2025 Liquidity Re-staking: Opportunities and Challenges Ahead

The Resurgence of Restaking Wave: Top Protocols Worth Watching

In the ever-evolving crypto market, liquid restaking is becoming a new favorite for enhancing capital efficiency. Compared to traditional staking, these protocols allow users to maintain asset liquidity while earning additional yields through DeFi.

According to the latest statistics, several mainstream restaking protocols have emerged, with total value locked (TVL) reaching billions of dollars, attracting more Ethereum stakers to participate.

Leading the Pack: Etherfi and EigenLayer

Etherfi ranks at the top with over $2.8 billion in TVL. Its innovation lies in allowing users to stake ETH in exchange for eETH, a native Ethereum liquid restaking token that can freely circulate within the DeFi ecosystem. Through collaboration with EigenLayer, Etherfi has expanded validation capabilities, providing security support for multiple modules.

EigenLayer holds the second position with over $1.5 billion in TVL. Its innovative model enables Ethereum stakers to extend their staked ETH or LSTs to other applications and earn extra rewards. This shared security design not only strengthens overall ecosystem security but also improves staker capital efficiency.

Rapidly Growing Newcomers

Puffer Finance locked in $850 million within just 13 days, becoming the second-largest liquid staking protocol on Ethereum. Its anti-slash technology and permissionless validator setup have attracted industry attention.

Renzo Protocol, with over $1 billion in TVL, simplifies EigenLayer processes to offer users higher yields than traditional staking. The protocol employs automated strategy management to reduce operational complexity for users.

Kelp DAO attracted over 10% of EigenLayer deposits within just 15 days of launch. Its rsETH token allows users to deposit LSTs for free and earn multiple layers of yield.

Protocols Focused on Yield Innovation

Pendle specializes in yield tokenization, splitting LSTs into principal tokens (PT) and yield tokens (YT), enabling investors to manage yield strategies more flexibly. Its 1-year growth of 2,076% reflects market recognition of its innovative approach.

Swell offers rswETH tokens, supporting LST deposits for free, and collaborates with Layer-2 projects like AltLayer and Chainlink to promote Layer-2 innovation.

Restake Finance, as the first modular liquid restaking protocol, ensures transparent operation through 1:1 support mechanisms and DAO governance. Its RSTK token serves both utility and governance functions.

Inception issues isolated liquid restaking tokens (iLRTs), reducing pooling risks and providing more refined strategy options.

Restaking vs Liquid Staking vs Traditional Staking

These three staking methods reflect the industry’s continuous efforts to maximize capital efficiency:

Core Advantages Comparison:

Traditional staking requires locking assets, limiting accessibility. Liquid staking provides immediate liquidity via LSTs, allowing users to stake and participate in DeFi simultaneously. Restaking further breaks through bottlenecks—users can earn multiple streams of yield through a restaking mechanism without unbonding their initial stake.

What is Liquid Restaking? Core Mechanism Breakdown

Liquid restaking builds upon liquid staking by introducing a new derivative token to enable yield compounding.

Basic Process:

First, users stake PoS tokens (like ETH) into a protocol, receiving liquid staking tokens (LSTs), such as stETH or eETH. These LSTs represent the original staked assets and can be freely traded or lent on DeFi platforms.

Next, users deposit these LSTs into a restaking protocol, which deploys them onto EigenLayer or similar platforms to support additional validation services. In this process, users receive liquid restaking tokens (LRTs), such as rsETH or rswETH.

Finally, LRT holders earn rewards from the original staking and from restaking validation, achieving multi-layered capital utilization.

Difference Between LST and LRT:

LST is a tokenized form of staked assets, providing liquidity. LRT is an advanced derivative of LST, embodying the concept of layered investment—it not only carries the original staking rewards but also potential gains from subsequent DeFi activities.

Opportunities and Risks of Liquid Restaking

Attraction Points

Liquid restaking offers investors three core advantages:

Enhanced Capital Efficiency — Same capital can generate yields across multiple protocols without splitting funds

Yield Compounding Mechanism — Participants earn both staking rewards and restaking rewards simultaneously

Lower Participation Barriers — No need to operate validation nodes, reducing technical complexity

Potential Risks to Watch Out For

1. Smart Contract Risks — Complex protocol architectures may contain vulnerabilities, risking fund loss

2. Slashing Risks — Validator misconduct can lead to slashing of staked assets

3. Liquidity Risks — Insufficient market depth may cause difficulties in liquidation or slippage

4. Decoupling Risks — LRTs may lose value correlation with underlying assets, especially during extreme market volatility

5. Counterparty Risks — Restaking involves multiple parties; failure of any link can trigger chain reactions

6. Regulatory Uncertainty — Changes in regional policies may impact service availability

How to Choose the Right Restaking Protocol

When selecting among many options, focus on:

Security Audits — Prioritize protocols audited by reputable firms (e.g., Code4rena, OpenZeppelin)

Supported Assets — Confirm whether the protocol supports your intended staking cryptocurrencies

Yield Structure Comparison — Compare APY, fee rates, and compounding cycles

Community Size & Transparency — Active communities and open operational data reflect protocol health

Risk Management Measures — Check for insurance pools, emergency funds, or risk controls

Summary

Liquid restaking marks a significant evolution in DeFi, combining the security of traditional staking with the flexibility of modern finance. From Etherfi’s market leadership to Puffer Finance’s rapid rise, and emerging players like Renzo and Kelp DAO, the entire restaking ecosystem is thriving.

However, opportunities come with risks. Investors should conduct thorough research, assess their risk tolerance, and start small to gain experience. Only with a deep understanding of mechanisms and cautious risk management can one truly seize the opportunities in the wave of liquid restaking.