Original author: Mix Web3

The Restaking protocol has made Eigenlayer the most popular infrastructure project on Ethereum. The core team EigenLabs received $50 million in financing, led by Blockchain Capital, with participation from well-known VCs in the industry such as Coinbase Ventures, Polychain Capital, Bixin Ventures, and Hack VC.

According to the official tweet on May 2, the first phase of EigenLayer mainnet will be launched soon, and will support Liquid Restaking and Native Restaking. EigenLayer hopes to provide additional staking opportunities for ETH holders who choose to join by introducing the Restaking service, and promote project innovation in the Ethereum ecosystem by reducing the security cost of AVS.

It has to be said that Restaking once again verified the power of Web3 composability.

What is Restaking?

Restaking was first proposed by Sreeram Kannan, the founder of Eigenlayer. Eigenlayer is a decentralized trust market in the Ethereum ecosystem, which aims to expand the trust network of Ethereum. Its core mechanism, Restaking, allows ETH that has been staked on Ethereum to be staked again on other consensus protocols, allowing it to share the almost unshakable economic security of Ethereum and ensure its own safe startup and operation. In addition to receiving Ethereum staking rewards, ETH stakers can also get the Restaking income provided by AVS.

Essentially, Restaking is a shared security mechanism that allows the same assets to be pledged to multiple "decentralized applications/blockchains" at the same time to provide security for them. Generally speaking, new "decentralized applications/blockchains" will choose to join a blockchain ecosystem that is sufficiently secure and compatible with their own projects, and attract pledgers of this blockchain by issuing rewards; pledgers can pledge their already pledged assets to this new "decentralized application/blockchain" again and receive another share of the reward income.

The so-called shared security is to allow a blockchain to enhance the security of its own blockchain by sharing the value of another blockchain's verification nodes. For example, Polkadot's "slot solution", Octopus Network's "LPoS" proof of stake, Cosmos' "Replicated Security", Avalanche's "subnet" and Polygon's "supernet" are all players in the field of shared security.

Just a few months after Eigenlayer proposed the concept of Restaking, Octopus Network, a leading infrastructure project in the NEAR ecosystem, announced the follow-up of Restaking services. Octopus Network allows $NEAR holders to stake NEAR public chains while restaking for application chains, providing security to obtain staking rewards provided by application chains.

I believe that other Layer 1 public chain Restaking projects are also in the works. If any project is officially announced, the author will conduct research and share it as soon as possible.

Why is Restaking so highly anticipated?

As the narrative of multi-chain networks and application chains gradually gains popularity, it becomes particularly important to provide lower-cost and more decentralized shared security services for the secure startup and operation of blockchains.

Usually in various shared security solutions, there are three key stakeholders, namely "decentralized applications/blockchains", "blockchains providing shared security" and "stakers". The Restaking mechanism not only maximizes the interests of the three parties, but also completely unifies the interests of the three.

1. Decentralized Applications/Blockchain

"Decentralized applications/blockchains" represented by middleware chains and application chains require extremely high economic and time costs if they want to achieve secure startup and operation by building their own verification node network.

The Restaking solution is chosen because the "decentralized application/blockchain" will first join a blockchain ecosystem that is sufficiently secure and compatible with its own project. Its community has a large number of pledgers who can serve as security service providers, and can directly utilize its existing billions or even tens of billions of dollars in security.

"Decentralized applications/blockchains" can flexibly obtain and adjust the amount of pledge and security level through rewards according to the security needs of their own different development stages. For example, the security level can be relatively low in the early stage of project launch, and can be adjusted to a higher security level through governance when the assets increase in the later stage.

At the same time, Restaking allows new projects to be more closely tied to the selected ecosystem, helping to gain support from the ecosystem.

2. Pledger

From the perspective of the staker, Restaking is the best choice. In addition to staking for the original blockchain and earning rewards, the Restaking mechanism allows the same staked token to be staked on other blockchains to provide security for them, thereby obtaining another security reward.

The compound income brought by Restaking is the most capital-efficient staking method at present.

Gabriel Haines used a 7-second magical video to succinctly describe the huge appeal of Restaking to stakers: "You take your staked ETH... and you stake it again."

3. Blockchain that provides shared security

Blockchains that provide shared security are usually Layer 1 public chains based on PoS.

First of all, Restaking solves the problem that the original crypto-economic security of blockchain is difficult to transfer and expand to other protocols in the ecosystem: for example, Ethereum is the blockchain with the highest security level, but the security level of various middleware protocols in its ecosystem is significantly lower than that of Ethereum.

Secondly, Restaking creates more economic value for pledged tokens. The scale of the blockchain token pledge market will be greatly expanded, and the value ceiling of pledged tokens will be unprecedentedly improved.

With the increasing number of Restaking projects, the blockchain that provides shared security will inevitably become the hub blockchain with the highest security, the most stakers, the most application layer protocols, the most Web3 users, and the most encrypted assets in the entire ecosystem. The feedback effect of the Restaking project further enhances the economic security and value capture ability of the blockchain.

The best part is that blockchains provide shared security at no additional cost.

The growth flywheel built by Restaking

Each decentralized application/blockchain that adopts Restaking is like a bond market, with different degrees of productivity and yield. Part of its value will continue to flow into the blockchain ecosystem and be converted into the appreciation of the pledged token.

The use of Restaking by stakers brings higher returns, which not only increases the value of the staked tokens, but also stimulates the motivation to continue staking. When stakers reinvest these returns into the staking pool, the entire Restaking shared security model forms a logical closed loop of the value growth flywheel.

Of course, as an emerging thing, Restaking also has various potential risks, such as possible centralization risks, risks brought by high leverage, cross-domain MEV, and how to establish a review market, which need to be continuously improved through innovation.

I will discuss this in a subsequent article in the Restaking series.

Disclaimer: This article is for informational purposes only and should not be used as legal, tax, investment, financial, or any other advice.