Restaking

Restaking is a mechanism that allows users to reuse tokens that have already been staked in a Proof of Stake (PoS) system to generate additional yields. By leveraging restaking, users can maximize the utility of their staked tokens by participating in multiple staking opportunities simultaneously. This can result in higher overall returns. However, with the potential for greater rewards comes increased risk, specifically the possibility of additional slashing. Slashing occurs when a staker's funds are partially or fully deducted as a penalty for protocol violations, such as downtime or double-signing. Therefore, while restaking can enhance earnings, it also exposes stakers to higher risks of losing their assets if the protocols they restake into encounter issues.

The restaking mechanism is particularly beneficial for new protocols seeking security. Instead of creating a new token and persuading investors to stake it, these protocols can leverage existing staking infrastructures. By utilizing platforms that support restaking, new protocols can tap into the security provided by already staked tokens in well-established networks. This model reduces the barriers to entry for new projects, allowing them to focus on innovation and development rather than on building a robust and secure staking environment from scratch. This approach not only provides immediate security but also aligns the incentives of stakers with the success of multiple networks, thereby fostering a more interconnected and secure blockchain ecosystem.

EigenLayer is a prominent example of a platform that enables restaking. In this framework, protocols seeking enhanced security are referred to as Actively Validated Services (AVS). Restakers have the option to either directly operate nodes that validate the services provided by AVS, ensuring their correct operation, or delegate their staked tokens to existing operators who perform these validation tasks. This dual option allows restakers to choose their level of involvement and risk, either by taking an active role in securing these services or by passively earning rewards through delegation. EigenLayer’s model illustrates the potential of restaking to create a more secure and versatile blockchain landscape by connecting existing staking pools with emerging projects in need of validation and security.

An example of an AVS in the oracle space is RedStone AVS, which utilizes this model to provide secure and reliable oracle services.