Restaking is a new concept in the cryptocurrency space that builds upon the traditional staking process.
Staking is an important part of blockchains powered by the proof-of-stake (PoS) consensus – Solana and Ethereum – that involves stakeholders, called validators, locking up a certain amount of native cryptocurrency to help secure the network and participate in the block creation process by validating transactions.
Meanwhile, restaking allows delegators to leverage their staked assets further by reusing them across multiple protocols. It focuses on aggregating and extending the security of larger blockchains to other services such as oracle networks, data availability layers, and blockchain bridges. The delegation process also allows validators to generate additional rewards for helping secure several platforms concurrently using a single cryptocurrency.
In this article, we will explain what crypto restaking is, how it works, the difference between traditional staking and restaking, and how it is reshaping PoS blockchains.
What Is Crypto Restaking?
Restaking allows PoS blockchain validators to use their staked tokens to secure other protocols in the ecosystem. This process enhances the utility of the staked asset and offers the holder additional rewards.
Under the traditional staking process, cryptocurrencies remain locked until the end of the staking period, which results in issues like: large portions of the coin’s liquidity being dormant on the blockchain; only those who stake large amounts of tokens earning substantial rewards; validators only being able to stake on the main blockchain; and newer protocols having to build their own validator sets to ensure security.
Restaking builds on the concept of liquid staking, which is a process that uses staked coins as collateral to issue liquid staking tokens that can be used on DeFi platforms to generate additional yield. It also democratized staking, allowing more cryptocurrency users to take part as there are no minimum requirements, which is beneficial and rewarding for small crypto holders.
Restaking enables other DeFi protocols on PoS blockchains to utilize staked assets to improve their security. Validators are rewarded with additional incentives on top of staking rewards from the mainnet.
How Does Crypto Restaking Work?
In retrospect, restaking enables crypto users to stake the same coins on both the main blockchain and other protocols on the network, thereby securing all of these networks at once.
Restaking protocols provide an opt-in service where validators, called restakers, can redeploy their staked cryptocurrency across multiple protocols. This also includes liquid staked assets. When restaking, users accept slashing conditions set by each protocol, on top of the slashing measures of the blockchain.
Slashing is a critical component of PoS blockchains, where staked tokens act as collateral. In the case that a validator breaks rules during the consensus process, they will lose a percentage of their staked tokens. This condition ensures that validators act in the best interests of the protocol they are helping secure.
Similar to delegated PoS models, restaking validators can entrust registered operators to stake on their behalf. This allows restakers who may not have the time or equipment to meet the resource requirements of certain protocols the chance to participate in the consensus and earn rewards, minus the fee charged by the operator.
What Is Native Restaking?
Native restaking is only accessible to users who operate validator nodes. In this process, node operators can restake their already staked tokens directly through a restaking protocol by assigning their validator withdrawal credentials to that particular platform’s smart contracts.
This allows the same staked cryptocurrency to not only secure the mainnet but also additional protocols simultaneously, thereby extending the blockchain’s cryptographic security to these other protocols. Meanwhile, the validator earns additional rewards for supporting both networks.
Native restaking can yield extra rewards for securing multiple networks, but comes with increased slashing risks if the validator decides to act maliciously.
What Is Liquid Restaking?
Liquid restaking protocols combine the benefits of liquid staking and restaking to offer enhanced liquidity, improved capital efficiency, and additional yield generation opportunities. This makes it easy for users to capitalize on restaking without worrying about setting up any operator software.
Moreover, the user can opt to allow the restaking protocol to select the project to restake with. It addresses the issue of illiquidity that comes with traditional staking, where tokens are typically locked in smart contracts and remain dormant as they cannot be used until the staking period ends.
In liquid staking, validators receive a derivative token that represents their staked assets, and this “receipt token” or liquid restaking token (LRT) can be traded or used across DeFi applications, while the original assets remain staked.
Pros and Cons of Crypto Restaking
Now that you understand the basics of crypto restaking, it is important to understand the pros and cons of the staking mechanism. So, let’s take a look at them.
Advantages of Crypto Restaking
- Restaking allows users to stake the same assets across multiple protocols simultaneously, enabling them to earn multiple rewards without liquidating their holdings. It maximizes the utility and returns on the staked assets.
- Newer blockchain protocols can leverage the security of established networks like Ethereum or Solana by restaking their asset pools. This reduces the need for them to set up independent validation infrastructures.
- By locking more assets across multiple blockchain protocols, restaking contributes to the overall security and decentralization of the mainnet.
- Restaking encourages users to hold their assets for a longer period, even incentivizing them. This helps holders to ride out market volatility and avoid impulsive selling.
- It helps improve liquidity across DeFi ecosystems and stabilizes token prices by enabling more efficient asset utilization.
- Some restaking protocols allow stakers to participate in governance decisions, enabling them to influence the future direction of the platforms.
- Liquid restaking lowers the barrier to entry by allowing users to earn multiple staking rewards without running a resource-intensive validator node.
Disadvantages of Crypto Restaking
- Restaking exposes the user to higher slashing risks. Misbehavior or failure to comply with protocol rules can lead to penalties and partial or complete loss of staked assets. This risk is compounded by the multiple commitments made when restaking crypto assets.
- Restaking involves the use of multiple smart contracts, which possess the risk of bugs, coding errors, or exploits that could result in financial losses to the delegator.
- Users must be careful when delegating stakes to third-party platforms, as they will be trusting these operators to act honestly and securely. Any failure or malicious action on the operator’s part can lead to losses without compensation.
- Concentrating large amounts of staked assets on a few protocols can lead to single points of failure, increasing systemic risks.
- Managing multiple staking positions across protocols increases complexity and requires users to be vigilant about security and protocol risks.
- Restaking return can vary significantly depending on market conditions and the protocols involved. This makes income from staking less predictable.
Popular Crypto Restaking Protocols
Here are the crypto restaking protocols we recommend if you wish to maximize your staking rewards:
- EigenLayer (Ethereum)
- Jito (Solana)
- Renzo Protocol
- Peddle Finance
Also Read: Crypto-Friendly Banks for 2025: Where to Bank with Bitcoin and Cryptocurrencies
Final Thoughts
Restaking is a significant advancement for PoS blockchains like Ethereum or Solana. By enabling validators to redeploy their staked crypto across various DeFi services, it provides more value while ensuring security for other protocols. It widely improves the capital efficiency of staked assets, allowing stakers to access more services and earn additional rewards.
This innovation not only expands the rewards potential for PoS validators but also enhances the security of the blockchain and protocols that are dependent on it by aggregating resources and sharing them across different platforms.