What Is Restaking and How Does EigenLayer Work

EigenLayer has attracted over $15 billion in total value locked since launching on Ethereum mainnet, according to data from DeFiLlama. That makes it one of the largest DeFi protocols by deposits, surpassing established lending platforms. The rapid growth signals strong demand for a way to earn additional yield from already-staked ETH without unstaking it.

What is restaking in simple terms?

Restaking is the practice of using tokens that are already staked on a base layer blockchain (like Ethereum) to provide security to other protocols or services at the same time. Think of it as renting out your staked collateral to additional tenants while keeping it deposited with the original landlord.

In traditional staking, your ETH secures the Ethereum network and earns one stream of rewards. In restaking, that same ETH simultaneously secures Ethereum plus one or more external services — oracles, bridges, data availability layers, or rollup sequencers — and earns rewards from each. The key innovation is that no additional capital is required. You earn multiple yield streams from the same deposit.

The concept was formalized by Sreeram Kannan, a professor at the University of Washington, who founded EigenLayer as the first major restaking protocol. The academic paper underpinning EigenLayer argues that Ethereum’s massive validator set represents an underutilized security resource. Restaking unlocks that resource for the broader ecosystem. Read our staking fundamentals guide if you need background on how proof-of-stake works before diving into restaking.

How does EigenLayer work?

EigenLayer operates as a set of smart contracts on Ethereum that sit between stakers and external services. The core mechanism has three participants: restakers who deposit assets, operators who run validation software, and Actively Validated Services (AVSs) that consume the pooled security.

The process works like this: an ETH staker deposits their staked ETH (or liquid staking tokens like stETH, rETH, or cbETH) into EigenLayer’s contracts. They then delegate to an operator. That operator registers with one or more AVSs and runs the required validation software for each. When the AVS pays rewards, they flow back to the operator and the restakers who delegated to them.

According to EigenLayer’s documentation, the protocol supports two restaking methods: native restaking (pointing your Ethereum validator’s withdrawal credentials to EigenLayer’s contracts) and liquid restaking (depositing LST tokens like stETH directly). Native restaking earns the highest combined yield but requires running an Ethereum validator. Our research methodology includes reading protocol documentation directly for technical claims like these.

What are Actively Validated Services (AVSs)?

An Actively Validated Service (AVS) is any system that needs its own validation mechanism and chooses to rent security from EigenLayer rather than bootstrapping a new validator set from scratch. Before EigenLayer, every new protocol that needed economic security had to attract its own set of validators and incentivize them independently — an expensive and slow process.

EigenDA is the most significant AVS by adoption. It provides cheap data availability for Ethereum rollups, competing with Celestia and Ethereum’s own blob space. According to EigenLayer’s protocol page, over a dozen AVSs were live on mainnet when I last checked, with more in development. Each AVS sets its own slashing conditions and reward rates.

What are the risks of restaking with EigenLayer?

Restaking amplifies yield but also amplifies risk. The primary risk is compounded slashing: if a validator misbehaves on an AVS, both the AVS slashing penalty and the base Ethereum slashing penalty could apply to the same deposit. You could lose tokens from two directions simultaneously. This is the fundamental tradeoff of restaking — more yield for more exposure.

Smart contract risk is significant. EigenLayer’s contracts control billions of dollars in deposited assets. A vulnerability in the restaking contracts could lead to loss of funds. The protocol has been audited by multiple firms including Trail of Bits and Sigma Prime, but no audit guarantees safety. The Euler Finance hack in 2023 drained nearly $200 million from an audited protocol.

Operator risk is another concern. You delegate to an operator who runs validation software for multiple AVSs. If that operator has poor uptime or misconfigured systems, slashing penalties hit your deposit. Choosing a reputable operator with a strong track record is critical. Check your operator’s performance history on EigenLayer’s dashboard before delegating. This is not financial advice, but the due diligence process mirrors what we describe for evaluating staking platforms more broadly.

What is liquid restaking and how is it different?

Liquid restaking tokens (LRTs) are wrapper tokens issued by protocols that handle the restaking process on your behalf. You deposit ETH or stETH, receive an LRT in return, and earn combined staking plus restaking yield without managing operators or AVS selection yourself. The LRT is tradeable, providing liquidity that native restaking does not offer.

Major liquid restaking protocols include ether.fi (eETH), Puffer Finance (pufETH), Renzo (ezETH), and KelpDAO (rsETH). According to DeFiLlama data, ether.fi is the largest by TVL with over $5 billion deposited when I last checked. These protocols abstract away the complexity of choosing operators and AVSs, making restaking accessible to anyone who can use a DeFi application.

The tradeoff is another layer of smart contract risk. With liquid restaking, your funds flow through the base staking protocol (like Lido), then through EigenLayer’s contracts, then through the LRT protocol’s contracts. Each layer adds a potential failure point. I consider liquid restaking appropriate for users comfortable with DeFi risk, but not for beginners still learning basic staking. Start with simple delegated staking on our ETF and direct buying guide if you are new to crypto investing.

Frequently Asked Questions