Liquid Restaked Tokens — The Future of DeFi?
CryptoRankActively Validated Services (AVS) and Pooled Security
EigenLayer allows ETH to be restaked into multiple protocols known as Actively Validated Services (AVS), thereby protecting multiple networks/services simultaneously with Pooled Security. Bridges, oracles, and sidechains are just a few examples of AVS.
The main advantage of AVS is the increased security due to the use of the Ethereum consensus layer.
The EigenLayer model is innovative but has a significant drawback — once your Liquid Staking Tokens (LST) are locked, they become illiquid.
Benefits and Risks of Liquid Restaked Tokens (LRT)
Liquid Restaked Tokens (LRT) offer a solution to this problem, allowing you to unlock this liquidity and add another layer of leverage to increase returns.
Benefits:
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Unlocking previously placed tokens for use in other DeFi protocols.
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Increased profitability due to additional leverage.
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No manual work is required as DAOs or protocols manage repositioning.
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Savings on gas fees while optimizing returns.
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Diversification and risk reduction.
Risks:
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Loss of assets due to misconduct.
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Hacking of smart contracts.
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High sensitivity to volatility; there will be a cascading drop in the case of a Black Swan.
Development and The Future of Liquid Restaked Tokens
Restaking is a logical extension of the LSDFi narrative, and it could bring huge liquidity to DeFi, as there are already 27M Eth staked in smart contracts.
LRTs are in the early stages of development, but there are already several projects that are actively developing in this direction: Stader Labs, Astrid Finance, InceptionLST, RestakeFi, Octopus Network, Tenet, EigenLayer.
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