📕 Better than Yesterday #37: What is Restaking?

Decentralized Finance (DeFi) is experiencing a resurgence, thanks to a new type of asset called “liquid restaking tokens” or LRTs. The concept of “restaking” has piqued the interest of crypto enthusiasts globally, with billions of dollars being poured into this sector.

In less than a year, Ethereum "restaking" juggernaut EigenLayer has gobbled up more than $16 billion in ether (ETH) deposits – digital assets that will theoretically be used to help secure upstart cryptocurrency protocols.

Let’s dive in with BSCS and find out about restaking, how it works, its benefits, and potential risks.

What Is Restaking?

Staking plays a crucial role in securing a Proof-of-Stake blockchain. Validators on the network can stake a certain amount of the blockchain’s native token to support network security and earn a passive income. 

So that was staking. But what is restaking?

Restaking allows previously staked assets to be staked again on a different platform or program, enhancing the asset's utility and potential for rewards.

This process enables staked assets to be leveraged by other decentralized protocols, offering additional reward opportunities to both validators and nominator stakers.

Restaking protocols have been highly popular over the past year. Since the beginning of 2024, the TVL locked up in these protocols has jumped from $1.01B to ~$8B.

How Restaking Works?

EigenLayer initiated the Restaking concept and was the first project to implement this idea on the mainnet. It provides a framework that allows Restaker, Operator, and AVS to interact with each other.

Restaker

Stake ETH/LST and accept additional cut conditions to provide validation services to selected AVS. In return, they will earn additional revenue.

Operator

This person manages the technical aspects on behalf of Restaker, including setting up the necessary hardware and software to authenticate AVSs. In return, they receive a portion of the income.

AVS (Actively Validated Services)

Infrastructure requires independent confirmation. They will pay Restaurateurs and Operators to "rent" security.

Types of Restaking

Two types of restaking options are available to users:

• Native

• Liquid

Native restaking

Native restaking involves using smart contracts to manage assets under a validator's node, enhancing the crypto-economic security of the assets.

Validators participating in native restaking programs must adopt additional node software specific to the restaking module, allowing them to securely offer their staked assets for further utilization within the restaking ecosystem.

This process ensures that assets remain secure while allowing validators to acquire additional reward opportunities.

Liquid restaking

The second option is liquid restaking, which utilizes Liquid Staking Tokens (LSTs).

In this type of restaking, users stake their assets in an app in exchange for an LP (liquidity provider) token. The user can then stake their LP in a staking protocol.

Restaking aims to provide more value to stakers and other protocols. Before the advent of restaking, tokens were locked into a single protocol and were committed to a single cause. Restaking upends this, allowing stakers to provide more services with a single stake and earn greater rewards.

As restaking continues to evolve, we will continue to see more use cases for staked assets through restaking come to the fore.

Stay tuned for part 2, where we will unveil the benefits and risks of this newest investment trend!

About BSCS

BSCS - The fully decentralized protocol for launching new ideas. An all-in-one Incubation Hub with a full-stack Defi platform across all main blockchain networks. We provide exclusive services including IDO/INO Launchpad, Yield farming, NFT Auction, Marketplace, and BSCSwap.

BSCS operates on top of all main blockchain networks and is designed to offer maximum value to consumers and institutions.

BSCS platform uses the Sharing Economy Model for the purpose of profit-sharing, helping users to access DeFi platforms in the easiest, safest, and most cost-effective way. BSCS is the most convenient bridge to connect users and application products on all main blockchain networks.

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