The Best Liquid Restaking Protocols for Greater Gains
With over $10B in total value locked (TVL), liquid restaking protocols have become a significant focus in the current crypto cycle. As the crypto industry's newest investment trend, restaking protocols offer novel ways to secure other apps and protocols and maximize yields for stakers.
Discover the top protocols revolutionizing how users engage with Ethereum staking and EigenLayer. From automatic staking to enhanced yields, explore the features of these popular liquid restaking protocols to help optimize your DeFi journey.
Key Takeaways:
Liquid restaking protocols offer innovative ways to maximize returns on staked assets in the DeFi space.
They enhance capital efficiency by allowing users to simultaneously stake their assets on multiple protocols.
While offering increased rewards, liquid restaking introduces complexities and risks, highlighting the need for thorough research and risk assessment before choosing to participate.
What Is Liquid Restaking?
Liquid restaking allows users to stake their liquid staking tokens (LSTs) on other protocols in order to earn additional rewards, while still maintaining the liquidity of staked assets.
How Does Liquid Restaking Work?
Liquid restaking is a groundbreaking approach in the cryptocurrency space, amplifying the benefits of the proof of stake (PoS) system. In PoS blockchains, validators stake their cryptocurrency as collateral to validate transactions and earn rewards. Liquid restaking takes this concept further by enabling validators to ârestakeâ their already staked assets, allowing them to provide economic security to multiple blockchain protocols simultaneously through a process known as rehypothecation.
Platforms such as EigenLayer facilitate this process by allowing validators to restake their assets with actively validated services (AVS) that support the Ethereum networkâs infrastructure, such as scaling solutions. These services require economic backing provided by the restaked assets. To represent the staked assets in this new context, theyâre tokenized into liquid restaking tokens (LRTs), which have various uses within the ecosystem, including securing other protocols and participating in governance decisions.
Advantages of Liquid Restaking
When users lock their assets for restaking, they receive liquid staking tokens (LSTs) in return. These tokens represent the original staked assets and can be used in various decentralized finance (DeFi) applications while users continue to earn staking rewards and provide liquidity. They then need to delegate their stakes to operators managing the AVS on EigenLayer, either via self-delegation or by choosing an existing operator.
The primary advantage of liquid restaking is its capability to improve capital efficiency. Validators can earn additional rewards without additional staking, which enhances the liquidity of the entire system. However, with the potential for higher returns comes increased risk. The rehypothecation of assets means that if one part of the system fails, it could impact other parts secured by the same assets.
Best Liquid Restaking Protocols
The top liquid restaking protocols by TVL offer solutions for maximizing returns on staked assets.
ether.fi
ether.fi is a decentralized, noncustodial liquid staking platform that focuses on Ethereum (ETH) native restaking. It's the leading liquid restaking protocol, with a TVL of over $5 billion as of Oct 24, 2024. The platform allows users to earn DeFi rewards on staked ETH while maintaining control of their keys. Fees are an annualized 2% platform fee based on the vault TVL, but there are no deposit fees, performance fees or exit fees.
Pros
ether.fi integrates with several DeFi protocols, expanding the utility and value of its native token, eETH
Automatic restaking through EigenLayer that can potentially enhance returns
Promotes decentralization and reinforces Ethereumâs security by deploying global validator nodes
Cons
Newcomers to the platform may find navigating its complexities a challenge
Puffer Finance
Puffer Finance is a liquid restaking protocol built on top of EigenLayer, which allows users to deposit stETH or wstETH and receive pufETH in return. The platform aims to decentralize Ethereum network operations by attracting more solo stakers and securing the activity of AVS on EigenLayer. Puffer receives a fee to support growth.
Pros
Offers pufETH tokens, which allow stakers to earn yields and combine PoS and restaking rewards
Incorporates anti-slashing technology and a permissionless validator setup for robust security
Rapid platform adoption reflected in the TVL of approximately $844 million
Friendly interface with extensive support through FAQs, guides and an active Discord community
Cons
Although itâs expanding, Puffer has limited integration with DeFi applications
Renzo
Renzoâs liquid restaking hub is designed to facilitate user interaction with various blockchain services. It serves as an interface to the EigenLayer ecosystem, securing AVS and offering a higher yield than traditional ETH staking. The protocol reduces complexity for end users, and facilitates collaboration between users and EigenLayer node operators. Renzo distributes 100% of EigenLayer rewards and fees, which are split between protocol reserves and node operators.
Pros
Renzo supports a range of tokens, including ETH, wBETH and stETH, broadening restaking opportunities
It implements AVS on EigenLayer to optimize yields while managing risk
Cross-chain capabilities with links to Connext, and plans to introduce BNB Chain restaking, backed by significant investment from Binance Labs
Uses Figment for secure staking services, undergoes audits and offers a bug bounty for vulnerabilities
Cons
Varying response times for user support via Telegram and Discord
Performance is tied to the success of the EigenLayer ecosystem
Swell
The Swell network offers users a unique opportunity to earn rewards by staking Ether (ETH) and receiving liquid staking tokens such as swETH, or liquid restaking tokens like rswETH. These tokens can then be used within the Swell ecosystem to earn additional yield.
