Staking Derivatives (e.g., Lido's stETH, Rocket Pool's rETH) excel at capital efficiency and liquidity because they unlock the value of staked assets. This allows operators to simultaneously secure the base layer (like Ethereum) and an AVS without additional capital lock-up. For example, the ~$30B Total Value Locked (TVL) in liquid staking tokens provides a massive, composable collateral base for AVSs like EigenLayer, enabling rapid bootstrap of cryptoeconomic security.
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Comparisons
Staking Derivatives as Collateral vs Native Assets for AVS Backing
A technical and economic comparison for protocol architects and CTOs. Analyzes the trade-offs between accepting liquid staking tokens (LSTs) and requiring native assets to secure Actively Validated Services (AVSs).
Chainscore © 2026
introduction
THE ANALYSIS
Introduction: The AVS Security Dilemma
The foundational choice between staking derivatives and native assets for securing an Actively Validated Service (AVS) defines its economic security and operational resilience.
Native Assets (e.g., direct ETH, AVAX, SOL staking) take a different approach by providing unintermediated security and simpler slashing. This results in a direct, non-custodial bond between the operator and the AVS, eliminating derivative-specific risks like de-pegging or protocol failure. The trade-off is significantly lower capital efficiency, as the same asset cannot be restaked elsewhere, requiring a larger dedicated stake to achieve comparable security guarantees.
The key trade-off: If your AVS priority is maximizing security budget and attracting operators from established pools, staking derivatives are superior. If you prioritize minimizing systemic risk, ensuring slashing finality, and building a self-contained security model, native assets are the definitive choice. The decision hinges on whether you value leveraged, composable security or sovereign, simplified enforcement.
tldr-summary
Staking Derivatives vs. Native Assets
TL;DR: Key Differentiators at a Glance
A direct comparison of the two primary collateral types for securing Actively Validated Services (AVS).
01
Staking Derivatives: Capital Efficiency
Simultaneous yield generation: Assets like stETH or cbETH accrue staking rewards while deployed as AVS collateral. This matters for protocols like EigenLayer where operators can maximize returns on a single capital base, avoiding the opportunity cost of idle assets.
02
Staking Derivatives: Composability & Liquidity
Deep, established secondary markets: Major LSTs like Lido's stETH (>$30B TVL) offer instant liquidity on DEXs like Uniswap and Curve. This matters for AVS operators who may need to manage risk or exit positions without waiting for an unstaking period, enhancing operational flexibility.
03
Native Assets: Security & Simplicity
Direct slashing enforcement: Native ETH or other PoS tokens are subject to the underlying consensus layer's slashing conditions. This matters for AVS designers (e.g., AltLayer, Espresso) who require the strongest, most unambiguous economic security with no intermediary trust assumptions.
04
Native Assets: Protocol Alignment & Sovereignty
No third-party dependencies: Using native ETH avoids reliance on the governance or technical risks of derivative issuers like Lido DAO or Coinbase. This matters for AVSs prioritizing censorship resistance and minimizing systemic risk from external protocol failures.
HEAD-TO-HEAD COMPARISON
Staking Derivatives vs Native Assets for AVS Backing
Direct comparison of key metrics for securing Actively Validated Services (AVSs) on EigenLayer.
| Metric / Feature | Staking Derivatives (e.g., stETH, cbETH) | Native Assets (e.g., ETH, stETH underlying) |
|---|---|---|
Capital Efficiency |
| 100% (single-use) |
Liquidity Provision | High (via DeFi pools) | Low (locked in staking contract) |
Slashing Risk Surface | Higher (smart contract + consensus layer) | Lower (consensus layer only) |
Protocol Integration | Easier (ERC-20 standard) | Complex (requires custom bridging) |
Time to Liquid Exit | ~1-7 days (unstaking period) |
|
Yield Source | Dual (Staking + AVS rewards) | Single (AVS rewards only) |
Primary Use Case | Maximizing yield & DeFi composability | Simplified security & risk isolation |
pros-cons-a
Staking Derivatives vs. Native Assets for AVS Backing
Pros and Cons: Staking Derivatives (e.g., LSTs)
Key strengths and trade-offs for securing Actively Validated Services (AVS) on EigenLayer and similar systems.
01
Staking Derivatives: Capital Efficiency
Specific advantage: Enables simultaneous yield from base-layer staking (e.g., 3-4% on Ethereum) and AVS rewards. This matters for maximizing ROI on a single capital deposit. Protocols like Lido's stETH ($35B+ TVL) and Rocket Pool's rETH provide deep liquidity for this strategy.
02
Staking Derivatives: Liquidity & Composability
Specific advantage: LSTs are highly liquid and can be used across DeFi (e.g., as collateral on Aave, MakerDAO). This matters for operational flexibility, allowing operators to manage slashing risk without locking native assets. The LST market is a mature infrastructure layer.
03
Staking Derivatives: Smart Contract Risk
Specific disadvantage: Introduces dependency on the LST protocol's security (e.g., Lido, Rocket Pool). This matters for risk assessment, as a bug or governance attack on the derivative contract could impact the AVS's backing, adding a layer of systemic risk beyond the base chain.
04
Staking Derivatives: Yield Dilution & Depeg Risk
Specific disadvantage: LST value can deviate from the native asset (e.g., stETH depeg event in 2022). This matters for collateral stability, as a depeg could trigger undercollateralization for the AVS. Rewards are also shared with the LST protocol.
05
Native Assets: Simplicity & Direct Security
Specific advantage: Eliminates intermediary risk by staking the base asset (e.g., native ETH) directly. This matters for security purists and protocols prioritizing the strongest cryptographic guarantees. The slashing penalty is applied directly and predictably.
