What if your staked tokens could do more than just sit idle, securing the Ethereum network? Imagine leveraging them to enhance security across multiple blockchains and DeFi protocols, all while earning additional rewards.
Enter the world of re-staking, where your assets work harder and smarter, opening new possibilities in decentralized finance.
What is re-staking?
Re-staking is an advanced staking mechanism allowing users to stake their already staked tokens to secure additional protocols, services or blockchains without un-staking from the original one.
For example, users who have staked ETH in lido and have received stETH, can stake those stETH on a re-staking protocol to support additional protocols, thereby earning extra rewards while maintaining their original staking commitments.
This extended use of staked assets enhances security, provides additional rewards, and increases capital efficiency within the blockchain ecosystem.
When users opt for re-staking, they have various options to choose from, each serving different purposes within the DeFi ecosystem: Secure oracles and blockchains, support DeFi protocols such as lending platforms, and DEXs, and participate in governance processes.
Each action has its own risk and rewards.
Slashing risk
Re-staking introduces a concept known as slashing risk. This is the potential for users to lose a portion of their staked tokens if they act maliciously or fail to perform their duties adequately within the protocols they are securing.
Since re-staking involves multiple protocols, the risk can compound, making it crucial for users to understand and manage these risks effectively. Platforms like EigenLayer implement rigorous checks and balances to minimize such risks, but users must still be diligent and aware of the potential for slashing.
Potential rewards
By supporting multiple protocols, users can earn additional incentives from each protocol they help secure. This means that the same set of staked tokens can generate multiple streams of income, significantly enhancing the overall yield compared to traditional staking.
These rewards not only come in the form of additional tokens but can also include governance tokens, fee discounts, and other benefits depending on the protocols involved.
Value proposition
Re-staking allows the security of a primary blockchain (like Ethereum) to be extended to secondary blockchains, Layer 2 solutions, or decentralized applications.
This helps in enhancing the overall security and reliability of these services without requiring them to establish their own validator networks.
At the same time, re-staking enables the same staked asset to be utilized across multiple platforms, maximizing the utility and efficiency of capital.
Validators earn rewards from several sources without needing additional capital investment.
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