Restaking works in that already staked Ethereum tokens can be rehypothecated to secure a variety of applications and accrue rewards.
“Restaking” involves reusing staked Ether to earn fees and rewards. The restaked tokens can then help secure and validate other protocols. But many fear restaking could disrupt Ethereum’s chain itself.Ethereum restaking — proposed by middleware protocol EigenLayer — is a controversial innovation over the past year that has some of the brightest minds worried about the potential ramifications.
In essence, stakers lock up their tokens to commit to producing Ethereum blocks — an on-chain way of supporting development, regardless of fluctuations in highly volatile token prices. In short, restaking works in that already staked Ethereum tokens can be rehypothecated to secure a wider variety of applications and accrue additional rewards.So restaking is a crypto primitive for generating economic security from Ethereum’s nine years of concerted developer activity and project track record.
Kannan essentially seeks to export the “trust” generated by Ethereum for other projects across the ecosystem and other chains. “In crypto, mechanisms for trust mean that investors need skin in the game. The pseudonymous world needs carrots and sticks whereby validators are distributed.” He calls it “permissionless innovation.” The big idea for EigenLayer is to bridge blockchains and create super applications, taking the best each chain has to offer.
EigenLayer isn’t live yet, and it’s impact is still highly speculative, according to Anthony “0xSassal” Sassano, a full-time Ethereuem educator, founder of YouTube channelTo date, there’s only a smart contract for staked ETH to bootstrap the EigenLayer network, and perhaps given EigenLayer’s hype, people are depositing their ETH into that network, expecting to farm an unconfirmed airdrop of native EigenLayer tokens.
“Just like how Terra’s over-leveraged ‘safe’ collateralization of Luna was, there would always be a risk of participants over-leveraging into this new concept, and such a risk won’t be quantifiable until we see more data sets throughout the emergence of this new restaking narrative.” Sassano also notes that the functionality of Ethereum proof-of-stake was designed to make sure that there won’t be a sudden influx or outflux of validators, which would affect the core properties of Ethereum’s consensus mechanism.
Anything built on top of Ethereum introduces additional complexity and risk. Juan David Mendieta Villegas, co-founder and chairman at crypto market maker Keyrock, tells Magazine: He also sees restaking protocols akin to a venture capital arm for layer 1s that might discourage solo stakers and further centralize networks.
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