Restaking is a new asset class. It is not a feature of Ethereum but a fundamental redefinition of staked ETH's utility. This creates a capital efficiency primitive that separates security provisioning from consensus, enabling a market for trust.
liquid-staking-and-the-restaking-revolution
Blog
Why Restaking is Not Just a Feature, But a New Asset Class
A technical breakdown of how restaking creates a unique, layered risk/return profile that demands its own allocation and valuation models, distinct from simple staking.
introduction
THE PARADIGM SHIFT
Introduction
Restaking transforms idle validator capital into a foundational, programmable resource for securing new protocols.
The value accrual flips. In traditional staking, value flows to the validator. In restaking, value accrues to the underlying capital (stETH, rETH) and the networks it secures, like EigenLayer and Babylon. The asset becomes the service.
This creates systemic leverage. A single staked ETH position can simultaneously secure Ethereum, an EigenLayer AVS like EigenDA, and a Bitcoin staking protocol. This composability is the engine for a multi-trillion-dollar cryptoeconomic security market.
Evidence: The $15B+ Total Value Locked (TVL) in EigenLayer before mainnet launch demonstrates market conviction in this thesis, dwarfing the initial adoption of major L2s like Arbitrum and Optimism.
key-trends
ECONOMIC PRIMITIVES
The Three Pillars of the New Asset Class
Restaking transforms idle security into a composable, yield-bearing capital asset that underpins a new financial stack.
01
The Problem: Idle Security Capital
Proof-of-Stake validators lock up $100B+ in dormant capital, earning only base staking yield. This is a massive, untapped economic resource.
- Opportunity Cost: Capital is single-use, securing only its native chain.
- Inefficient Markets: No mechanism to price or trade this security-as-a-service.
- Stagnant Yield: Base staking APR is often insufficient for sophisticated capital.
$100B+
Dormant Capital
~4%
Avg. Base APR
02
The Solution: EigenLayer & The AVS Marketplace
EigenLayer creates a two-sided marketplace for cryptoeconomic security. Restakers sell slashing risk; Actively Validated Services (AVS) like AltLayer and EigenDA buy it.
- Capital Efficiency: One stake secures multiple services, multiplying yield potential.
- Programmable Security: AVSs define custom slashing conditions for tailored security.
- Liquidity for Trust: Security becomes a liquid, tradable commodity with its own risk/return profile.
$18B+
TVL
50+
AVSs
03
The Asset: Yield-Bearing Collateral
Liquid Restaking Tokens (LRTs) like ether.fi's eETH and Renzo's ezETH tokenize the position, creating a super-collateral that accrues multi-source yield.
- Composability: Use LRTs as collateral in DeFi (Aave, Maker) while earning restaking yield.
- Yield Aggregation: Auto-compounds rewards from base staking + multiple AVS subsidies.
- Risk Tranches: Future LRTs will separate principal from yield, enabling structured products.
5-15%
Target APY
$10B+
LRT TVL
deep-dive
THE PRIMITIVE
Deconstructing the Restaking Yield Stack
Restaking transforms idle validator capital into a foundational yield-generating asset that powers a new wave of decentralized services.
Restaking is a capital asset. It abstracts staked ETH into a programmable financial primitive. This creates a new base layer for trust, enabling protocols like EigenLayer to bootstrap security for AVSs (Actively Validated Services) without issuing new tokens.
The yield is multi-layered. Native staking yield is the base. AVS rewards from services like EigenDA or AltLayer add a risk-adjusted premium. This creates a composable yield stack, not a single return.
It commoditizes crypto-economic security. Before restaking, each new chain or service needed its own token and validator set. Now, security is a rentable resource, creating a market more efficient than isolated PoS chains.
Evidence: EigenLayer has over $15B in TVL, demonstrating market demand to rehypothecate Ethereum's stake. This capital efficiency forces a re-evaluation of monolithic L1 security models.
