The Restaking Renaissance: PoS, Points and Peripheral Yield
"Renaissance - a revival of or renewed interest in a given subject matter, often characterised by rapid change or new innovations after a long period of stability or consistency."
Renaissance is a term that we hear all too frequently when indulging in the excitement of Web 3.0. That’s because it captures more than just an inspiring innovation or a sudden significant change. A renaissance is an era of evolution, captured by hundreds of thousands of individual innovations and pioneering personas. What truly characterises a renaissance isn’t the scope of its individual change… it’s the wonder of knowing we’re far from finished changing the world.
It’s no secret that the last few months have seen something of a renaissance for proof-of-stake blockchains and staking technology. The sudden flurry of new innovations like “restaking”, “LRTs” and “points” reflect a significant change in understanding about the potential of decentralized consensus mechanisms. With so many new products and technologies on the horizon, it can be hard to keep track! 😅
But don’t fear - in this piece we’ve pulled together some helpful hints to break through the hype and understand how to profit from the opportunity. We at Beefy are proud to be playing our part in the restaking renaissance, and with the help of our autocompounding vaults, we hope you will too!
Restaking
As a reminder, “proof of stake” (“PoS”) is a form of consensus mechanism where those helping to validate new transactions put up (or “stake”) valuable assets as collateral to demonstrate their good intentions. Validators putting up stake receive rewards for their efforts, but those who screw up or do wrong will have some of their collateral taken (or “slashed”), to incentivize good behavior.
Originally, staked assets were effectively locked into the protocol, meaning they couldn’t be used for other onchain activities like DeFi. Over time, “liquid staking” emerged, which involves a provider staking assets on your behalf whilst issuing you a “liquid-staking token” (“LST”) (e.g. Rocketpool Ether) to reflect your claim to the deposited assets and rewards. In exchange, the provider keeps a share of the rewards, meaning a marginally lower yield for those who stake via LSTs. However, LSTs open up access to all manner of additional activities and sources of yield in addition to staking.
Restaking is the next iteration of PoS innovation, where additional consensus mechanisms can be operated on top of an existing PoS blockchain. Restaking protocols take already-staked assets and utilize them as stake in limitless further staking protocols. The role of the protocol is to facilitate the delivery of data from other consensuses to stakers for validation, and distribute additional rewards to those stakers for additional, peripheral yield. Users simply migrate their existing stake into the protocol (or “restaking”), and the protocol handles the rest.
Points
A significant part of the excitement around restaking and LRTs is the prospect of “points.” Points are a centralized and non-transferrable currency offered by projects, which are intended to reflect the recipients’ interest in some future token distribution or airdrop. Points enable the gamification of products and protocols in much the same way as governance token, whilst allowing the project to reserve their actual token launch and distribution for later on, after users are already on board.
2023 saw a massive influx of projects, building hype and engagement with points. First among those names is EigenLayer - the leading restaking protocol on Ethereum. EigenLayer’s meteoric growth into one of the biggest Ethereum protocols has been supercharged by an enormous points program. EL promises participation in a future airdrop based on the value and time committed to the retaking protocol, whether through redeploying solo validators into their “Eigenpods”, or depositing LSTs directly into the protocol. Beefy is proud to have committed four members of our validator herd to join the restaking revolution with EigenLayer.
The immense excitement around EL’s points scheme has itself inspired innovations across the space, as projects seek to capture a slice of users’ enthusiasm for points. Take, for example, Kelp DAO, who seeks to become the largest restaking participant in EigenLayer by offering bonus yield with their $KEP token. With projects like Kelp, users get the benefit of staking yields, restaking yields, points and governance tokens from the project.
Liquid Restaking Tokens
But restaking and points are not the end of the story; far from it. That same spirit of innovation that transformed staking into LSTs has seized the restaking opportunities, giving rise to “liquid restaking tokens” (or “LRTs”).
LRTs take receipt of your own staking funds, stake and restake them through restaking protocols, AND handle your points for you, delivering you hefty yields with minimal effort. Because they’re ERC-20 tokens, LRTs then allow you to deploy your funds in DeFi, like yield farming with Beefy.
The restaking renaissance has already birthed a whole cohort of LRTs, including Kelp DAO’s rsETH, Renzo Protocol's ezETH, ether.fi's eETH, and Vector Reserve's vETH. Each is supported by its own DEX liquidity, and can be used as collateral for loans or yield farming. So with Beefy, you can use LRT vaults to access staking yield, restaking yield, points yield, trading fees, farming yields and autocompounding.
Restaking Renaissance
Now that you’ve got all the facts, you’re ready to start playing your part in the Restaking Renaissance. Well, Beefy’s got all the solutions you need to build up your points and optimize your yield, all from the comfort of your favorite DeFi interface.
You can get access to all these exciting LRTs directly on Ethereum with our Curve and Aura vaults. Or save yourself some gas fees by heading over to Arbitrum for our new Equilibria vaults. And for an additional layer of yield, check out the Beefy Boost taking place on our vETH/ETH Curve Vault right now. So many options!
So, what are you waiting for? Restaking is here, and the rewards are plentiful. Get your share of the action now, with just a few clicks on the Beefy app.
There's no need to thank us. 😘