"Restaking: The New Frontier in Blockchain Security"

Industry Experts Weigh in on Inherent Risks of Restaking Protocols

Liquid staking and restaking protocols have quickly gained traction in decentralized finance (DeFi), driven by their potential to enhance blockchain security and efficiency. However, these protocols also present potential systemic vulnerabilities. BeInCrypto spoke with different industry experts to better understand the intricacies of staking mechanisms and the challenges they pose for users.

The Rise of Restaking

Over the past year, staking has evolved from an emerging concept in the DeFi sector to a mechanism that has completely reshaped the idea of security across blockchain networks. Spearheaded by Ethereum, with EigenLayer taking the lead, this protocol has offered dynamic solutions to overcome the fragmented security of traditional Layer 2 blockchains.

When Ethereum transitioned to a proof-of-stake (PoS) ecosystem in 2022, it replaced mining with staking, opening new possibilities for staking rewards and ensuring mainnet security. Traditionally, each decentralized network has been responsible for developing and maintaining its security measures, often relying on PoS mechanisms. This requires significant investment in security infrastructure, and it can be challenging for emerging networks to achieve the level of security offered by established networks like Ethereum.

To mitigate this downside, the concept of restaking soon appeared. This mechanism occurs when already staked Ethereum is used to lend security to other mainnet elements, such as bridges, protocols, oracle networks, and scaling solutions. “Restaking is fundamentally about bootstrapping economic security for new protocols, often using liquid-staked tokens that are already tied to providing security elsewhere,” Laura Wallendal, CEO and Founder of Acre, told BeInCrypto.

Restaking offers a potential solution by enabling smaller networks to leverage the security of existing PoS chains, thereby enhancing their overall security posture.

EigenLayer Pioneers Restaking Protocols

Built on top of Ethereum in June 2023, EigenLayer has become the most-used restaking protocol today. As of writing, the protocol’s Total Value Locked (TVL) is weighed at over $15 billion.

Sreeram Kannan, the brain behind the protocol, developed this mechanism to reap the security benefits of the Ethereum network and extend the same to other protocols