Restaking in DeFi: An In-Depth Guide
Restaking in DeFi is quickly becoming one of the most talked-about innovations in crypto. It allows users to reuse their already staked ETH to secure multiple decentralized services, like oracles, bridges, and data layers, on top of Ethereum. Instead of earning rewards from just one protocol, you now earn from many, using the same capital.
The concept is similar to rehypothecation in traditional finance, where collateral is reused to unlock more value. In crypto, restaking brings that idea into a decentralized, programmable world.
At the center of this movement is EigenLayer, a restaking protocol built on Ethereum with over $10 billion in total value locked (TVL). It lets stakers opt in to support external services called Actively Validated Services (AVSs). Other platforms like Renzo and Ether.Fi build on this by offering liquid restaking tokens (LRTs) that stay usable across DeFi.
In this guide, we’ll break down what restaking is, how it works, its benefits, risks, and how to get started. Whether you’re staking ETH already or exploring new DeFi strategies, restaking is a concept worth understanding.
What Is Restaking in DeFi?
Restaking is when you take your already-staked crypto, usually ETH, and put it to work securing more than just Ethereum. You still earn regular staking rewards, but now your assets also help protect other systems like data layers, oracles, or bridges. In return, you earn additional rewards. That’s the core idea behind restaking crypto.
Here’s a simple analogy:
Staking is like renting out your house to one tenant (Ethereum).
Restaking is like subletting a few rooms to others (like EigenDA or oracle networks), without buying another house. Your ETH stays locked in Ethereum’s proof-of-stake (PoS) system, but now it’s also securing other services. That’s capital efficiency in action.
Now, enter liquid restaking.
Platforms like Renzo or Ether.Fi give you a liquid restaking token (LRT) in return for restaking. This token acts like a receipt. And just like Lido’s stETH in liquid staking, these LRTs can be used in other DeFi protocols. So your ETH isn’t just working twice, it’s also staying liquid.
What about restaking vs staking?
Staking only supports Ethereum. Restaking expands that support to other protocols, known as Actively Validated Services (AVSs). These Actively Validated Services (AVSs) rely on restakers to secure their networks instead of building their own validator sets from scratch. Examples include EigenDA (a data availability layer), oracle systems, and even cross-chain bridges.
And restaking vs yield farming?
Yield farming is about chasing high APYs, often across risky platforms. Restaking isn’t about hopping around for rewards. It’s about extending the same ETH to secure multiple layers of crypto infrastructure.
It’s one of the clearest attempts yet to turn Ethereum into a “security-as-a-service” model.
How Restaking in DeFi Works
Restaking starts with staking your ETH. You either run a validator or use services like Lido or Rocket Pool. That ETH helps secure Ethereum’s proof-of-stake (PoS) network, and you earn regular staking rewards.
Next, you opt into a restaking protocol like EigenLayer. This layer lets you reuse your already-staked ETH to secure other decentralized systems, called Actively Validated Services (AVSs).
Here’s a simple way to picture it:
Imagine you own a car. Normally, you’d use it just for Uber rides (staking). But with restaking, that same car also delivers food for DoorDash while still driving Uber passengers. You don’t need a second vehicle. You’re just using the same asset to do more work.
You choose which AVSs to support. For instance, you might secure EigenDA, an oracle network, or a cross-chain bridge. Each one offers different incentives and risks.
Smart contracts handle delegation, tracking, and penalties if things go wrong. You keep your original staking rewards and earn new ones from the AVSs. Some platforms even issue liquid restaking tokens (LRTs)—receipts that can be reused across DeFi.
Types of Restaking
There are two main types of restaking: native and liquid. They both help you earn extra rewards from staked ETH, but how they work (and who they’re for) is very different.
Native Restaking
Native restaking is for people who run their own Ethereum validator nodes.
You stake ETH directly on Ethereum. Then you opt into a restaking protocol like EigenLayer and register your validator to support other systems called Actively Validated Services (AVSs).
