Staked assets are the new primitive. Idle ETH in a wallet is dead capital; stETH, rETH, and cbETH are programmable, yield-bearing collateral. This transforms the fundamental unit of value from a static token to a dynamic, cash-flow-generating asset.
liquid-staking-and-the-restaking-revolution
Blog
The Future of Collateral: Staked Assets as the New Base Layer
Proof-of-stake consensus transforms idle security capital into productive, composable yield. This analysis argues staked ETH is evolving from a passive asset into the fundamental collateral layer for the entire on-chain economy.
introduction
THE SHIFT
Introduction
The next generation of DeFi protocols will be built on a base layer of productive, staked assets, not idle tokens.
This shift redefines capital efficiency. Protocols like Aave and MakerDAO now treat staked assets as primary collateral, enabling higher loan-to-value ratios against a yield that offsets borrowing costs. The old model of overcollateralization with volatile assets is obsolete.
The base layer is now a yield curve. The competition between Lido, Rocket Pool, and EigenLayer is not just for market share, but to define the risk/return profile of the foundational collateral that secures the entire DeFi stack. The winning asset becomes the system's risk-free rate.
key-trends
THE NEW COLLATERAL STACK
Executive Summary
The $100B+ staked asset economy is shifting from a yield silo to a foundational, composable capital layer for DeFi and beyond.
01
The Problem: Idle Capital Silos
Staked ETH and other PoS assets are locked in single-use vaults, creating $80B+ in non-productive collateral. This capital inefficiency fragments liquidity and limits DeFi's leverage capacity.
- Opportunity Cost: Yield from staking vs. yield from lending/borrowing.
- Fragmented Security: Capital is siloed instead of backing a unified economic layer.
$80B+
Idle TVL
2-3x
Potential Multiplier
02
The Solution: Programmable Staked Assets
Liquid Staking Tokens (LSTs) and Restaking protocols like EigenLayer and Babylon transform staked assets into a base layer for cryptoeconomic security and capital efficiency.
- Composability: Use stETH as collateral on Aave, MakerDAO.
- Security-as-a-Service: Restaked ETH secures AVSs (Actively Validated Services).
30+
AVSs Secured
$15B+
Restaked TVL
03
The New Risk Stack: Slashing & Depeg
Composability introduces systemic risks: a slashing event on a restaked asset can cascade through DeFi protocols. This demands new risk management primitives.
- Oracle Dependencies: LST/RT price feeds become critical infrastructure.
- Insurance Markets: Protocols like EigenPie and Symbiotic emerge to underwrite slashing risk.
>50%
DeFi Exposure
New
Risk Markets
04
The Endgame: Universal Economic Security
Staked assets evolve into a unified cryptoeconomic security layer, decoupling security from individual chains. This enables secure, trust-minimized bridges, oracles, and co-processors.
- Cross-Chain Security: Projects like Omni Network use restaked ETH.
- Capital Superposition: A single asset can simultaneously secure multiple services.
10x
Security Scale
Unified
Base Layer
thesis-statement
THE FUTURE OF COLLATERAL
The Core Thesis: Security as a Serviceable Asset
Staked crypto assets are evolving from passive yield generators into the foundational, serviceable capital for securing the entire decentralized stack.
Staked assets are productive capital. The $100B+ in staked ETH and SOL is not idle; it is the security substrate for their respective ecosystems, enabling trustless bridging and light client verification for L2s and appchains.
Security becomes a rentable commodity. Protocols like EigenLayer and Babylon abstract this security into a service, allowing staked assets to be re-staked to secure new networks, AVSs, and oracles without new token issuance.
This commoditization flips the security model. Instead of every new chain bootstrapping its own validator set, they lease security from established pools, creating a more capital-efficient and stable base layer for DeFi and infrastructure.
Evidence: EigenLayer has over $20B in restaked ETH, demonstrating massive demand to transform latent security into an active, yield-generating service for projects like AltLayer and Lagrange.
market-context
THE COLLATERAL PIPELINE
The Current State: From LSTs to AVSs
Liquid Staking Tokens are evolving from passive yield assets into the primary collateral for a new generation of decentralized infrastructure.
LSTs are becoming money legos. Assets like Lido's stETH and Rocket Pool's rETH are no longer just yield-bearing tokens; they are the foundational collateral for restaking protocols like EigenLayer. This creates a capital efficiency flywheel where staked ETH secures both the consensus layer and new services.
AVSs consume staked capital. Actively Validated Services (AVSs)—from rollups like AltLayer to oracles—lease security from restaked ETH pools. This model inverts the security budget, allowing protocols to bootstrap trust without issuing a native token, shifting the economic burden to the staker.
The base asset is programmable yield. The end-state is a capital market for slashing risk. Stakers allocate to AVS bundles based on risk-adjusted returns, transforming staked ETH from a static deposit into a dynamic, composable financial primitive that underpins the entire modular stack.
