Is the Re-staking Market Welcoming Spring? A Review of Potential Projects in the Re-staking Track

1. Reasons for the Resurgence of EigenLayer's Popularity

With the approval of the Bitcoin spot ETF, Ethereum also welcomes good news: the market expects the approval of the Ethereum spot ETF, and the Cancun upgrade is coming soon, reviving Ethereum, which has been dormant for a long time.

The amount of Ethereum staked continues to rise, and the demand for re-staking is increasingly prominent. EigenLayer allows users to re-stake ETH, liquid-staked ETH, and LP tokens to other sidechains, oracles, middleware, etc., to earn validation rewards as nodes. This enables third-party projects to enjoy the security of the ETH mainnet, while ETH stakers can also gain more rewards, achieving a win-win situation.

The renewed staking craze has become the focal point of the Ethereum ecosystem as EigenLayer increases the LST staking limit. In just one month, EigenLayer has absorbed over 500,000 Ethereum, with a TVL exceeding $1.6 billion, jumping to become the 12th top protocol on the Ethereum chain.

Recently, EigenLayer announced that it would provide restaking services for Cosmos subchains, which is significant for both Ethereum and Cosmos. EigenLayer's restaking service for Cosmos subchains enables Cosmos to gain the security of Ethereum, while also opening up new avenues for incremental yields for Ethereum stakers.

The first AVS using EigenLayer validation service - EigenDA is about to launch, and its DA service narrative has also become the market focus with the skyrocketing of Celestia token TIA.

2. Potential Projects in the Re-staking Track

The re-staking track not only includes EigenLayer, but also the derivative projects under the Restaking narrative contain opportunities. Re-staking is mainly divided into four categories:

1. LSD Restaking: Stake the LST( obtained from the LSD protocol, such as stETH, cbETH), into EigenLayer for further staking.

2. Liquid-LSD Restaking: Through the LRD protocol ( such as Kelp DAO ), the LST is delegated to the protocol to be deposited into EigenLayer for restaking, and users receive the collateral receipt token LRT.

3. Native Restaking: Validators use the EigenPod smart contract to redirect their validator withdrawal receipts to EigenLayer.

4. Liquid Native Restaking: Projects like etherf.fi or Puffer Finance that offer small ETH node services provide the ETH within the node to EigenLayer for staking.

Here are five re-staking projects that have not yet issued tokens. These projects can earn their respective project points while also earning EigenLayer points:

Kelp DAO

Kelp DAO is a Restaking project launched by the multi-chain LSD project Stader Lab, belonging to the Liquid-LSD Restaking type. Currently, deposits of Lido's stETH and Stader's ETHx are open, but deposits are paused due to the full quota of EigenLayer LST. Kelp DAO has launched a points system as a sub-project of Stader Lab, and it is expected to issue its own tokens in the future. One can look forward to the synergy between SD( Stader Lab token ) and Kelp DAO.

Swell

Swell is an established LSD protocol that recently announced its entry into the Liquid Restaking field, belonging to the Liquid Native Restaking type. After adding the restaking feature, users can deposit ETH in exchange for rswETH, unrestricted by EigenLayer LST quota limits. Swell has not yet issued its tokens, creating expectations for an airdrop, and its LST token swETH is favored by airdrop hunters, ranking as the second staking asset in EigenLayer. Participating in LSD and restaking can earn points.

ether.fi

ether.fi belongs to the Liquid Native Restaking type and has received $5.3 million in seed funding from BitMEX founder Arthur Hayes. ether.fi implements ETH staking in a decentralized, non-custodial manner and provides restaking services. As it is native ETH restaking, it can continue to be deposited without being affected by the EigenLayer LST limits. Its collateral certificate token eETH( and wrapped token weETH) are currently among the few liquid LRT collateral certificate tokens.

Renzo

Renzo is also a type of Liquid Native Restaking and is not subject to the EigenLayer LST deposit limit, and deposits are still available at the moment. However, note that the ETH deposited into Renzo is currently not redeemable, and the collateral certificate ezETH cannot be transferred, putting it in a locked state in the short term. On January 16, Renzo announced the completion of a $3 million seed round financing, which provides some security assurance. Compared to similar protocols, Renzo has a smaller locked amount, and currently appears to offer a better cost-performance ratio. However, due to the method of gaining points rewards through user acquisition and the undisclosed team background, as well as the lack of redemption, it has been questioned by some users.

Puffer Finance

Puffer Finance is a liquid staking protocol that is anti-penalty, similar to ether.fi, and belongs to the Liquid Native Restaking type. Staking is not yet open. Puffer Finance has raised $6.15 million in seed funding led by Jump Crypto. EigenLayer requires a threshold of 32 ETH for general Ethereum restaking nodes, while Puffer's restaking function lowers this threshold to below 2 ETH, aiming to attract small nodes to participate.

3. An Alternative Way to Participate in Re-staking Using Pendle

Pendle is a decentralized interest rate trading market that offers trading of PT( principal tokens and YT) yield tokens. Trading YT through Pendle can accelerate the acquisition of ether.fi and EigenLayer points.

Enter the Pendle YT-eETH trading, and purchase YT-eETH. Holding YT-eETH can earn you stake rewards, ether.fi double points, EigenLayer points, and Pendle trading rewards. Currently, 1 eETH can buy approximately 11 YT-eETH, equivalent to 11 times leverage.

The YT price gradually decreases as the expiration date approaches, essentially exchanging time for stake returns and points. You can also choose to form LPs to earn rewards, which carries lower risk but may face impermanent loss, resulting in relatively low efficiency in acquiring points.

4. Potential Risks of Re-staking

Re-staking, as an emerging concept, provides stakers with more opportunities to participate in different networks and increase their returns. However, re-staking also carries some potential risks:

1. Fine Risk: The risk of losing staked ETH due to malicious activities is increasing.

2. Centralized Risk: An excessive number of stakers moving to protocols like EigenLayer may pose systemic risks to Ethereum.

3. Contract Risk: The smart contracts of various protocols may have security vulnerabilities.

4. Multi-layered risk accumulation: Re-staking combines the original staking risks with additional risks, forming multi-layered risks.

5. Summary

The ETH/BTC exchange rate rebounded strongly after the approval of the Bitcoin spot ETF. With positive factors such as the Cancun upgrade and the Ethereum spot ETF, the Ethereum ecosystem is expected to warm up. The main themes of the Ethereum ecosystem moving forward are the direct benefits of the Cancun upgrade to the L2 sector and the restaking ecosystem of EigenLayer.

Participating in the re-staking projects mentioned in the text is currently a cost-effective choice, allowing for multiple benefits from a single investment. However, it should be noted that the Altlayer airdrop rules mention that airdrops will be given to EigenLayer stakers, and it is still unclear whether staking to protocols like Kelp DAO and Renzo can be recognized as EigenLayer stakers.

We also need to realize that continuously nesting re-staking essentially creates speculative leverage for liquidity. While it brings higher returns, it also amplifies risks; any layer of the protocol experiencing contractual issues could lead to user asset damage.