Re-staking and Liquidity Re-staking: An In-depth Exploration of the Emerging ETH Yield Ecosystem

Introduction

Re-staking and liquidity re-staking have recently attracted widespread attention, especially among investors anticipating the benefits brought by the ETH ETF. Data from DeFi Llama shows that the total locked value of these two categories has grown rapidly, ranking fifth and sixth among all DeFi categories. Before delving into the additional benefits of re-staking and liquidity re-staking, let's first take a look at their basic principles.

Overview of staking and liquidity staking

Ethereum staking involves putting up ETH to secure the network and earn additional ETH rewards. While staking ETH can generate returns, there is also the risk of being penalized, as well as the risk of insufficient liquidity due to the unbonding period.

To become a validator, an individual stake requires a large investment of 32 ETH, which is too high a threshold for many people. Therefore, some platforms offer pooled staking services that allow multiple users to combine their ETH to meet the minimum staking requirements.

Although these services allow staking any amount of ETH, the staked ETH remains in a "locked" state until unstaking, which takes a few days (. Liquidity staking has emerged as an innovative solution, minting liquidity tokens to represent the user's staked ETH, which can be used to participate in DeFi activities to increase returns.

![Overview of Liquidity Re-staking])https://img-cdn.gateio.im/webp-social/moments-0f998bc34a85f32376838693afb870bb.webp(

) The Rise of Re-staking

Re-staking is an emerging concept that involves using staked ETH to secure certain modules that cannot be deployed or verified on Ethereum, such as sidechains, oracle networks, etc. These modules typically require active verification services ###AVS(, protected by their own tokens, but face challenges such as the need to establish independent security networks. Re-staking addresses this issue by introducing a large set of validators from Ethereum, increasing the cost of attacks.

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) Comparison of Re-staking Agreements

Currently, there are three main re-staking protocols in the market: EigenLayer, Karak, and Symbiotic. They have some differences in supporting assets, security models, execution layers, and so on.

• EigenLayer only supports ETH and its derivatives, with higher security.
• Karak and Symbiotic support a wider range of assets and offer more flexible security.
• The core contracts of EigenLayer and Karak are upgradeable, while the core contract of Symbiotic is basically immutable.

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) Overview of Liquidity Staking

The liquidity re-staking protocol provides users with liquidity wrapped tokens, allowing deposits of different assets. The main categories are as follows:

• LRT based on baskets: such as Renzo and Kelp, aggregating multiple underlying assets.
• Native LRT: Such as EtherFi and Puffer, only accept native ETH.
• Independent LRT: Such as Eigenpie and Mellow, specific LRTs are issued for specific deposits.

These protocols also differ in aspects such as DeFi integration and Layer 2 support.

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) The growth of re-staking

Re-staking deposits have surged since the end of 2023, with the liquidity re-staking ratio exceeding 70%. However, recent deposits in Eigenlayer have declined, possibly related to the upcoming token distribution. It is expected that funds may flow to other protocols such as Karak and Symbiotic.

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) Conclusion

Currently, about 13.4 million ETH have been staked through liquidity staking platforms, accounting for 40.5% of all staked ETH. The ratio of re-staking to liquidity staking is approximately 35.6%. With the introduction of new services and rewards, re-staking platforms are expected to attract more funds, becoming an increasingly important part of the ETH ecosystem.

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