You’re in full control. You decide which AVSs to support. But there’s a catch: if those AVSs fail or misbehave, your staked ETH can get slashed. So, higher rewards but higher risk too.
Best for: Advanced users, node operators, or staking services with technical experience and infrastructure.
Liquid Restaking
Liquid restaking is for everyday DeFi users.
You don’t need to run a validator. Instead, you use liquid staking tokens (LSTs) like stETH or rETH that you already hold. You deposit these into platforms like Renzo or Ether.Fi and get liquid restaking tokens (LRTs) like ezETH in return. Basically, you trust the protocol to delegate to AVSs on your behalf.
These LRTs still earn restaking rewards, and you can use them in other DeFi apps too.
Best for: Users who want passive yield without managing complex infrastructure.
Benefits of Restaking
Restaking isn’t just another yield farming trick. It changes how Ethereum security and rewards can scale without needing more ETH. Here’s why restaking crypto is gaining so much attention.
1. Capital Efficiency
Restaking lets you do more with the ETH you’ve already staked. Normally, if you wanted to support multiple protocols, you’d need to unstake and redeploy your funds, wasting time, gas, and risking base rewards.
With restaking, one deposit works in multiple places.
Example: You stake 32 ETH to secure Ethereum. Then you restake it to help secure EigenDA, a data availability service. You earn rewards from both without touching your original stake. It’s like using one house as both a home and a co-working space.
2. Extra Yield from AVSs
Actively Validated Services (AVSs) are protocols that need security but don’t want to build their own validator networks. Through EigenLayer, they tap into Ethereum’s existing validators and pay you for the service.
That means:
- ETH staking rewards
- Restaking rewards from AVSs
- Bonus perks like airdrops or early access to new projects
3. Shared Security for New Protocols
Restaking makes Ethereum’s validator network available to emerging protocols. Instead of launching their own infrastructure, rollups, oracles, and bridges can “borrow” Ethereum’s trust layer.
Think of it like startups using AWS instead of building their own data centers, but for decentralized security.
4. Sustainable Ecosystem Growth
New protocols can fund security without printing tons of new tokens or raising massive capital. They use fees or small incentives instead.
This leads to healthier tokenomics, less dilution, and better long-term ecosystems.
Risks and Challenges
Restaking offers better yield and capital efficiency, but it also introduces new risks. You’re not just doubling your rewards. You’re also doubling your exposure.
1. Slashing from AVS Failures
When you restake, you agree to let your ETH be slashed not only for Ethereum-related issues, but also if an Actively Validated Service (AVS) you support misbehaves.
Example: You restake to secure an oracle network. If its validators collude or break consensus, your ETH could get slashed, even if you didn’t do anything wrong.
That’s the price of shared security. You gain rewards, but also share responsibility.
2. Smart Contract Risk
Platforms like EigenLayer, Renzo, and Ether.Fi rely on smart contracts to manage staking, delegation, and slashing. The more layers involved, the more ways things can break.
Example: A bug in a restaking contract or liquid restaking token (LRT) logic (like ezETH) could lead to fund loss, faulty slashing, or even drained liquidity pools.
Ethereum staking is battle-tested. Restaking protocols are still young and evolving.
3. Regulatory Uncertainty
Restaking has similarities to rehypothecation—reusing the same collateral for multiple things. That makes it a potential target for regulators.
Depending on your region, issues could arise around:
- LRTs being classified as securities
- Tax complications
- Platforms being forced to geo-block users
So look out for these.
4. Systemic Risk
EigenLayer dominates the restaking crypto space. If something goes wrong there, it could affect multiple AVSs, LRTs, and even Ethereum’s staking economy.
Example: If several AVSs fail at once, it could trigger mass slashing, cause LRTs like stETH or ezETH to depeg, and shake trust across the ecosystem.
How to Get Started With Restaking
Getting started with restaking crypto is easier than it sounds, especially if you’re already staking ETH or holding liquid staking tokens (LSTs) like stETH or rETH.
