Why Restaking Creates Systemic Risk

A single slashing event on an actively validated service (AVS) can cascade, triggering mass unstaking and liquidity crises across multiple protocols. The shared security model becomes a shared failure vector.

• Correlated Penalties: A bug in an oracle AVS like eoracle could slash stakers across dozens of DeFi apps.
• Liquidity Run Risk: Mass, simultaneous unstaking can overwhelm withdrawal queues, freezing $10B+ TVL.

Restaked ETH is simultaneously pledged as collateral for multiple AVSs, creating a phantom liquidity multiplier. In a crisis, this liquidity vanishes, exposing protocols like Aave and Compound to undercollateralized positions.

• Over-leveraged Security: The same ETH secures a rollup, a bridge, and an oracle, multiplying effective TVL.
• Protocol Contagion: A depeg in a liquid restaking token (LRT) like ether.fi's eETH could trigger mass liquidations in DeFi.

Stakers delegate to operators who make opaque choices about which AVSs to secure. This creates a hidden risk layer where the failure of a minor AVS, or a malicious operator cohort, can impact major ecosystems like Polygon and Arbitrum.

• Operator Centralization: Top 5 operators control a majority of restaked ETH, creating a central point of failure.
• AVS Bloat: Low-quality AVSs with $100M+ in TVL introduce tail risk without proportional reward.

The pursuit of points and restaking yield incentivizes stakers to opt into risky, untested AVSs. This misalignment turns security into a speculative game, undermining the integrity of the entire cryptoeconomic stack secured by EigenLayer.

• Security as a Commodity: Stakers chase highest yield, not most critical infrastructure.
• Adversarial AVSs: Malicious actors can launch high-yield AVSs to attract security, then attack it for profit.

A single bug in an EigenLayer AVS (Actively Validated Service) can trigger slashing across the entire restaked capital pool. This creates a contagion vector where a failure in a niche service (e.g., a data availability layer) can bankrupt validators securing unrelated networks like Ethereum and Celestia.

• Correlated Penalties: Slashing events are not isolated.
• Amplified Losses: $10B+ TVL can be at risk from a single AVS fault.

During a crisis, mass unstaking requests trigger EigenLayer's 7-day+ withdrawal queue, trapping capital. This creates a liquidity crisis where liquid restaking tokens (e.g., ether.fi's eETH, Renzo's ezETH) depeg, causing cascading liquidations in DeFi protocols like Aave and Compound.

• Depeg Spiral: Liquid staking tokens lose their 1:1 backing.
• DeFi Contagion: Undercollateralized loans trigger system-wide margin calls.

A dominant Liquid Restaking Token (LRT) provider (e.g., ether.fi, Puffer Finance) controlling >33% of restaked ETH can exert undue influence over AVS governance and slashing decisions. This centralizes critical security decisions, undermining the decentralized security model.

• Governance Capture: A few entities control slashing votes.
• Single Point of Censorship: Cartel can selectively attack or protect services.

AVSs providing oracle services (e.g., for Chainlink competitors) become single points of failure for the entire DeFi ecosystem. A corrupted or slashed oracle AVS could feed bad price data, causing synchronized, catastrophic failures across hundreds of protocols simultaneously.

• Systemic Data Corruption: One AVS failure corrupts all dependent dApps.
• Synchronized Failure: Entire DeFi ecosystem fails in unison.

An attacker can cheaply bribe or extort a small AVS operator to act maliciously, knowing the resulting slashing penalty will be socialized across all EigenLayer restakers. This creates perverse incentives where the cost of attack is low, but the damage is catastrophic and borne by unrelated parties.

• Asymmetric Risk: Low-cost attack, high-socialized cost.
• Bribery Vector: $1M bribe can threaten $1B in staked value.

Ethereum validators using restaking services could be deemed to be operating unregistered securities platforms (the AVSs). A single regulatory action against EigenLayer could force a mass exit, collapsing the TVL and destabilizing the base layer's security budget.

• Jurisdictional Risk: Global regulators can target the core protocol.
• Security Budget Collapse: Ethereum's staking yield plummets, threatening Proof-of-Stake security.