2024-04-15 15:31:23
Ethereum staking means that staked Ether is used on the Ethereum network to support the security of other decentralized protocols. Restake mechanisms incentivize staked tokens to improve the overall functioning of the blockchain.
What is a restake?
Restaking is a process that enables more active use of tokens locked during staking on blockchain networks. In the case of Ethereum, which is a proof-of-stake (PoS) network, restaking allows users to reuse their already staked Ether, increasing their rewards and strengthening the security of the network. This is achieved by using staked tokens in collaboration with validators of different networks. Restaking thus activates tokens that would otherwise remain inactive on the blockchain, thus increasing staking rewards for participants.
Types of restake
There are two main forms of restake: native and liquid restake. Native restake is available to those running an Ethereum validating node. This works through smart contracts that monitor the assets staked in the validator’s node.
Liquid restake allows stakers to restake using Liquid Staking Tokens (LST), which offer additional rewards.
How does liquid restake work?
The operation of liquid restake can be demonstrated through the example of EigenLayer. With more than $250 million in locked value (TVL), EigenLayer is a bridge between Ethereum and other blockchain applications. The EigenLayer on smart contracts works through, allowing stakers to restake and contribute to the security of various platforms.
A restake allows protocols or Continuous Validation Services (AVS) to leverage the collective security of Ethereum’s stakers so they can evolve more efficiently. These AVSs, also known as EigenLayer modules, can form different networks.
Rest building concerns
Re-staking is the reuse of cryptocurrency already staked on the Ethereum network, when capital originally invested in a certain project or validator is invested in new projects or validators. This enables the multiple use of capital, which increases not only the yield, but also the risk. If capital is reused excessively and without control, it can lead to project instability. According to Vitalik Buterin, co-founder of Ethereum, restake protocols pose significant systemic risks because these protocols can transform the security structure of the blockchain.
Published on the BitcoinBázis page.
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