What is restaking and why does it add risk?
Restaking means using crypto you already staked to secure extra networks and earn more rewards. The same stake then answers to more than one slashing rule.
Vahe HakobyanEditor-in-chief
Updated Oct 6, 20263 min readFact-checked
On this page
- EigenLayer launched on Ethereum in 2023 and is well known.
- Liquid restaking tokens are receipts you can use in DeFi.
- Slashing can cut the original stake, not only rewards.
- Rewards often come as points or tokens, not fixed payouts.
- One asset can support more than one network at once.
New or small networks need validators, and they pay for that security. A restaker points already staked coins at those extra jobs.
How does restaking work?
You opt into extra services through a restaking protocol. EigenLayer, which launched on Ethereum in 2023, is the best known one. Operators run the validators and follow each service's rules, and some restaking protocols, or separate liquid restaking protocols built on top of them, also give you a liquid restaking token. It is a receipt for the restaked position.
How do people use restaking?
People restake to earn more from coins they already hold, without giving up the original staking position. Rewards vary and often arrive as points, new tokens or protocol incentives. A point does not promise an airdrop or a fixed payout.
- Earn points, tokens or incentives on top of the original staking rewards.
- Lend the liquid restaking token or use it as collateral.
- Pick which extra services and operators to opt into.
- Keep the first stake in place while other networks use it.
What risks does restaking add?
Restaking adds slashing risk. Slashing destroys part of a stake when a validator or an operator breaks the rules of a network it serves. Your coins now back several networks, so a failure in one can reach the stake you started with. Rewards can also fall, and points do not guarantee a payout.
How is restaking different from staking?
Plain staking puts your coins behind one network and pays you for that work. Restaking keeps that first position and adds other networks on top, so the same asset supports more than one network. The extra work brings extra rules and extra ways for the stake to be cut.
Frequently asked questions
The IRS treats crypto as property, so restaking rewards are generally taxable as income when you receive them and can determine their value. Points can be harder to value, and a later sale can produce a capital gain or loss. A tax professional can help with your situation.
No. Liquid staking gives you a token for staking on one network. Restaking puts that same stake behind extra networks, and a liquid restaking token covers the larger position.
Yes. You use a restaking protocol, and operators run the validators for you. You still carry the slashing risk.