PRIMITIVE VS. COMPOSITE YIELD
Asset Class Comparison: Staking vs. Restaking
A first-principles breakdown of how restaking fundamentally redefines capital efficiency and risk/reward by creating a new, composable yield-bearing asset class.
| Core Dimension | Native Staking (e.g., ETH) | Liquid Staking (e.g., stETH) | Restaking (e.g., EigenLayer) |
|---|---|---|---|
Primary Yield Source | Protocol Inflation + MEV/Tips | Protocol Inflation + MEV/Tips | Protocol Inflation + MEV/Tips + AVS Service Fees |
Capital Multiplier (Max Theoretical) | 1x | 1x (but liquid) |
|
Underlying Asset Utility | Secures L1 Consensus | DeFi Collateral, Lending | Secures L1 + Additional AVSs (Rollups, Oracles, Bridges) |
Yield Composability | |||
Protocol Risk Surface | Single (L1 Consensus) | Single (L1 Consensus + LST Issuer) | Multiplied (L1 + AVS Slashing Conditions) |
Slashing Risk Profile | L1 Consensus Failure | L1 Consensus Failure | L1 Failure + AVS Penalty Enforcement |
Key Innovation | Proof-of-Stake Security | Tokenized Staking Position | Re-hypothecation of Staked Capital |
Representative APY Range (2024) | 3-5% | 2.8-4.8% | 5-15%+ (base + AVS rewards) |
counter-argument
THE REBUTTAL
The Steelman: "It's Just Leveraged Staking"
Restaking is not a feature; it's a new asset class that redefines the economic security of blockchains.
A new economic primitive emerges when staked ETH is programmatically rehypothecated. This is not leverage; it's the creation of a security-as-a-service market where capital efficiency is a byproduct, not the goal.
The asset class is security itself. EigenLayer and Renzo don't just amplify yield; they commoditize Ethereum's trust, allowing new protocols like AltLayer and EigenDA to bootstrap security without bootstrapping a token.
Leverage implies risk multiplication, but restaking's systemic risk is correlated slashing. This creates a network of interdependent security where a failure in one AVS cascades, a fundamentally different risk profile than simple DeFi leverage.
Evidence: The $15B+ TVL in EigenLayer demonstrates capital is pricing this as a new yield source, not just staking leverage. Protocols like Kelp DAO build entire businesses on this rehypothecation layer.
risk-analysis
SYSTEMIC RISKS
The Bear Case: What Could Go Wrong?
Restaking's promise of capital efficiency creates unprecedented, tightly-coupled systemic risks that could dwarf DeFi's previous failures.
01
The Slashing Cascade
A critical bug or coordinated attack on a major Actively Validated Service (AVS) could trigger mass slashing across the entire restaking ecosystem. This creates a non-linear risk profile where a failure in one service can drain collateral from dozens of others, creating a domino effect of insolvency.
- Correlated Failure: Unlike isolated DeFi hacks, slashing hits the base collateral layer.
- Unproven Penalties: AVS slashing conditions are untested at scale; a $1B+ slashing event is plausible.
- Liquid Staking Token (LST) Depeg Risk: Mass slashing could cause stETH, rETH, etc., to trade at a deep discount, spreading contagion.
>100 AVSs
Correlated Risk
$1B+
Event Risk
02
The Centralization Vortex
Restaking's economic logic inherently favors the largest, most trusted operators like EigenLayer and Lido, recreating the validator centralization problem at a meta-layer. This creates a single point of political and technical failure.
- Oligopoly of Operators: Top 3 entities could control >60% of restaked ETH, dictating AVS economics.
- Governance Capture: Centralized operator sets make AVSs vulnerable to coercion or cartel behavior.
- Ecosystem Fragility: The failure or malicious action of a major operator could cripple the entire restaked security supply.
>60%
Potential Control
3 Entities
Critical Mass
03
The Yield Mirage & AVS Saturation
The current double-digit yield projections are a temporary artifact of low AVS supply and high restaking demand. As the market saturates, yields will compress towards the risk-free rate, exposing the model's fragility.
- Economic Dilution: Each new AVS dilutes the security budget and yield for restakers.
- Junk Bond Problem: Low-quality AVSs will emerge, offering high yields for disproportionate risk, misleading passive restakers.
- Liquidity Crisis: In a downturn, the rush to unstake (despite long withdrawal queues) could trigger a liquidity crunch across integrated DeFi protocols like Aave and Compound.
<5%
Long-Term Yield
100+ Days
Exit Queue
04
The Regulatory Kill Switch
Restaking transforms staked ETH from a passive security instrument into an active, yield-seeking financial product. This fundamentally changes its regulatory profile, inviting scrutiny as a potential unregistered security or creating a systemically important financial market utility.
- SEC Jurisdiction: The Howey Test is more likely to apply to restaking rewards from AVS operations.
