What is Restaking?

Restaking lets crypto investors earn additional yield from already-staked assets. Learn how restaking works, where the rewards come from, and the risks involved.

What is restaking in crypto?

Restaking is the process of using already-staked crypto assets to secure additional protocols and earn additional rewards.

Normally, when investors stake ETH or another proof-of-stake asset, those funds only help secure one blockchain. Restaking changes that by allowing the same collateral to secure multiple services at once.

There are two main forms of restaking:

• Native restaking: Investors restake directly with validator infrastructure.

• Liquid restaking: Investors use liquid staking tokens like stETH, eETH, or rsETH through third-party protocols.

The idea is simple: instead of earning yield from one source, investors can stack multiple layers of rewards on top of the same collateral. This is known as compostability in DeFi.

For example, an investor could stake ETH for normal Ethereum staking rewards, receive stETH from Lido, then restake that stETH through EigenLayer to earn additional yield from actively validated services (AVSs).

How does liquid restaking work?

Liquid restaking combines liquid staking protocols with restaking protocols.

Here’s how it works:

1. An investor stakes ETH through a liquid staking provider like Lido or EtherFi.

2. The investor receives a liquid staking token like stETH or eETH.

3. That liquid staking token is deposited into a restaking platform.

4. The protocol uses that collateral to secure additional networks or services.

5. The investor earns multiple streams of yield from one original asset.

The yield comes from several places at once:

• Ethereum staking rewards

• Restaking rewards from AVSs

• Liquidity incentives

• Protocol token rewards or points campaigns

This is why restaking yields are often higher than normal staking yields. Investors are effectively taking on additional risk in exchange for additional rewards.

Some protocols also issue liquid restaking tokens (LRTs) like ezETH or rsETH. These tokens represent restaked positions and can still be used across dApps while generating yield, like LP tokens.

Bonded vs. unbonded restaking

Bonded restaking means the collateral is actively tied to validator performance and can be slashed if validators misbehave or fail. This model is closer to traditional Ethereum staking, where validators risk losing part of their collateral for malicious behavior or downtime.

Unbonded restaking removes some of those direct validator obligations. Instead of actively securing networks with slashable collateral, the protocol may use softer trust assumptions or off-chain coordination systems.

Bonded restaking generally offers stronger security guarantees but comes with higher slashing risk. Unbonded restaking is often more flexible but may provide weaker economic security.

How to restake?

Restaking is relatively straightforward for Ethereum users.

1. Buy ETH.

2. Stake ETH through a staking platform like Lido, Rocket Pool, or EtherFi.

3. Receive a liquid staking token like stETH or eETH.

4. Connect your wallet to a restaking protocol like EigenLayer.

5. Deposit the liquid staking token into the protocol.

6. Start earning additional restaking rewards.

Some protocols now simplify this process into a single-click experience where staking and restaking happen automatically.

What are the benefits of restaking?

Obviously, the main benefit of restaking is additional yield, and during bull markets, restaking rewards can significantly outperform standard staking returns.

But restaking also improves network security across the broader ecosystems. Instead of every new protocol needing to bootstrap its own validator network from scratch, projects can tap into existing economic security from Ethereum validators and stakers.

What are the risks of restaking?

Restaking carries the traditional risks of staking, and some extras.

The biggest risk is slashing. If validators securing additional services fail or behave maliciously, investors may lose part of their collateral.

Smart contract risk is another major risk. Restaking protocols add additional layers of complexity, integrations, and dependencies, increasing the chance of exploits or bugs.

Finally, there’s also liquidity risk. Some liquid restaking tokens can trade below their underlying asset value during periods of market stress.

Is restaking supported on other chains than Ethereum?

Yes. While Ethereum dominates the restaking market currently, restaking is expanding to other ecosystems.

Babylon brought a form of Bitcoin restaking to the market by allowing BTC holders to help secure proof-of-stake chains without bridging Bitcoin directly onto other networks.

Solana has several growing restaking protocols, including Jito and Solayer.

Meanwhile, Cosmos already uses forms of shared security and validator delegation that overlap with many restaking concepts.

What are the best restaking protocols?

EigenLayer restaking

EigenLayer is the largest restaking protocol on Ethereum. The platform introduced the concept of shared Ethereum security for AVSs and helped kickstart the entire restaking sector. Users can restake native ETH or liquid staking tokens to earn additional rewards on top of standard Ethereum staking yield.

Babylon restaking

Babylon brings restaking concepts to Bitcoin. Instead of bridging BTC onto other chains, Babylon allows Bitcoin holders to contribute economic security to proof-of-stake networks directly from the Bitcoin ecosystem.

EtherFi restaking

EtherFi combines liquid staking with an integrated restaking infrastructure. Users receive eETH when staking ETH, which can then be used across DeFi protocols and restaking applications to generate additional yield streams.

Don’t forget the tax bill…

Staking, liquid staking, or restaking – it all comes with a tax bill. Generally, new tokens from staking are additional income and subject to income tax. But it does depend on how your specific protocol works, so check out our DeFi taxes guide for more information.

Whatever your investments, Koinly can calculate your taxes. Just connect your wallet to automatically import your read-only transaction history, and Koinly will do the rest to categorize and calculate your taxes.