EigenLayer and restaking: Restaking Liquid Staked ETH (LsETH)

EigenLayer announced it will be adding restaking support for LsETH. Here’s the 101 on EigenLayer, restaking LsETH, potential risks, and where to go to learn more.

EigenLayer and restaking: Restaking Liquid Staked ETH (LsETH)

  • EigenLayer will be adding restaking support for Liquid Collective starting on February 5th. View their support announcement here.
  • LsETH holders who participate have the potential to receive additional protocol fees and rewards from the EigenLayer protocol, while simultaneously receiving ETH network rewards by holding LsETH.
  • The window for restaking LsETH on EigenLayer will be open from February 5th - February 9th, 2024.



EigenLayer: Developing ETH staking across multiple protocols at once

Launched in June of 2023, EigenLayer introduces a new technological innovation to the Ethereum ecosystem: restaking, or the ability to stake ETH across multiple protocols at once. Restaking on EigenLayer will enable liquid staking tokens and traditionally staked ETH to simultaneously be used as cryptoeconomic security for protocols other than Ethereum, opting-in to additional slashing agreements and receiving additional protocol fees and rewards from the EigenLayer protocol in exchange.

EigenLayer’s development is currently in Stage 1 on mainnet. During this stage Ethereum stakers can deposit supported liquid staking tokens (LSTs) within limited participation windows, and begin accumulating Restaked Points in exchange. Restaked Points are a measure of a participant’s contribution to the shared security of the EigenLayer ecosystem and equal to the time-integrated amount staked. A recent change made by EigneLayer also identifies that the restaked points available for restaking any one LST will capped at 33%, to encourage restaking diversification across supported LSTs.



Restaking Liquid Staked ETH (LsETH) on EigenLayer

Liquid Collective is designed to be a trusted and secure liquid staking solution: built and operated by a broad and dispersed ecosystem of proven, known providers, for top-tier security, transparency, and reliability with no single point of failure. Less than a year after launch, Liquid Collective has over $78M+ in TVL with 38% QoQ growth in Q4 '23.

LsETH, Liquid Collective’s LST, is a token that represents ownership of staked ETH along with accrued ETH network and MEV rewards. LsETH features automatic reward restaking (compounding), enterprise-grade security, Node Operator performance agreements, and built-in slashing coverage including Nexus Mutual cover.


For LsETH holders:

  • LsETH holders have the potential to receive additional protocol fees and rewards from the EigenLayer protocol, while simultaneously receiving ETH network rewards simply by restaking and holding LsETH.
  • As a LST designed with a compliance-focused ecosystem, LsETH may unlock access for developers to a broad and dispersed community of institutional stakers, enabling compliance-focused protocols built on top of EigenLayer to be powered by restaked LsETH.
  • While EigenLayer’s restaking capabilities and rewards are not yet fully live, LST holders who deposit to EigenLayer now can begin accumulating Restaked Points from the EignLayer protocol.
  • Restaking is a cutting-edge technology with lots of potential for growth in its ecosystem of participants; EigenLayer crossed $1.4 billion in TVL just 6 months after its mainnet launch last year.


For the EigenLayer ecosystem:

  • Liquid Collective is a decentralized, onchain protocol built to expand global Ethereum participation and adoption by meeting the compliance and security requirements of institutions and enterprises.
  • Supporting LsETH for restaking on EigenLayer will offer developers and the entire EigenLayer ecosystem access to a growing and diversified segment of restakers and financial services integrations, including institutional stakers, funds, and treasuries, as well as businesses, including exchanges, banks and fintechs, who will only be able to participate in restaking through an enterprise-grade, compliance-focused LST.
  • LsETH already has direct integration with some of the world’s largest platforms and support from leading custodians (including Coinbase, Bitcoin Suisse, Figment, Anchorage, BitGo, Fireblocks, and more).



Potential risks of restaking LsETH on EigenLayer

It’s important to note that EigenLayer is an unaffiliated third-party integration protocol with its own risks of participation, and subject to its own terms of service. You can learn more about EigenLayer’s security measures and terms of service in their documentation.

As with any DeFi protocol, participation in EigenLayer comes with the risks associated with EigenLayer’s smart contracts themselves; one’s own due diligence should always be conducted before making any independent DeFi participation decision. Innovations in DeFi, especially novel ones like EigenLayer, also come with unknown and unforeseen risks. For example, critics say that EigenLayer’s staking could carry overleveraging risks and/or rehypothecation risks, with complex interdependence coming from the use of liquid staking tokens, which themselves represent ownership of staked ETH, to secure other networks—along with the potential for users to use representative liquid restaking tokens in other areas of DeFi as well.

To many of these critiques the EigenLayer community refutes that EigenLayer’s approach focuses on using staked assets for network security rather than speculative financial activities, and that liquid restaking tokens themselves will not be able to be restaked, thus reducing systemic risks. You can read about some of the common risk critiques of EigenLayer, and EigenLayer’s rebuttals, in this thread on X and its linked resources.



How to get involved

  • The window to restake LsETH on EigenLayer will only be open from Feb 5th at 12:00 PM PT - Feb 9th at 12:00 PM PT.
  • Restaking LSTs on EigenLayer involves connecting a web3 wallet to the EigenLayer app. You can review the steps to restake LSTs on EigenLayer in their documentation here.



Resources


Liquid Staked ETH (LsETH):


EigenLayer:




Please Note

Liquid staking via the Liquid Collective protocol and using LsETH involves significant risks. You should not enter into any transactions or otherwise engage with the protocol, LsETH or any third-party software unless you fully understand such risks and have independently determined that such transactions are appropriate for you. Any discussion of the risks contained herein should not be considered to be a disclosure of all risks or a complete discussion of the risks that are mentioned. The material contained herein is not and should not be construed as financial, legal, regulatory, tax, or accounting advice. LsETH users may be subject to slashing losses. If slashing losses were to occur, they would be socialized pro rata for all LsETH user's starting with earned but unredeemed network rewards. EigenLayer offers third-party products that are not offered by or in partnership or affiliation with Liquid Collective. Any discussions of EigenLayer products contained herein are not and should not be considered to be an endorsement of EigenLayer or its products and services. Restaking involves significant risks. You should not enter into any transactions or otherwise engage with EigenLayer products and services unless you fully understand such risks and have independently determined that such engagement is appropriate for you. EigenLayer is a software protocol developed by third parties that are unaffiliated with Liquid Collective. You acknowledge and agree that we are not party to any transactions conducted while using EigenLayer. We make no representations or warranties regarding EigenLayer. We are in no way liable for any acts or omissions by you in connection with your use of EigenLayer or as a result of your restaking of LsETH. Products and services offered by EigenLayer and other third parties are subject to separate terms and conditions. Please visit https://www.eigenlayer.xyz/ for more information.

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