Crypto Lexicon
Restaking and Shared Security
Restaking is a mechanism pioneered by EigenLayer that allows users with staked Ethereum (or Liquid Staking Tokens) to repurpose their capital to secure secondary protocols, bridges, and oracle networks simultaneously, earning additional yield.
The Problem with Bootstrapping New Networks
Historically, every new decentralized network (such as an oracle network, cross chain bridge, or sidechain) had to create its own token and build a dedicated multi million dollar validator trust pool from scratch to prevent 51 percent attacks.
Restaking solves this by allowing developers to borrow the multi billion dollar security pool of Ethereum directly.
How EigenLayer and AVS Work
- Staked Capital Reuse: Users deposit staked ETH or LSTs (like stETH) into restaking smart contracts.
- Actively Validated Services (AVS): Secondary protocols (oracles, data availability layers, execution rollups) opt in to use this capital for security validation.
- Dual Yield Stream: Stakers earn their base Ethereum consensus staking yield plus additional protocol rewards from the AVS networks they validate.
Systemic Risks and Slashing Cascades
- Extended Slashing Conditions: By restaking, you agree to additional slashing rules set by each AVS. A software bug in an AVS can result in validator capital being burned.
- Systemic Leverage: Chaining multiple layers of synthetic receipts (Liquid Restaking Tokens) creates financial leverage that can unwind violently during extreme market contractions.
Explore decentralized finance mechanisms in our Complete Guide to Decentralized Finance (DeFi).
Frequently asked question
What is Restaking and Shared Security?
Restaking is a mechanism pioneered by EigenLayer that allows users with staked Ethereum (or Liquid Staking Tokens) to repurpose their capital to secure secondary protocols, bridges, and oracle networks simultaneously, earning additional yield.