THE FUTURE OF COLLATERAL
Collateral Efficiency: Staked Assets vs. Traditional DeFi
Compares the capital efficiency, risk profile, and composability of using staked assets (e.g., stETH, rETH) versus traditional DeFi collateral (e.g., USDC, ETH) in lending and money markets.
| Feature / Metric | Staked Asset Collateral (e.g., Lido stETH) | Traditional Liquid Collateral (e.g., USDC, ETH) | Yield-Bearing Vaults (e.g., Aave aTokens) |
|---|---|---|---|
Capital Efficiency (Loan-to-Value Ratio) | 85-90% | 75-82% | 70-80% |
Native Yield Accrual | |||
Oracle Attack Surface | High (Dual-Price: Asset + Staking Derivative) | Medium (Single-Price: Spot Asset) | Medium (Single-Price: Underlying + Accrued Yield) |
Protocol Integration Complexity | High (Requires slashing/withdrawal queue handling) | Low (Standard ERC-20) | Medium (Rebasing/balance-tracking logic) |
Composability Layer | Base Layer (EigenLayer, Babylon) | Application Layer (MakerDAO, Compound) | Intermediate Layer (Yearn, Convex) |
Liquidation Risk During Staking Slashing | High (Collateral value can drop >30% instantly) | Low (Governance-triggered, rare) | Low (Tied to underlying protocol risk) |
Typical Money Market APY for Suppliers | 3.2% (Staking Yield) + 1.5% (Lending Reward) | 0.0% + 2.8% (Lending Reward) | 4.5% (Underlying Yield) + 0.5% (Lending Reward) |
DeFi Lego Composability | Restaking (EigenLayer), LST LPing (Curve) | Standard Lending/Borrowing, Stablecoin Minting | Yield Aggregation, Strategy Vaults |
deep-dive
THE COLLATERAL
The Mechanics of Composable Yield
Staked assets are evolving from a passive security mechanism into the programmable base layer for a new financial system.
Staked assets are the new base layer. The $100B+ in staked ETH and SOL is no longer just securing networks; it is the foundational capital for a parallel financial system. This capital is now programmable collateral, enabling lending, borrowing, and derivatives without the inefficiency of unlocking.
Composability unlocks capital efficiency. A staked asset like stETH on Lido or mSOL on Marinade is a yield-bearing token. Protocols like Aave and Euler accept these tokens as collateral, letting users borrow against future yield while maintaining network security. This creates a recursive loop of capital utility.
The risk shifts from slashing to de-pegging. The primary failure mode is no longer validator slashing but the liquidation risk from the staked asset's price deviating from its underlying asset (e.g., stETH/ETH depeg). This makes oracle reliability and liquidity depth, as seen with Chainlink and Curve pools, the critical infrastructure.
Evidence: The Total Value Locked (TVL) in liquid staking derivatives (LSDs) exceeds $50B. Aave's Ethereum market holds over 3M stETH as collateral, demonstrating that restaking protocols like EigenLayer are a natural evolution, not a novel concept.
risk-analysis
THE FUTURE OF COLLATERAL
The Bear Case: Systemic Risks and Centralization Vectors
Staked assets are becoming the foundational collateral layer for DeFi, creating new systemic dependencies and single points of failure.
01
The Lido Monoculture
Liquid staking derivatives (LSDs) like stETH concentrate staking power. Lido's ~30% of all staked ETH creates a centralization vector for the entire DeFi ecosystem that uses it as collateral.\n- Protocol Risk: A bug or slashing event in Lido could cascade through Aave, Maker, and Compound.\n- Governance Capture: The Lido DAO's decisions on node operators affect the security of billions in DeFi TVL.
~30%
ETH Staked
$20B+
DeFi TVL Exposure
02
Rehypothecation Cascades
The same staked asset (e.g., stETH) is used as collateral across multiple lending protocols simultaneously, creating a fragile web of interconnected liabilities.\n- Liquidity Mirage: TVL is inflated as the same asset is counted multiple times.\n- Contagion Risk: A depeg or price shock triggers margin calls and liquidations across every layer at once, as seen in the 2022 stETH depeg.
3-5x
Collateral Reuse
Minutes
Cascade Speed
03
Validator Centralization
Staking pools and services consolidate node operations with a handful of cloud providers (AWS, GCP) and geographic regions, undermining blockchain's physical decentralization.\n- Infrastructure Risk: A major cloud outage could take down a critical mass of validators.\n- Censorship Vector: Concentrated node operators are vulnerable to regulatory pressure, threatening transaction neutrality.
>60%
On Cloud Providers
3
Major Regions
04
The Oracle Problem, Amplified
The price of complex staked assets (LSDs, LP tokens, restaked assets) is determined by a handful of oracles (Chainlink, Pyth). A failure or manipulation here invalidates the entire collateral layer.\n- Single Point of Truth: A critical bug in a major oracle feed could freeze or drain multi-billion dollar markets.\n- Pricing Lag: During volatile depegs, oracle latency can cause catastrophic liquidations before prices correct.
