1. What is the reason for the resurgence of EigenLayer?
With the approval of Bitcoin spot ETF, positive news for Ethereum emerges: the expectation of the approval of Ethereum spot EFT and the upgrade of Cancun have given the long-sluggish Ethereum new vitality.
The amount of Ethereum pledged continues to increase, and the need for re-staking is becoming increasingly prominent. EigenLayer allows users to re-stake ETH, lsdETH (liquidity pledged ETH) and LP Token on other side chains, oracles, middleware, etc., as nodes and receive verification rewards. In this way, third-party projects can enjoy the security of the ETH mainnet, and ETH pledgers can also get more benefits, achieving a win-win situation.
Data source: https://dune.com/hildobby/eth2-staking
The re-staking trend has become the focus of the Ethereum ecosystem after EigenLayer increased the LST pledge limit. In just one month, EigenLayer absorbed more than 500,000 Ethereums, with a TVL of over 1.6 billion US dollars, becoming the 12th top protocol on the Ethereum chain.
Data source: https://defillama.com/protocol/EigenLayer?denomination=ETH
Recently, EigenLayer announced that it will provide re-staking services for Cosmos child chains, which is of great significance to both Ethereum and Cosmos. EigenLayer provides re-staking services for Cosmos child chains, which enables Cosmos to obtain the security of Ethereum and opens up a new world of incremental returns for Ethereum stakers.
The picture shows EigenLayer Universe, source: https://x.com/eli5_defi/status/1746550169183846503?s=20
The first AVS — EigenDA, which uses EigenLayer verification services, is also about to be launched. The narrative of its DA service has also become a hot topic in the market as Celestia’s token TIA surged.
The picture shows EigenDA’s partners. Source: https://x.com/eigen_da/status/1731674794347860449?s=20
For more information about EigenLayer, please refer to this issue: "Research Report | EigenLayer: Strengthening Ethereum Security and Inspiring a New Era of Staking"
2. What are the potential projects in the re-pledge track?
EigenLayer is not the only project in the restaking space. There are also many opportunities for derivative projects under the Restaking narrative. Here are four types of Restaking:
LSD Restaking: Deposit the LST (stETH, cbETH, etc.) you get after depositing into the LSD protocol into EigenLayer and then stake it.
Liquid-LSD Restaking: Through LRD protocols such as Kelp DAO, LST is delegated to the LRD protocol, which deposits it into EigenLayer and then stakes it, while users receive the collateral certificate token Liquid Restaking Token (LRT).
Native Restaking: Native liquid staking means that the validator uses the EigenPod smart contract to redirect the validator withdrawal certificate to EigenLayer.
Liquid Native Restaking: Native liquid restaking refers to projects such as etherf.fi or Puffer Finance that provide small ETH node services, providing the ETH in the node to EigenLayer for restaking.
Image from: Delphi Digital, source: https://x.com/Delphi_Digital/status/1740463277099151482?s=20
Below is a list of five un-coined re-staking projects for your reference. These five projects can obtain EigenLayer points while obtaining points for their respective projects.
Kelp DAO
Kelp DAO is a restaking project developed by Stader Lab, a multi-chain LSD project. It belongs to the Liquid-LSD restaking type mentioned above. It currently accepts deposits of two LST tokens, Lido's stETH and Stader's ETHx. However, since the EigenLayer LST quota is full, deposits are currently suspended.
Although Stader Lab has already issued a token, Kelp DAO has already launched a points system. As its sub-project, Kelp DAO should still launch its own token. And we can expect the linkage effect between SD (Stader Lab's token) and Kelp DAO.
Swell
Swell is a long-established LSD protocol. Not long ago, it announced that it would enter the field of Liquid Restaking, which is a product of the Liquid Native Restaking type. After adding the re-staking function, users can deposit ETH and exchange it for rswETH, so Swell will no longer be subject to the EigenLayer LST quota limit.
Since Swell has not yet issued a token and has no airdrop expectations, its LST token swETH has attracted the attention of airdrop hunters and is currently the second most pledged asset in EigenLayer. Previously, LSD could earn points, and participating in re-staking can also earn points.
ether.fi
ether.fi is a Liquid Native Restaking product. It has received a $5.3 million seed round of financing from Arthur Hayes, the founder of BitMEX. Unlike Lido, ether.fi uses a decentralized, non-custodial approach to staking ETH, and announced that it will provide re-staking services. Since it is native ETH re-staking, it is not affected by the EigenLayer LST limit and can still be deposited. Its collateral certificate token eETH (wrapped token weETH) is also one of the few liquid LRT collateral certificate tokens.
Renzo
Renzo is also a Liquid Native Restaking product and is not subject to the EigenLayer LST deposit limit. Deposits are still accepted. However, it should be noted that ETH deposited in Renzo is not currently open for redemption, and the collateral certificate ezETH cannot be transferred, so it is locked in the short term.
On January 16, Renzo announced the completion of a $3 million seed round of financing, which ensures security. Compared with similar protocols, the locked amount is smaller, and it seems to be more cost-effective at present.
