Okay, so I just learned what Eigenlayer was and thought it would be a good idea to share what i have learned with you. I know everyone is busy in their own lanes of crypto, at this point there is too much going on to keep up with everything. This article aims to give you all the necessary information you need to know about EigenLayer, its risks, its benefits, and if you should be restaking or not.

What is Eigenlayer?

Eigenlayer is a platform that bootstraps new proof of stake systems. It connects stakers to infrastructure builders and allows for security to be shared across the network. Staking your ETH enables us to share the security on protocols other than Ethereum while getting a reward in the process. On Eigenlayer, there is no financial activities going on, no one is swapping or lending out your staked Ether.

Right now, I think EigenLayer is why some of the APYs on ETH (specifically on Blast) are so high. When you are lending or LPing into a pool this ETH can then be restaked to earn additional points on your money.

Native Restaking vs. Liquid Restaking

Restaking enables stakers to restake their Native ETH or Liquid Staking Tokens (LST) to provide greater security for services in the EigenLayer ecosystem, known as Actively Validated Services (AVSs).

Native Restaking describes those that are specifically staking on EigenLayer’s smart contracts (EigenPod). To do this you must be a node validator meaning you will be going through a process that I do not understand myself. You will have to create an EigenPod, deploy new validators, and set withdrawal credentials. If you want information on this you should read it directly from their docs (here).

Liquid Restaking describes those that will stake their ETH in a platform like Lido and get a token back like stETH. Once you get these tokens from a staking service you can restake them for more rewards.

What Are the Benefits of Restaking?

• Collective Participation Drives Adoption and Security

• More Rewards for ETH Stakers

• Security for new protocols

I have been using Blast pretty much since the beginning and it is now apparent to me that you can restake your ETH. This allows for more rewards to be given out but before doing this you should weigh out the risks associated with it.

What Are the Risks?

• Risk of Slashing

• Opportunity Costs

• Smart Contract Risks for LST Services

• Whale Caps?

When I first started looking into this my mind immediately went to rehypothecation. I thought this was going to add a bunch of systemic risks to crypto that could lead to complete meltdowns like we had with Luna last bull run, but from examining closer on how these AVSs work, the risks seems to be more one-off rather than being completely systemic.

For those that do not know, slashing is when a validator is a being a bad actor, whether it is an accident or malicious. When a node gets slashed for providing false or fraudulent data, they will lose the ETH that they have staked.

If you are interested in learning more about EigenLayer and what its possibilities are we suggest looking and reviewing their docs.