Pros
Swell provides opportunities to earn rewards by securing Ethereum, or by restaking to secure actively validated services on EigenLayer
Users receive swETH or rswETH, both liquid tokens that can appreciate in value as rewards accrue
Platform integrates with DeFi protocols such as EigenLayer, Liquis, Sommelier and Pendle to maximize yields
Limited period of zero fees
Cons
The concept of liquid restaking may be somewhat complex for new users
Kelp
Kelp, a decentralized autonomous organization (DAO) that operates in the DeFi sector, focuses particularly on liquid restaking. It uses EigenLayer to offer users the ability to earn rewards on their staked Ethereum while maintaining access to their funds through a unique token called rsETH.
Pros
Kelp supports various tokens, such as ETH, stETH, sfrxETH and ETHx, offering users multiple staking strategies
No deposit fees for liquid staking tokens, which can enhance overall returns
The platform boasts robust security and has undergone multiple security audits, including a notable one by Code4rena in November 2023
Cons
There may be restrictions on frequency and amounts of withdrawalsÂ
Eigenpie
Eigenpie is a SubDAO created by Magpie, focusing on liquid restaking of ETH LSTs via EigenLayer. It enables users to convert their liquid staked ETH tokens into isolated liquid restaked ETH tokens, thus allowing them to earn passive income from Ether staking and EigenLayer revenue simultaneously without a lockup period.
Pros
Staking with Eigenpie offers additional yield on ETH positions.
Advanced multi-signature mechanism and partnership with top auditors, such as BlockSec and PeckShield, to bolster security
Supports a variety of LSTs, including stETH, rETH and mETH, offering flexibility in investment options
No lockup period for assets
Cons
Currently, there arenât any unstaking options available, which limits liquidity for users wishing to withdraw their investments
User interface can be confusing when navigating DeFi functionalities, potentially hindering usability for some users
Bedrock
Bedrock is a multi-asset liquid restaking protocol that allows users to restake various cryptocurrencies and receive instant liquidity. It supports assets such as uniETH, uniBTC and uniIOTX, and is backed by notable industry figures such as Fisher Yu and Raullen Chai.
Pros
Users can restake any amount of tokens and receive instant liquidity
Multi-asset support, including Ethereum, Bitcoin and IoTeX native rewards
Users can earn boosted rewards via DeFi partnerships and Bedrock Diamonds
Bedrock supports cross-chain operations for assets such as uniETH, uniBTC and uniIOTX
Cons
New users may find the protocolâs multi-layered features somewhat complex
Euclid Finance
Euclid Finance is a platform designed to simplify the liquid restaking process. It offers an omnichain liquid asset, elETH, which represents restaked positions, and establishes a trustless and permissionless network of operators. Euclid Finance intends to introduce a commission of 5â10% on restaking yields from EigenLayer in the future, which will be redistributed to operators and ECL token holders.
Pros
Euclid Finance offers a risk-minimized solution by addressing risks associated with LSTs
Users can deposit ETH and LSTs from different networks seamlessly, avoiding bridging or gas fees
Restakers can delegate assets to various operators, who are required to stake ECL (Euclidâs governance token) as a security deposit, thus ensuring a trustless operator network
Euclid prioritizes decentralization, aiming to establish a fair launch protocol governed by the community and enabling a decentralized operator network
Cons
As a new platform, uncertainties regarding performance and market adoption may exist
InceptionLRT
InceptionLRT is a platform that offers liquid restaking services, allowing users to restake their Ethereum or LSTs for additional rewards through a decentralized trust marketplace. It operates on the EigenLayer protocol.
Pros
Users can increase their overall returns via staking and restaking rewards
Staked assets gain liquidity, enabling users to utilize them in DeFi applications
InceptionLRT uses a decentralized trust system, potentially providing enhanced security and transparency
Cons
Users are susceptible to market fluctuationsâs impact on their returns
The concept of liquid restaking and decentralized trust marketplaces may pose complexities for new users
Does Liquid Restaking Offer Greater Gains?
Over time, liquid restaking can compound benefits received during the staking and restaking process. Investors can optimize returns over the long run and maintain critical liquidity. In addition, restaking promotes network engagement and security.
However, while liquid restaking offers the potential for higher gains, it also introduces increased complexity and risks. Conduct your own thorough research and consider these factors before engaging in liquid restaking.
The Bottom Line
Liquid restaking presents a promising avenue for maximizing returns on staked assets in the DeFi space. While offering the potential for higher gains, it also introduces complexities and risks.
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