06
Native Assets: Protocol Alignment
Specific advantage: Strengthens the economic security of the underlying chain (e.g., Ethereum). This matters for ecosystem-aligned AVSs like EigenDA, where the health of the base layer is paramount. It avoids fragmenting stake across derivative protocols.
07
Native Assets: Capital Opportunity Cost
Specific disadvantage: Capital is locked and cannot be redeployed for base-layer staking yield. This matters for operators seeking optimal returns, as they forgo ~3-4% annual staking rewards on Ethereum, making the AVS reward hurdle rate higher.
08
Native Assets: Illiquidity During Commitment
Specific disadvantage: Assets are non-transferable and illiquid for the duration of the AVS commitment. This matters for operational agility, preventing quick reallocation of capital in response to market conditions or new opportunities.
pros-cons-b
Staking Derivatives vs Native Assets for AVS Backing
Pros and Cons: Native Assets (e.g., ETH)
Key strengths and trade-offs at a glance for securing Actively Validated Services (AVS).
01
Native Assets: Pros
Direct Security & Simplicity: Backing an AVS with native ETH provides a direct, non-custodial slashing mechanism. This eliminates dependency on derivative protocols and their governance, reducing systemic risk. This matters for high-value, security-critical AVSs like EigenLayer where slashing must be absolute and unambiguous.
02
Native Assets: Cons
Capital Inefficiency & Opportunity Cost: Locking native ETH (e.g., 32 ETH for solo staking) ties up capital that cannot be used elsewhere. This creates a significant opportunity cost, as the asset cannot be simultaneously deployed in DeFi protocols like Aave or Compound for yield. This matters for operators seeking to maximize capital efficiency.
03
Staking Derivatives: Pros
Capital Efficiency & Composability: Using liquid staking tokens (LSTs) like Lido's stETH or Rocket Pool's rETH unlocks the value of staked assets. These derivatives can be used as collateral while still earning staking rewards, enabling participation in DeFi (e.g., lending on Aave) and AVS backing simultaneously. This matters for operators with constrained capital or yield-optimization strategies.
04
Staking Derivatives: Cons
Protocol & Liquidity Risk: AVS security becomes dependent on the health of the derivative protocol (e.g., Lido's oracle security, Rocket Pool's minipool design). A depeg event, governance attack, or liquidity crunch in the LST (like the stETH/ETH depeg in 2022) could cascade to the AVS. This matters for risk-averse protocols requiring maximum security guarantees.
CHOOSE YOUR PRIORITY
Decision Framework: When to Choose Which Model
Staking Derivatives for Capital Efficiency
Verdict: The clear winner for maximizing capital utility. Strengths: Enables recursive staking (e.g., stETH -> eETH -> AVS). Protocols like EigenLayer and Ether.fi unlock deep liquidity pools. Drastically improves Return on Capital Employed (ROCE) by allowing the same capital to secure multiple networks and generate multiple yield streams simultaneously. Trade-offs: Introduces smart contract risk from derivative issuers (e.g., Lido, Rocket Pool) and liquidity risk if the derivative de-pegs. Requires trust in the derivative's underlying collateralization and oracle security.
Native Assets for Capital Efficiency
Verdict: Inefficient for this goal. Weaknesses: Capital is siloed and idle. A native ETH stake on Ethereum cannot be simultaneously used to back an AVS on EigenLayer or secure a Cosmos appchain. This leads to lower aggregate yields and higher opportunity cost for stakers and protocols seeking bootstrap liquidity.
COLLATERAL ANALYSIS
Technical Deep Dive: Risk Vectors and Slashing Mechanics
Choosing between staking derivatives (like LSTs) and native assets (like ETH) as collateral for securing Actively Validated Services (AVSs) involves fundamental trade-offs in security, liquidity, and systemic risk. This analysis breaks down the key risk vectors and slashing mechanics for protocol architects and risk managers.
Native assets provide superior security for AVS backing. The slashing risk is direct and unambiguous, as the validator's own stake is forfeited. Staking derivatives like Lido's stETH or Rocket Pool's rETH introduce a delegation layer, creating a slashing risk mismatch where the derivative holder may be penalized for a validator's fault they do not control. This adds a critical third-party dependency on the security of the underlying liquid staking protocol (LSP).
verdict
THE ANALYSIS
Final Verdict and Strategic Recommendation
A data-driven breakdown of the strategic trade-offs between using staking derivatives or native assets to secure your AVS.
Staking Derivatives (e.g., Lido's stETH, Rocket Pool's rETH) excel at providing capital efficiency and liquidity because they unlock the value of staked assets. For example, an AVS accepting stETH as collateral allows node operators to simultaneously secure Ethereum (earning ~3-4% staking rewards) and your AVS, avoiding the opportunity cost of locking native ETH. This creates a more attractive yield profile, as seen with EigenLayer's rapid growth to over $15B in TVL, largely driven by liquid staking tokens (LSTs).
Native Assets (e.g., ETH, AVAX, SOL) take a different approach by prioritizing security isolation and simplicity. This results in a trade-off: while capital is locked and illiquid, the security of your AVS is directly and solely backed by the chain's base economic stake. There is no dependency on the solvency or slashing mechanisms of a derivative protocol, reducing systemic risk vectors. This model is foundational for networks like Cosmos, where validators use native ATOM to secure individual app-chains.
The key trade-off is between composable yield and sovereign security. If your priority is maximizing node operator participation and bootstrapping TVL quickly in a competitive market, choose Staking Derivatives. Their liquidity and yield-stacking appeal are powerful growth levers. If you prioritize minimizing protocol dependencies and ensuring the highest degree of security isolation for a mission-critical AVS, choose Native Assets. The direct stake provides a cleaner risk model, albeit at the cost of capital efficiency.
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