Liquid Native Restaking: The Future of Staking on EigenLayer and DeFi

06 Sep

06Sep

Liquid Native Restaking is quickly becoming one of the hottest topics in the EigenLayer ecosystem and the DeFi market. It has garnered significant attention from the community and major investment funds. But what makes Liquid Native Restaking so special? Let’s dive deeper into this innovative concept and explore its potential.

What is Liquid Native Restaking?

Restaking is a concept introduced by EigenLayer, allowing users to stake their Liquid Staking Tokens (LST) on the platform after their initial stake. Native Restaking, on the other hand, refers to the activities of Validators on the EigenLayer network. Typically, Ethereum Validators earn only from staking on Ethereum. However, with EigenLayer’s Native Restaking model, Validators on Ethereum can also earn additional income by participating in EigenLayer.

That said, Native Restaking comes with some inherent challenges. For example, becoming a Validator on Ethereum requires significant financial and hardware investments. Specifically, users must lock up at least 32 ETH (around $70,000 at the time of writing). Additionally, issues like security risks and slashing penalties make it even more complicated.

Liquid Native Restaking was developed to address the challenges of Native Restaking on EigenLayer. The core advantage of Liquid Native Restaking projects is that Node Operators can create and manage a node on Ethereum with just 2 ETH, which is significantly lower than the direct requirement on the Beacon Chain.

Furthermore, technologies like Distributed Validator Technology (DVT) help reduce the need for advanced hardware while enhancing security. These solutions not only make scaling easier but also improve the decentralization of the Ethereum network.

How Liquid Native Restaking Works

Liquid Native Restaking platforms generally follow a simple three-step process:

Step 1: Users deposit ETH into Liquid Native Restaking protocols and receive LST tokens, representing their stake rewards from both Ethereum staking and the activities of Node Operators on EigenLayer.
Step 2: Aspiring Node Operators must deposit a minimum of 2 ETH, while the remaining ETH is allocated from the pool of user deposits.Step 3: The Node Operators run their operations across both EigenLayer and Ethereum, maximizing their rewards. Meanwhile, the technologies behind Liquid Native Restaking aim to enhance security and decentralization.

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