The crypto market recently experienced a sharp, sudden correction just ahead of the Bitcoin spot ETF decision. However, following the initial panic, Ethereum ecosystem tokens like LDO and ARB rebounded strongly. Smaller Ethereum L2 tokens, such as Metis, even reached new highs. This suggests continued market confidence in the Ethereum ecosystem.
With L2 tokens already seeing significant pumps and many liquid staking projects offering only beta-level returns, investors are looking for the next emerging narrative within Ethereum.
One major, yet still unfolding, catalyst is restaking and EigenLayer.
What Are Liquid Restaking Tokens (LRTs)?
Restaking is not a new idea. EigenLayer introduced the concept to Ethereum in June 2023. It allows users to restake their already-staked Ethereum or Liquid Staking Tokens (LSTs). This provides additional security to various decentralized services on the network, all while earning extra rewards.
If we ignore the complex technical details, the investment logic is simple:
- Staking on Ethereum provides security and yields rewards.
- Restaking aims to provide more security and, crucially, more rewards.
So, how does this work in practice? Here’s a simplified flow:
- You stake your ETH with an LSD provider (e.g., Lido).
- You receive an LST (e.g., stETH).
- You restake that stETH into EigenLayer.
- You earn yields from both steps 1 and 3.
This seems perfect: two yields for one asset. However, a critical problem emerges: locked liquidity. Your LST, once restaked in EigenLayer, is immobilized and cannot be used elsewhere in DeFi to generate additional yield.
In a market obsessed with capital efficiency, locked liquidity is a major hurdle. This is where Liquid Restaking Tokens (LRTs) come in.
Understanding the LRT "Nesting Doll" Model
Think of LRTs as proof-of-deposit receipts. You deposit ETH to get an LST (like stETH), which is a receipt proving your initial stake. You can then deposit that LST into a restaking protocol to receive a new receipt—the LRT. This LRT proves you have restaked your LST.
Your underlying asset is still ETH, but you now have three layers of assets: your original ETH, the LST, and the LRT. Each layer can potentially be used in different DeFi activities (staking, restaking, lending, collateralizing), multiplying your opportunities to generate yield with the same initial capital.
LRTs solve the liquidity problem inherent in basic restaking. They unlock the capital efficiency that the market demands. As Ethereum regains focus, the narrative around solving EigenLayer's capital efficiency could propel LRTs into the spotlight.
Promising Projects in the LRT Ecosystem
Several projects are already working on LRT solutions. While some established names have seen price discovery, we will focus on a mix of lower-market-cap tokens and pre-token projects that may hold potential.
Established Players with Lower Market Caps
SSV Network ($SSV)
SSV Network, a known player in liquid staking, has seamlessly expanded into restaking. It allows EigenLayer validators to分散 their duties across SSV's distributed network of operators, enhancing security and performance.
- Thesis: Existing staking infrastructure providers are naturally positioned to win in restaking.
- Market Cap: ~$330 million.
- Outlook: Its established position and "professional retraining" into restaking make it a relatively lower-risk bet within the narrative.
Restake Finance ($RSTK)
As one of the first modular liquid restaking protocols built on EigenLayer, Restake Finance's model is straightforward. Users deposit LSTs, which are then restaked via EigenLayer. In return, users receive rstETH (an LRT) that can be deployed across DeFi while still earning EigenLayer points.
- Token Utility: The $RSTK token is used for governance, staking to boost rewards, and functions as a proxy for EigenLayer's success.
- Market Cap: ~$38 million.
- Performance: The token saw a significant pump after its debut, but its market cap remains small compared to established players. 👉 Explore more restaking strategies
Projects with Upcoming Token Potential
Stader Labs ($SD) and Kelp DAO
Stader Labs, a multi-chain staking platform, is incubating Kelp DAO, an organization focused solely on liquid restaking. Users can deposit LSTs to mint Kelp's LRT, rsETH, which gains exposure to EigenLayer rewards while maintaining liquidity.
- Thesis: Investment is made through $SD, as Kelp DAO has not yet launched a token. This creates potential for airdrops or strong price correlation for $SD holders.
