As Ethereum staking and restaking protocols gain immense popularity, stakers often face a frustrating trade-off: lock up assets to secure networks and earn yield, or keep tokens liquid to participate in DeFi. But can Liquid Restaking Tokens (LRTs) bridge this gap?
Liquid Restaking Protocols take underlying staked assets or Liquid Staking Tokens (LSTs), restake them into Actively Validated Services (AVSs), and issue a derivative LRT representing the user's position. This allows users to retain full liquidity, enabling them to trade, lend, or use their restaked assets across various decentralized finance (DeFi) platforms while simultaneously compounding multiple layers of yield.
LRTs maximize capital efficiency by unlocking liquidity for locked assets, though users must carefully navigate smart contract vulnerabilities and compounding protocol risks.