Blockdaemon Blog

Restaking Workshop Recap - Consensus 2024

Daemon News
Jun 6, 2024
Learn about restaking in context, EigenLayer, and Blockdaemon's staking support for institutions.

At this year's Consensus, Konstantin Richter, Blockdaemon CEO & Founder, led a workshop on the topic of staking, restaking, and Blockdaemon’s role in supporting institutions with industry leading infrastructure.

The recording for this workshop is hosted on the Consensus2024 site, with a full recap outlined in this blog.

Timeline of Ethereum Hardforks 

The Beacon Chain introduced staking to Ethereum, marking the beginning of the network's transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS).

Source: Blockdaemon

The Merge (Sep 2022) transitioned Ethereum's mainnet from PoW to PoS, significantly reducing energy consumption, and eliminating the need for miners to secure mainnet.

The Shapella Fork Update (Apr 2023) enabled the withdrawal of staked ETH for the first time, allowing staked ETH to become liquid. 

Dencun Fork (May 2024) focused on layer 2 (L2) scaling, while the upcoming Pectra fork is anticipated soon, with scope currently in discussion.

Ethereum’s Progress Post-Merge

Since The Merge, active validators have doubled to over 1,000,000. However, despite the increasing number of validators, overall rewards have trended downward due to various factors:

- Protocol Rewards: Steady but decreasing due to the rise in active validators.

- Transaction Fees: Reduced due to the bear market and increased activity on L2s.

- MEV (Maximum Extractable Value): Declined due to lower token price volatility, though this can spike during bull markets.

While rewards for stakers have decreased, this benefits the protocol by maintaining high security with low inflation and benefits users with low gas fees and MEV extraction.

What is Restaking? 

Restaking involves reusing staked collateral to provide economic security to various projects. For stakers, it offers additional reward opportunities but comes with increased risk. For Actively Validated Services (AVSs), it provides "security as a service."

EigenLayer Protocol

EigenLayer has made restaking prominent in the Ethereum ecosystem, though similar concepts existed in Cosmos IBC and traditional finance (via account control agreements).

EigenLayer’s Staged Rollout

EigenLayer's rollout strategy begins by bootstrapping restaking collateral through a points system on the supply side. The next step involves onboarding Actively Validated Services (AVSs) and node operators to establish the demand side infrastructure. Following this, EigenLayer will launch EigenDA as the first AVS and introduce the $EIGEN token through airdrops. The final phase focuses on enabling onchain rewards and slashing conditions, which will be individually determined by each AVS.

Source: Blockdaemon

Current State of Restaking

EigenLayer currently leads as the first restaking protocol on Ethereum, with more protocols expected by the end of the year. Actively Validated Services (AVSs) require economic security as a service, eliminating the need to launch their own PoS blockchain. Both retail and institutional stakers provide capital, seeking additional rewards despite increased risks.

Why Restake Now?

Restaking allows staked ETH to secure multiple protocols, boosting potential rewards. In addition, liquid restaking offers liquidity and the ability to leverage staking in DeFi lending, enhancing capital efficiency.

Currently, 27% of all ETH is staked, and only 4% is restaked. Significant growth potential exists particularly in restaking. Competing restaking protocols will make restaking more feasible for institutions. Currently more retail-focused, Liquid Restaking Tokens (LRTs) will see broader adoption within the next 6-12 months. By developing an understanding of (liquid) restaking now, stakeholders will be prepared for the next phase of Ethereum’s growth. Restaking rewards will also soon begin to flow. Slashing conditions will be much more complex than traditional staking networks, making the reliability of node operators crucial when considering risk management.

As risks diminish, restaking's appeal will increase, especially with regulatory clarity and mature reporting.

Restaking will become even more relevant around the time of the Pectra hard fork, likely to occur in late 2024. This update will likely raise the maximum effective balance to 2048 ETH, rendering 32 ETH increments obsolete and enabling auto-compounding of rewards.

Restaking with Blockdaemon

Blockdaemon was an early infrastructure provider for EigenLayer, actively participating in their Node Operator Working Group and becoming one of the first to support their EigenDA AVS launch.

Blockdaemon has also added single-click support for Eigenlayer as part of a significant upgrade to the staking flow design in the Blockdaemon App. The new UI makes it easier and more intuitive than ever to stake and restake using the Blockdaemon app. 

In addition to restaking, Blockdaemon offers comprehensive dashboard, reporting, API, and in-app staking capabilities for ETH staking. 

To learn more, book a call with the Blockdaemon team today. 


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