Restaking
Restaking is a mechanism that allows users to leverage their staked assets to secure additional protocols or services, thereby earning extra rewards. In the context of the SAFU protocol, restaking plays a crucial role in providing security and insurance coverage for various DeFi products.
Restaking: Gaining extra yield in exchange for extra risk.
The liquid staking ecosystem of Ethereum has grown to be one of the largest success stories in the DeFi sector to date. With a TVL of over $46 billion on Ethereum alone, the ability to restake your ETH and increase your capital efficiency throughout Ethereum's DeFi ecosystem has been massively useful and one of the few examples of genuine utility occurring in the crypto industry.
Lido and Rocket Pool have led the way for years. Until recently, liquid staking had stagnated as a narrative as users had become accustomed to the utility of stETH - users began to participate heavily again after Eigenlayer, a native restaking protocol for ETH, began opening up deposits, growing to over $12 billion in TVL (Nov' 2024)
Since EigenLayer launched in June 2023, with its promise to leverage Ethereum's robust economic security to power a new wave of decentralized applications and infrastructure, the concept of restaking has quickly evolved from a novel primitive to a fully-fledged competitive sector within crypto.
You can think as Restaking as a two-sided trust marketplace;
Restaking allows users who have already staked ETH or other assets on Ethereum's consensus layer to opt into EigenLayer smart contracts (or other restaking platform like Symbiotic), thereby extending the security provided by their staked ETH to other applications within the network. This mechanism enables the aggregation of cryptoeconomic security, facilitating the validation of new applications being developed on Ethereum.
Making Ethereum stake available for use by other protocols is valuable for other protocols, because it lowers the cost of capital for stakers....you can think as it as a trust marketplace where protocols that need staked assets to secure service X, can match with stakers from the most protocol with the largest value staked, Ethereum.
Restaking potential lies in its ability to leverage the security of Ethereum's consensus layer to support a wide range of additional services and protocols. By allowing the restaking of ETH and other ERC2Os, EigenLayer, Symbotic, Karak (etc) create a more versatile and secure environment for the development of decentralized applications, making it a crucial component in the ongoing evolution of the Ethereum ecosystem.
PS: This explains Restaking using EigenLayer concepts but could be replicated for Symbiotic, Karak, Nektar and other restaking platforms
Restaking (Eigen Layer) Architecture Overview
Glossary
Restaking enables stakers to restake their Native ETH or other ERC20s to provide greater security for services in the EigenLayer ecosystem, known as Actively Validated Services (AVSs).
Operators are entities that help run AVS software built on EigenLayer. They register in EigenLayer and allow stakers to delegate to them, then opt in to provide various services (AVSs) built on top of EigenLayer.
Delegation is the process where stakers delegate their staked ETH (or other ERC20) to operators or run validation services themselves, effectively becoming an operator. This process involves a double opt-in between both parties, ensuring mutual agreement. Restakers retain agency over their stake and choose which AVSs they opt-in to validate for.
Actively Validated Services (AVSs) are services built on the EigenLayer protocol that leverage Ethereum's shared security.
Operators perform validation tasks for AVSs, contributing to the security and integrity of the network.
AVSs deliver services to users (AVS Consumers) and the broader Web3 ecosystem.
LRTs
Like LSD, LRT providers let users join EigenLayer restaking without becoming full operators or making a full Ethereum validator deposit. These protocols handle organizational matters and give investors a share of the reward from AVS operators.
So, LRT is built on EigenLayer, which is built on Ethereum's native staking and liquid staking platforms. This means that the assets of a retail user, who doesn't plan to run their own node, will be leveraged on four layers simultaneously:
Ethereum basic staking;
liquid staking platform (optional);
EigenLayer restaking pools;
liquid restaking service.
Benefits of Restaking in SAFU
Restaking in SAFU enables users to maximize yield while contributing to the security and reliability of DeFi insurance markets. However, it is important to understand and manage the associated risks.
Restaking Flow Example
Alice stakes 10 ETH in Lido and receives 10 stETH.
She restakes her 10 stETH in the SAFU protocol, supporting the USDe insurance market.
If a covered event (e.g., USDe depeg) occurs, a portion of Alice's restaked assets may be slashed to pay out claims.
If no event occurs, Alice earns both Lido staking rewards and SAFU yield.
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