The winner-takes-most flywheel is the core mechanic. The largest restaking pools on EigenLayer offer the highest yields from pooled AVS rewards, attracting more capital, which further increases their security premium and market dominance.
liquid-staking-and-the-restaking-revolution
Blog
Why the Economics of Restaking Inevitably Centralize Power
An analysis of how the capital efficiency and risk management imperatives of restaking protocols like EigenLayer will drive stake consolidation, creating powerful new intermediaries in the crypto security layer.
introduction
THE ECONOMIC FLYWHEEL
The Centralization Paradox of Capital Efficiency
The economic design of restaking creates a self-reinforcing cycle that concentrates power among a few dominant players.
Capital begets capital in a way that staking does not. Unlike native staking, where yield is capped by protocol issuance, restaking yield scales with the number of secured services, creating a superlinear return profile for the largest pools.
Smaller operators are priced out. To compete, an operator must match the slashable stake of giants like Figment or Kiln, requiring prohibitive capital that erodes their effective yield, creating an insurmountable economic moat.
Evidence: The top 5 node operators on EigenLayer consistently command over 60% of the total restaked ETH, a concentration metric that native Ethereum validation has actively worked to reduce through initiatives like DVT.
key-trends
RESTAKING ECONOMICS
The Inevitable Forces of Consolidation
The economic design of restaking protocols creates powerful, self-reinforcing incentives that concentrate capital and operational control.
01
The Winner-Take-Most Fee Market
The AVS (Actively Validated Service) fee model favors the largest operators. Projects pay for security, creating a direct revenue stream to top stakers.\n- Top 5 operators on EigenLayer command a dominant share of delegated ETH.\n- Smaller node operators are priced out, unable to compete on slashing insurance or uptime guarantees.\n- The result is a positive feedback loop: more stake → more revenue → more ability to attract stake.
>60%
Top 5 Share
$15B+
Addressable Fees
02
The Capital Efficiency Trap
Liquid Restaking Tokens (LRTs) like ether.fi's eETH and Renzo's ezETH abstract complexity but centralize delegation power.\n- Users delegate capital allocation decisions to a handful of LRT protocols.\n- These protocols rationally delegate to the largest, safest operators (e.g., Figment, Kiln), further entrenching their position.\n- The system optimizes for yield aggregation, not decentralization, creating a few massive points of failure.
~80%
LRT Market Share
3-5
Major Protocols
03
The Slashing Risk Concentration
Correlated slashing risk across hundreds of AVSs is managed by the largest operators, not distributed.\n- A major operator failing could trigger simultaneous slashing events across multiple networks (e.g., EigenDA, Lagrange).\n- Insurance and hedging against this risk is only viable for large, capitalized entities, creating a high barrier to entry.\n- The system's security becomes dependent on the financial resilience of a few.
100+
AVS Dependencies
Systemic
Risk Type
04
The Protocol-Operator Cartel
Leading AVS developers (e.g., EigenDA, Espresso) form tight, exclusive partnerships with top-tier operators for launch.\n- This creates an insider track for established players, locking out new entrants.\n- Technical integration costs and shared branding further solidify these alliances.\n- The ecosystem evolves into a club of credentialed participants, mirroring TradFi underwriting syndicates.
Exclusive
Launch Deals
High
Barrier
deep-dive
THE ECONOMIC GRAVITY
The Flywheel of Centralized Risk Management
Restaking's core economic incentives create a self-reinforcing cycle that consolidates power among the largest operators.
The winner-takes-most dynamic is inherent to restaking. Operators with the largest stake attract more delegations, which increases their revenue, allowing them to invest in superior infrastructure and marketing, which attracts more stake. This is the positive feedback loop that defines the system.
Risk aggregation becomes a moat. Large operators like EigenLayer operators and Lido node operators can diversify their slashing risk across hundreds of AVSs. Smaller operators cannot match this risk management, making them less attractive to delegators who seek safety.
Capital efficiency drives centralization. Protocols like EigenLayer and Symbiotic reward operators for reusing the same capital. The most efficient capital pools grow the fastest, creating a gravitational pull toward a handful of mega-pools, mirroring the consolidation seen in Liquid Staking Derivatives (LSDs).
Evidence: In liquid staking, Lido controls ~30% of all staked ETH. In restaking's early phase, the top 10 operators already command over 40% of EigenLayer's delegated stake, demonstrating the flywheel's immediate effect.