- **Market Cap (~$35 million):** $SD offers exposure to the restaking narrative through an established project.
Puffer Finance
Puffer Finance addresses a key barrier to EigenLayer restaking: the high 32 ETH requirement to run an Actively Validated Service (AVS). Its native restaking solution aims to lower this barrier to under 2 ETH, democratizing access for smaller node operators.
- Status: No token yet. Its unique value proposition makes it one of the most watched pre-token projects in the space.
Swell Network
Swell is a liquid staking protocol that has recently ventured into restaking. Users can deposit ETH to mint its LRT, rswETH. Crucially, Swell has not yet launched a token, and participation in its restaking vault accrues points, which often hint at a future airdrop.
- Status: No token yet. It represents a classic "points farming" opportunity for airdrop hunters.
Alternative Approaches: Beyond EigenLayer
Prisma ($PRISMA)
Prisma is not a direct LRT but a leading LSDFi protocol. It offers an alternative path to unlock LST liquidity. Users deposit LSTs to mint a stablecoin, mkUSD, which can then be used across DeFi. It solves a similar capital efficiency problem without being directly tied to EigenLayer.
- Market Cap: ~$17 million.
- Note: It boasts a stellar list of backers from across DeFi. However, its low float and concentrated holdings make it a highly volatile, high-risk asset suitable only for small positions.
Expanding to Other Ecosystems: The Solana Play
Picasso Network ($PICA)
For those looking beyond Ethereum, Picasso Network is building a cross-chain restaking layer. It's initially targeting Solana, aiming to become the "EigenLayer of Solana" by allowing users to restake Solana LSTs (like mSOL or jSOL) to secure other networks via IBC.
- Thesis: Capitalizes on Solana's growth and lower staking ratio compared to Ethereum.
- Market Cap: ~$100 million.
- Outlook: It provides diversified exposure to the restaking narrative outside of the crowded Ethereum ecosystem.
Frequently Asked Questions
What is the main difference between an LST and an LRT?
An LST (Liquid Staking Token) is a derivative received for staking a native asset like ETH. An LRT (Liquid Restaking Token) is a derivative received for restaking an LST, representing a deeper layer of yield-bearing, composable capital.
Is liquid restaking safe?
It introduces new risks. While it enhances capital efficiency, it also creates a complex system of interconnected protocols. A failure or exploit in one underlying protocol (e.g., the LST or restaking layer) could have cascading effects across the entire "stack" of assets.
How do I earn rewards with LRTs?
You typically earn rewards in three ways: 1) the base staking yield from your original LST, 2) additional restaking rewards from EigenLayer or similar protocols (often paid in points or a future token), and 3) yield from deploying your LRT in other DeFi applications like lending or liquidity pools.
What are "points" in restaking protocols?
Points are a reward tracking mechanism used by pre-token projects. By restaking your assets, you accumulate points, which are widely expected to be redeemed for a protocol's token when it launches, similar to an airdrop.
Can I restake on networks other than Ethereum?
Yes, the concept is expanding. Projects like Picasso Network are pioneering restaking for Solana and other ecosystems, indicating this could become a multi-chain narrative.
Why is capital efficiency so important in DeFi?
Capital efficiency refers to the ability to maximize earning potential from an asset without it sitting idle. DeFi is built on the principle that capital should always be working, and LRTs are a sophisticated evolution of this idea. 👉 Get advanced DeFi methods
Conclusion: A Narrative of Leverage and Liquidity
Liquid restaking represents a significant innovation in the pursuit of yield. For Ethereum, it bolsters security for a wider range of services. For investors, it acts as a powerful tool for speculative leverage—multiplying yield opportunities from a single asset through layered derivatives.
This creates a system where liquidity is maximized during bullish conditions, fueling growth and innovation. However, it also interconnects protocols, creating systemic risk where a failure in one part of the stack could trigger a widespread contagion.
The market's mantra holds true: liquidity never sleeps. The entire crypto market is a machine designed to attract and please liquidity. Liquid Restaking Tokens are simply the latest and most sophisticated engine in that machine, offering immense opportunity paired with non-trivial risk.