Understanding Liquid Restaking: The Complete Guide to Promising Protocols 2025

Restake Meaning and Basic Mechanisms

To understand the innovative liquid restaking scheme, it is first necessary to grasp the foundation on which it is built. This refers to Proof of Stake (PoS) — a consensus mechanism implemented in several blockchain networks to achieve decentralized agreement. In this system, participants must lock a certain amount of tokens as collateral, ensuring the operation and security of the network. The larger your stake, the higher the chance of being selected as a validator to verify transactions and create new blocks. For proper network operation, participants receive rewards calculated as a percentage of the staked amount.

Liquid restaking extends the classic staking paradigm through the introduction of a specialized mechanism. It allows liquid staking tokens (Liquid Staking Tokens, LST), which serve as digital representations of staked assets, to operate within the decentralized finance (DeFi) ecosystem. These tokens are not frozen — they can be freely traded, transferred, and used across various DeFi platforms.

How the Restaking Mechanism Works

Liquid restaking means that liquid staking tokens are used to participate in additional income-generating strategies within the DeFi space, while the original staking position remains active. This fundamentally differs from traditional liquid staking.

In conventional PoS staking, investors lock crypto assets to earn consensus rewards. Liquid staking allows obtaining liquid derivatives (LST), which represent these collateralized funds and can be used simultaneously for trading and interacting with the DeFi ecosystem. However, liquid restaking goes further: using the obtained LST, participants gain access to secondary layers of investment opportunities.

When LST are directed into liquid restaking protocols, a new class of derivatives — Liquid Restaking Tokens (LRT) — is generated. They accumulate both the initial collateral and potential income from reinvestment into additional DeFi strategies.

Additionally, using derivatives of liquid staking (LSDs) lowers the entry barrier for ETH participants: it is no longer necessary to lock a minimum of 32 ETH, as in native staking. Any participant can start with a smaller amount through these tools.

The process can be schematically described as follows:

Stage One: The participant locks PoS tokens in the network, contributing to consensus and blockchain security.

Stage Two: In exchange, they receive LST — a liquid representative of staked coins, ready for use in DeFi protocols.

Stage Three: The obtained LST is directed into liquid restaking strategies, creating additional income streams without unstaking the primary assets.

Result: the investor simultaneously supports network security through staking and extracts additional value via DeFi activity.

Advantages and Risks of Evolution

The advantages of liquid restaking include a sharp increase in capital efficiency, improved liquidity compared to traditional staking, and the possibility of multi-level income. Participants can earn rewards for validation and gains from interaction of LST with other DeFi protocols simultaneously.

However, this scheme is accompanied by increased risks. Dependence on the security of multiple protocol layers arises, vulnerability to smart contract baggage risks increases, potential depegging of liquid tokens can occur, and market volatility can radically impact derivative values.

Comparison: From Simple Staking to Multi-layered Reinvestment

The evolution from basic staking to liquid staking and further to liquid restaking demonstrates continuous improvement in approaches to capital optimization within the cryptocurrency space:

The main differences boil down to three aspects:

Access to Capital: Liquid restaking does not require abandoning the use of assets. They operate simultaneously across multiple directions, providing investor flexibility.

Asset Turnover: While in traditional staking assets are frozen, liquid restaking creates an environment of constant circulation through the issuance of liquid tokens ready for investment.

Capital Yield: Participants potentially earn a two-way income — through consensus rewards and through interaction of liquid derivatives with the DeFi ecosystem, significantly increasing the overall return on staked capital.