It should be noted that due to the form of earning points for attracting new users and the undisclosed team background, coupled with the fact that redemption is not open, it has been questioned and distrusted by some users.
Puffer Finance
Puffer Finance is an anti-forfeiture liquidity staking protocol, similar to ether.fi. It is also a Liquid Native Restaking product, and is not yet open for staking. Puffer Finance received a seed round of financing led by Jump Crypto, with a total of US$6.15 million in financing, and its valuation was not disclosed.
EigenLayer imposes a 32 ETH threshold requirement on general Ethereum re-staking nodes, which must be met to run AVS.
Puffer’s re-staking feature is to lower this threshold to below 2 ETH in an attempt to attract small nodes.
3. Taking a different approach, how to use Pendle to participate in re-staking?
Pendle is a decentralized interest rate trading market that provides transactions for PT (Principal Token) and YT (Yield Token). We can use YT transactions in Pendle to accelerate the acquisition of ether.fi and EigenLayer points.
Enter Pendle's YT-eETH trading, and then buy YT-eETH. Holding YT-eETH, you can get staking income, double ether.fi points, EigenLayer points, and Pendle's trading rewards. Currently, 1 eETH can buy about 11 YT-eETH, which is equivalent to 11 times leverage.
It looks like the returns are very attractive, right? But after understanding the price mechanism of YT, you will know that the price of YT is gradually reduced as the expiration date approaches. This is essentially exchanging time for staking returns and points.
Of course, you can also obtain the above rewards in a lower-risk form by forming LPs, but this also has disadvantages, such as being susceptible to impermanent losses and having relatively low efficiency in obtaining points.
Tip: If you are not familiar with Pendle, please learn relevant knowledge before operating it. Due to space constraints, this article cannot provide too detailed an explanation.
4. Risks that cannot be ignored in re-pledge
Restaking, as an emerging concept in the crypto space, is emerging, providing more opportunities for stakers to join different networks and increase their returns. EigenLayer calls itself the "Airbnb of decentralized trust", highlighting the appeal of this opportunity. However, restaking is not without risks, and it introduces a series of potential issues that deserve careful consideration.
1. Penalty risk: Increased risk of losing staked ETH due to malicious activity.
2. Centralization risk: If too many stakers move to EigenLayer or other protocols, it may pose a systemic risk to Ethereum.
3. Contractual risks: The smart contracts of each protocol may have risks.
4. Multi-level risk superposition: This is the key issue of re-pledge. It combines the existing pledge risk with additional risks to form multi-level risks.
V. Conclusion
The ETH/BTC exchange rate rebounded strongly after the Bitcoin spot ETF was approved. With the support of the Cancun upgrade and the Ethereum spot ETF, the Ethereum ecosystem will also rebound. The next main themes of the Ethereum ecosystem are the L2 sector, which is directly beneficial to the Cancun upgrade, and the re-staking ecosystem of EigenLayer.
Using the projects mentioned today to participate in re-staking is undoubtedly the most cost-effective option. As long as you participate in staking, you can kill two or three birds with one stone. It should be noted that the recent Altlayer airdrop rules mentioned that airdrops will be given to EigenLayer pledgers, but it is still unknown whether they can be identified as EigenLayer pledgers by staking in protocols such as Kelp DAO and Renzo.
Image source: https://blog.altlayer.io/altlayers-alt-token-launch-f49bf8ac2556
Of course, we must also realize that the continuous re-staking is essentially a speculative leverage created for liquidity. While bringing higher returns, it also amplifies risks. No matter which layer of the agreement has a contract problem, the user's assets will be damaged.
Glossary
Restaking: Restaking involves staking liquidity staked tokens, enhancing security while allowing stakers to earn rewards from the services provided by the middleware application.
AVS (Actively Validated Services): Active verification services, any system that requires its own distributed verification semantics for verification, such as side chains, data availability layers, new virtual machines, keeper networks, oracle networks, bridges, threshold encryption schemes, and trusted execution environments.
LSD (Liquid Staking Derivatives): Liquidity staking derivatives refer to the receipt tokens obtained after staking tokens, which is equivalent to the deposit certificate after depositing money in a bank.
LST (Liquid Staking Token): Liquidity staking token, representing the tokens staked on the POS (Proof of Stake) blockchain, such as Lido's stETH, Coinbase's cbETH, etc.
LRT (Liquid Restaking Token): Liquidity restaking token, pledge LST again to obtain LRT.
Related project website
EigenLayer：https://www.EigenLayer.xyz/
Kelp Dao：https://www.kelpdao.xyz/
Swell：https://app.swellnetwork.io/
ether.fi：https://www.ether.fi/
Renzo：https://app.renzoprotocol.com/restake
Puffer Finance：https://www.puffer.fi/
Pendle：https://www.pendle.finance/
References
From Swell to Babylon: A look at the most representative projects in the Restaking track
Liquidity Never Sleeps, Looking for Potential Opportunities in the Re-staking Token (LRT) Narrative
《Quick Recap: EigenLayer Universe and LRTfi Narrative
《EigenLayer Docs》
《Pendle Academy》
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