- Global Fragmentation: Conflicting regulations across the US, EU (MiCA), and Asia could splinter the market.
- Operator Liability: Node operators may face legal liability for slashing events or AVS failures, forcing centralization.
Global
Regulatory Target
High
Securities Risk
investment-thesis
THE NEW PRIMITIVE
Portfolio Implications and Valuation
Restaking transforms staked ETH from a yield-bearing asset into a foundational capital layer, creating a new asset class with unique risk/return dynamics.
Restaking creates a new asset class. It is not a feature of Ethereum but a capital primitive that abstracts security. Staked ETH becomes a risk-bearing input for networks like EigenLayer, AltLayer, and Lagrange, which is fundamentally different from a simple yield token.
Valuation shifts from yield to utility. The value of restaked ETH is not its APR but its optionality as security. This creates a non-linear payoff structure akin to selling insurance, where fees from AVSs like Espresso or Witness Chain accrue to restakers.
Portfolio construction requires new models. Traditional TVL and APY metrics fail. The correct framework is risk-adjusted return on secured capital (RARSC), which must account for slashing correlation across AVSs and the systemic risk of the underlying EigenLayer operator set.
Evidence: EigenLayer's TVL surpassed $15B not from yield chasing, but from capital allocating to the security-as-a-service market. This capital is now the bedrock for dozens of new protocols, creating a valuation layer detached from simple DeFi APYs.
takeaways
RESTAKING DECODED
TL;DR for the Time-Poor CTO
Restaking transforms idle staked ETH into productive capital, creating a new, foundational asset class for decentralized security.
01
The Problem: Billions in Idle Collateral
Staked ETH on Ethereum is a $100B+ asset locked in a single function. This is capital inefficiency at a massive scale, creating a drag on the entire crypto economy's security budget.
- Opportunity Cost: Capital is non-fungible and non-productive.
- Security Fragmentation: New networks must bootstrap trust from scratch.
$100B+
Idle Capital
0x
Reuse Factor
02
The Solution: EigenLayer & the AVS Marketplace
EigenLayer introduces a restaking primitive, allowing ETH stakers to opt-in to secure new services (Actively Validated Services or AVSs) like rollups, oracles, and bridges.
- Capital Leverage: One stake secures multiple protocols.
- Trust Bootstrap: AVSs like EigenDA and Lagrange inherit Ethereum's security, avoiding the validator bootstrap problem.
$15B+
TVL
100+
AVSs
03
The New Asset Class: Yield-Bearing Security
Restaked ETH is not a token; it's a yield-generating security position. Its value is derived from the aggregate fees of the AVSs it secures, creating a new risk/return profile.
- Composability: Becomes base collateral for DeFi (e.g., lending on Aave).
- Risk Markets: Drives demand for insurance and slashing coverage protocols.
2-10%
Added Yield
New
Risk Vector
04
The Systemic Risk: Slashing Cascades
The core trade-off is correlated slashing risk. A fault in a major AVS could simultaneously slash restakers across dozens of services, creating a systemic contagion event.
- Risk Concentration: Unlike DeFi composability failures, this attacks the base security layer.
- Due Diligence Imperative: Restakers must audit AVS code and cryptoeconomic safety.
High
Complexity
Uncharted
Risk Model
05
The Infrastructure Play: Restaking Rollups
Networks like EigenDA and Espresso are building the first major AVSs: high-throughput data availability layers and shared sequencers. They are the initial proof points for restaking's utility.
- Market Validation: $1B+ in restaker commitments to EigenDA.
- Modular Synergy: Provides critical infra for rollup stacks like Arbitrum Orbit and OP Stack.
10-100x
Cost Save vs Alt-DA
Core Infra
Use Case
06
The Endgame: Hyper-Specialized Validator Sets
Restaking enables optimized security pools. Validators will form clusters based on hardware (e.g., GPUs for AI AVSs) or risk tolerance, moving beyond the one-size-fits-all model.
- Efficiency Gain: Right-tool-for-the-job security.
- Market Structure: Emergence of professional restaking operators and delegation markets.
Specialized
Pools
Professional
Operators
ENQUIRY
Get In Touch
today.
Our experts will offer a free quote and a 30min call to discuss your project.
NDA Protected
Confidentiality24h Response
Time to ValueDirectly to Engineering Team
No Sales Fluff10+
Protocols Shipped
$20M+
TVL Overall