1-2
Dominant Oracles
Seconds Lag
Critical Latency
05
EigenLayer's Systemic Stack
Restaking introduces a new risk layer: slashing for Actively Validated Services (AVSs). A failure in a popular AVS could lead to mass slashing of the base Ethereum stake.\n- Complex Interdependence: Ethereum's security is now shared with experimental middleware.\n- Operator Concentration: A small set of node operators will likely run the majority of high-value AVSs, creating a super-validator class.
$15B+
TVL Restaked
New Risk Layer
Slashing
06
Regulatory Attack Surface
Staking-as-a-Service providers and LSD issuers are clear, centralized legal entities, making them prime targets for enforcement actions (SEC, CFTC).\n- Kill-Switch Risk: A regulatory seizure or shutdown order could freeze core collateral assets globally.\n- Geographic Fragmentation: Compliance demands may lead to balkanized, jurisdiction-specific staking pools, breaking DeFi's composability.
Targeted Entities
Clear Legal
Global
Contagion Scope
future-outlook
THE NEW COLLATERAL PRIMITIVE
Future Outlook: The Multi-Chain Staked Asset Standard
Staked assets will become the dominant, programmable base layer for DeFi, abstracting away chain-specific liquidity.
Staked assets become money legos. Native staking yields transform static collateral into productive capital, creating a superior base layer for lending and derivatives. Protocols like EigenLayer and Babylon demonstrate this by enabling restaking of Bitcoin and Ethereum stake for cryptoeconomic security.
Liquidity fragments across chains. The current multi-chain reality forces protocols like Aave and Compound to deploy isolated pools on each network. This creates capital inefficiency and arbitrage opportunities that LayerZero and Circle's CCTP attempt to solve.
A standard unifies the stack. A canonical representation for staked assets, analogous to ERC-20, allows cross-chain intent solvers like Across and UniswapX to treat stETH or cbBTC as a single, fungible asset. This abstracts chain-specific execution.
Evidence: EigenLayer's TVL exceeds $15B, proving demand for yield-bearing collateral. The success of Lido's stETH as money market collateral on Aave and MakerDAO validates the model for a single chain.
takeaways
THE FUTURE OF COLLATERAL
Key Takeaways for Builders and Investors
Staked assets are evolving from a yield source into the foundational collateral layer for DeFi, unlocking new capital efficiency and composability models.
01
The Problem: Idle Capital in a Yield-Generating World
Staked ETH and LSTs represent $100B+ in locked value that is largely excluded from DeFi's credit markets. This creates a massive opportunity cost, forcing users to choose between security/staking rewards and leverage/utility.
- Capital Inefficiency: Staked assets are non-productive beyond base yield.
- Fragmented Liquidity: L1 staking pools and L2 DeFi are siloed.
- Solution Vector: Protocols that unlock staked asset liquidity without sacrificing security.
$100B+
Locked Value
0x
DeFi Utility
02
The Solution: Native Restaking as a Trust Primitive
EigenLayer and Babylon are pioneering a new base layer: using staked capital to secure additional services (AVSs, Bitcoin staking). This transforms staked assets into a reusable cryptoeconomic security primitive.
- Trust Multiplication: One staked asset can back multiple services, creating a security flywheel.
- Yield Stacking: Operators earn fees from secured services on top of base staking rewards.
- Builder Play: Launch a service (e.g., oracle, bridge) backed by $10B+ in shared security.
$10B+
TVL Secured
10x+
Trust Leverage
03
The Infrastructure: LSTs as the Ultimate DeFi Collateral
Liquid Staking Tokens (LSTs) like stETH, rETH, and sfrxETH are becoming the dominant collateral type. Their predictable yield and deep liquidity make them superior to volatile assets for money markets and stablecoin backstops.
- Stable Yield Source: LSTs provide a ~3-5% APY baseline, reducing liquidation risk.
- Composability Engine: LSTs flow into Aave, Maker, and EigenLayer in a single transaction.
- Investor Mandate: Back protocols that treat LSTs as a risk asset class, not just a wrapper.
~5% APY
Base Yield
#1
Collateral Type
04
The Endgame: Cross-Chain Collateral Networks
The future is a unified collateral layer where staked assets from any chain (e.g., Bitcoin via Babylon, Solana, Cosmos) can be used as trustless collateral anywhere. This requires intent-based bridges and universal settlement layers.
- Capital Unification: Breaks the chain-specific liquidity trap.
- Architectural Shift: Moves from isolated staking pools to a global collateral graph.
- VC Bet: Infrastructure enabling this flow (LayerZero, Axelar, Wormhole) becomes the new plumbing.
Multi-Chain
Asset Origin
1 Graph
Collateral Network
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