ECONOMIC REALITIES
The Centralization Scorecard: LSTs vs. The Coming Restaking Giants
A first-principles comparison of the economic forces driving centralization in Liquid Staking Tokens (LSTs) versus Dual-Staking and AVS-based restaking models.
| Centralization Vector | Liquid Staking (Lido, Rocket Pool) | Dual-Staking (EigenLayer, Symbiotic) | Pure AVS Restaking (Babylon, EigenDA) |
|---|---|---|---|
Capital Efficiency Multiplier | 1x (ETH only) |
|
|
Validator Entry Cost | 32 ETH or 8 ETH (minipool) | 0 ETH (Leverage existing stake) | 0 ETH (Software-only slashing) |
Node Operator Profit Share | 10-15% of rewards | 0% (Takes 100% of AVS fees) | 100% of AVS fees |
Protocol Fee Capture | 5-10% of staking yield | 0% (Fees go to operators) | 0% (Fees go to operators) |
Slashing Risk Concentration | Single chain (Ethereum) | Cross-chain (Cascading slashing) | Cross-chain + App-specific |
Governance Attack Cost | ~$30B (LDO market cap) |
| Unbounded (AVS ecosystem value) |
Yield Source Dependency | Ethereum protocol issuance | AVS demand & speculation | Pure AVS demand |
counter-argument
THE ECONOMIC REALITY
The Decentralist Rebuttal (And Why It Fails)
Theoretical decentralization arguments ignore the capital efficiency and risk dynamics that consolidate power in restaking protocols.
The Delegator's Dilemma centralizes power. Rational actors delegate to the largest, most reputable operators like Figment or P2P Validator to minimize slashing risk and maximize rewards. This creates a feedback loop where capital and influence pool at the top.
Capital Efficiency Beats Ideology. A whale with 100,000 ETH will not split stakes across 100 small nodes for 'decentralization'. They will use the single, most capital-efficient provider offering the best risk-adjusted yield, often a large entity like Lido or EigenLayer's own operators.
Risk Aggregation is Inevitable. Services like EigenLayer AVSs (Actively Validated Services) require high security guarantees. Developers building these services will whitelist only the largest, most reliable node operators, further entrenching their position and creating permissioned validator sets.
Evidence: Look at Liquid Staking. Despite hundreds of node operators, Lido's stETH is dominated by a cartel of ~30 professional entities. The same economic forces apply to restaking, where the stakes (and penalties) are higher.
takeaways
THE RESTAKING POWER LAW
Implications for Builders and Investors
Restaking's economic flywheel creates winner-take-most dynamics that concentrate control in a few protocols.
01
The EigenLayer Flywheel: A Centralizing Engine
EigenLayer's $20B+ TVL creates a self-reinforcing loop where more stake attracts more AVSs, which in turn attracts more stake. This creates a liquidity moat that new entrants cannot compete with, centralizing the supply of cryptoeconomic security.
- Winner-Take-Most: The dominant restaking pool captures the majority of fees and influence.
- AVS Lock-In: Builders are incentivized to launch on the largest pool for immediate security, reinforcing its dominance.
$20B+
TVL MoAT
>90%
Market Share
02
The LRT Oligopoly Problem
Liquid Restaking Tokens (LRTs) like ether.fi, Renzo, and Puffer abstract complexity but create a new layer of centralization. Their multi-billion dollar treasuries and points programs dictate capital flow, making them kingmakers for new AVSs.
- Capital Gatekeepers: A handful of LRT protocols control the allocation of ~70% of restaked ETH.
- Points-Driven Inefficiency: Capital chases farmable yield, not optimal security, warping the market.
~70%
Capital Control
3-5
Dominant Entities
03
For Builders: The AVS Commoditization Trap
AVSs become commodities competing solely on cost, as they all rent security from the same few pools. This erodes margins and forces reliance on the dominant restaking infrastructure.
- Security as a Utility: Differentiation shifts from cryptoeconomics to software features alone.
- Protocol Capture: The restaking pool, not the AVS, captures the long-term value and governance power.
>50%
Fee Share to Pool
Low
AVS MoAT
04
For Investors: The Systemic Slashing Contagion Risk
Heavy restaking concentration creates a systemic risk where a slashing event on a major AVS could cascade through the entire ecosystem, liquidating positions across LRTs and DeFi.
- Correlated Failure: A ~$1B slashing event could trigger a liquidity crisis.
- Regulatory Target: Concentrated points of failure attract scrutiny, threatening the entire model.
High
Correlation Risk
$1B+
Contagion Threshold
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Time to ValueDirectly to Engineering Team
No Sales Fluff10+
Protocols Shipped
$20M+
TVL Overall