Here’s what you’ll need:
- A self-custody wallet like MetaMask, Ledger, or Rabbi (check out the best crypto wallets)
- Staked ETH (via Lido, Rocket Pool, Coinbase) or LSTs
- Access to a restaking platform
- For native restaking: use EigenLayer
- For liquid restaking: try Renzo, Ether.Fi, KelpDAO, or Puffer
Once you’re in, you can restake and choose which Actively Validated Services (AVSs) to support.
Beginner tips:
- Start small. Tdest the platform with a small amount first.
- Do your homework. Read slashing rules and know what each AVS does.
- Avoid chasing high APYs blindly. Look for audited, community-supported AVSs.
- Be careful with LRTs. They unlock DeFi use cases—but also add risk if markets swing.
- Stay informed. These platforms move fast. Follow updates on Twitter or Discord.
With the right tools and caution, it’s a smart way to earn more while supporting the next wave of decentralized infrastructure.
Taxes on Restaked Tokens
Restaking might boost your yield, but it can also complicate your taxes. If you’re earning rewards or minting new tokens, there’s a good chance you’re also triggering taxable events.
Let’s break it down.
Are Restaking Rewards Taxable?
Yes, in most countries. Just like staking, the rewards you earn from restaking crypto, whether it’s ETH, AVS tokens, or fees, are usually taxed as ordinary income. You owe taxes based on the token’s fair market value (FMV) on the day you receive it.
So if you’re earning ezETH or eETH from platforms like Renzo or Ether.Fi, that’s likely income, even if you haven’t sold a thing.
Keep in mind that if its value appreciates when and if you decide to sell it in the future, you might also be subject to capital gains taxes.
Are LST or LRT Transactions Taxable?
This part gets tricky.
When you deposit stETH into a liquid restaking protocol and receive ezETH in return, is that a taxable swap?
- Some say yes—you traded one token for another, like a stETH-to-ezETH exchange.
- Others say no—you’ve just wrapped your position, like going from ETH to wETH.
The IRS (U.S.) and most global tax agencies haven’t given clear guidance yet. This is still one of the gray areas of crypto taxation. Because of this uncertainty, many conservative filers treat minting liquid restaking tokens (LRTs) as taxable, just to stay on the safe side.
What About Slashing?
If your ETH is slashed due to AVS failure or validator misbehavior, it’s unclear whether it counts as a capital loss or simply a non-deductible protocol risk. So it’s best to keep detailed records just in case.
Bottom line: Restaking adds yield, but also adds tax complexity. Always talk to a crypto tax pro, and use a tool like Bitcoin.Tax to track and categorize your rewards properly.
FAQ
What is the difference between staking and restaking?
Staking is when you lock up ETH to help secure the Ethereum network and earn rewards.
Restaking takes that same staked ETH and lets you use it to secure other protocols too, like oracles, bridges, or data layers without needing extra ETH. You earn extra rewards, but you also take on more risk by supporting multiple systems.
What is an AVS in restaking?
An AVS (Actively Validated Service) is a blockchain-based system, like an oracle, bridge, or data layer, that needs validators to stay secure. Instead of setting up its own validator network, it uses Ethereum’s staked ETH through restaking. This lets the AVS “borrow” Ethereum’s security without rebuilding it from the ground up.
What are the risks of EigenLayer restaking?
Restaking with EigenLayer can earn you more rewards, but it also comes with risks.
Here are the main risks of restaking with EigenLayer:
- Slashing risk: You can lose staked ETH if an AVS you support fails or acts dishonestly.
- Smart contract bugs: Complex code could have errors or get hacked, leading to loss of funds.
- Unstaking delays: You can’t withdraw your ETH immediately; there’s a waiting period.
- Regulatory uncertainty: Tax rules and legal treatment of restaking and LRTs are still unclear.
- Centralization risk: If too many people use EigenLayer, it could become a single point of failure.