📕 Better than Yesterday #38: What is Restaking? Part 2

Welcome back to our series on restaking! In this part, we delve into the benefits and risks of this emerging trend in the crypto world.

Restaking is revolutionizing how staked assets are used, providing more flexibility and potential rewards.

Let's explore why this concept is gaining traction and what it means for the future of crypto staking.

What Are the Benefits of Restaking?

Some of the main benefits of restaking include:

Flexibility

Restaking grants traders increased flexibility by allowing the use of staked assets in various financial activities without the need to unstake, thereby providing access to liquidity while maintaining the potential for rewards. This flexibility leads to more efficient capital allocation and maximizes the utility of staked assets. 

Mitigates shortcomings of traditional staking

Restaking addresses the opportunity cost associated with traditional staking, where assets are locked and inaccessible.

It enables token holders to derive liquidity from their assets without preceding potential rewards, making staking more appealing for those seeking liquidity and flexibility. 

Scalable security

Restaking allows protocols to achieve a degree of flexibility regarding security, depending on the network’s demands. Thanks to restaking, protocols can scale up their security when required by contracting validators present in a restaking protocol.

Once the security demands are met and the network returns to normalcy, protocols can scale down the security.

This allows protocols to take a cost-effective approach to network security scaling.

Security for new protocols

New protocols and networks need help developing an adequate security system, particularly in their early stages.

Restaking gives these protocols access to a large set of validators at the beginning of their development, allowing them to strengthen their security significantly.

What Are the Risks Associated With Restaking?

Not everyone in the crypto ecosystem is too pleased about the concept and has voiced concerns about potential issues associated with restaking. 

Centralization

One major concern is that restaking could result in stake centralization. This is because validators utilizing restaking services can offer higher APY.

As they can offer higher APY, it could attract more delegation to specific validators, leading to a few validators controlling the stake.

This could lead to a potential loss of neutrality.

Compounded slashing

Another risk associated with restaking is slashing. Slashing is a punitive measure in proof-of-stake blockchains that penalizes dishonest validators for misconduct by reducing their staked assets and excluding them from the network for a particular amount of time.

This is because restaking terms include extra slash conditions in exchange for the potential of increased rewards.

Each protocol has different terms for slashing, and depending on these terms, a validator could lose a significant percentage of their staked assets to slashing.

In Closing

Restaking is transforming the staking landscape by allowing staked assets to serve multiple purposes and earn greater rewards.

Before restaking, tokens were locked into a single protocol, committed to one cause. Now, restaking makes staked assets more versatile, benefiting stakers and protocols alike.

As the industry continues to advance, we will surely see a surge in innovative applications for blockchain assets, which will undoubtedly enhance the crypto ecosystem.

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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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