Analysis of Re-staking and Liquidity Re-staking Ecosystem

Introduction

Re-staking and liquidity re-staking have recently attracted widespread attention, especially from users looking to increase ETH returns based on the potential benefits brought by the ETH ETF. Data shows that the total locked value of these two categories (TVL) is growing rapidly, ranking fifth and sixth among all DeFi categories. Before discussing the additional benefits brought by re-staking and liquidity re-staking, let's first understand their basic principles.

Overview of Staking and Liquidity Staking

Ethereum staking is the process of contributing ETH to secure the network and earn additional ETH rewards. While staking ETH can yield returns, it also involves the risk of being penalized and the risk of insufficient liquidity due to the unstaking period.

Becoming a validator requires a significant upfront investment of 32 ETH, which is a high barrier for many. As a result, pooled staking services have emerged, allowing multiple users to combine their ETH to meet the minimum staking requirements.

Liquidity staking has emerged, allowing users to obtain liquidity tokens representing staked ETH. These tokens can accumulate rewards and can also be used to participate in DeFi activities to increase returns.

The Rise of Re-staking

Re-staking is a concept first proposed by EigenLayer, aimed at utilizing staked ETH to secure modules that cannot be deployed or verified on the EVM, such as sidechains, oracle networks, and data availability layers. These modules often require active verification services (AVS), and re-staking can leverage security from Ethereum's large validator set.

Comparison of Main Re-staking Protocols

EigenLayer, Karak, and Symbiotic are currently the main re-staking protocols. They differ in terms of supported assets, security models, execution layers, and so on:

• EigenLayer only supports ETH and its derivatives, which have high security but limited asset range.
• Karak and Symbiotic support a wider range of assets, offering more flexible security options.
• The core contracts of EigenLayer and Karak are upgradeable, while the core contract of Symbiotic is immutable.

The success of each protocol will depend on the cooperative relationships they can establish. Currently, the number of AVS built on EigenLayer is the highest, including EigenDA, AltLayer, and others.

Liquidity Re-staking Protocol Overview

The main liquidity re-staking protocols include EtherFi, Renzo, Puffer, Kelp, etc. They each have their own characteristics in terms of LRT types, supported assets, DeFi integration, and more:

• EtherFi and Puffer offer native LRT, accepting only ETH deposits.
• Renzo and Kelp offer LRT based on asset baskets, supporting deposits of multiple assets.
• Most protocols support Layer 2 and DeFi integration to enhance capital efficiency.

Growth Trends of the Re-staking Ecosystem

The amount of re-staked deposits has significantly increased since the end of 2023, with the liquidity re-staking ratio exceeding 70%. However, following the recent Eigenlayer airdrop, there has been a capital outflow, with some funds flowing to emerging protocols such as Karak and Symbiotic.

Conclusion

As of July 2024, nearly 33 million ETH have been staked, of which about 13.4 million ETH are staked through liquidity staking platforms, accounting for 40.5%. The ratio of restaking to liquidity staking is approximately 35.6%. With the removal of deposit limits on restaking platforms and expansion to other assets, it is expected to attract more funds in the future.