, this market will be expanding rapidly and becoming a Trend. ReStaking is not only a swiftly fading fad but also one of the most significant and promising areas in DeFi.

Because ReStaking not only helps users earn profits but also assists platforms in enhancing their security. Especially by assisting the growth of other sectors of the industry, and driving market expansion.

However, this comes with risks such as asset loss, Smart Contracts, property value inflation, and a bubble crash. Therefore, when participating in this market, we must exercise caution and tolerate the risk of capital loss.

We hope the article gives you a lot of useful information and knowledge about restaking!