DeFi’s 2025 obsession is a high-wire act called liquid restaking. Billions of dollars are chasing a simple, seductive idea – Get paid multiple times for the same crypto. Protocols like Ether.fi and Renzo are the new kings of this trend, pulling in cash from anyone hunting for the next big score.
However, this yield-stacking game isn’t just a golden goose; it’s a house of cards that could bring the whole system down. Everyone’s wondering if this is the next evolution of staking or just a faster way to get wrecked.
How we got here – Yield ladder
It started with a problem.
Staking your Ethereum meant locking it away, making it useless for anything else. Liquid Staking Tokens (LSTs) like Lido’s stETH fixed that, giving you a tradable receipt for your locked ETH. EigenLayer then asked a new question – What if that staked ETH could do more?
Restaking lets you use that same collateral to secure other new networks, called Actively Validated Services (AVSs). You take on more risk for securing them and, in theory, earn more rewards. The final piece, Liquid Restaking Tokens (LRTs), just makes this new, supercharged position tradable again.
Real vs. fake yield machine
So, where’s all the money coming from? The yield is a cocktail, part real and part pure hype. You get the basic 3-5% from staking Ethereum itself. Then you’re supposed to get fees from the new networks (AVSs) you’re helping to secure. That’s the “real” part, though it’s barely a trickle so far. The main driver, the rocket fuel for this whole boom, is the promise of free tokens.
EigenLayer and the restaking protocols are handing out “points” like candy, and traders are betting these points will turn into massive airdrops. Most of the “yield” people are chasing right now is just the perceived future value of these yet-to-exist tokens.
What keeps Buterin up at night?
Ethereum’s co-founder and other critics aren’t just being cautious – They’re sounding a five-alarm fire. The risks are layered on top of each other. A validator mistake on one small network could cause a “slashing” penalty that cascades through every service your ETH is securing, vaporizing your principal.
It’s the crypto version of the leverage that caused the 2008 financial meltdown. Then, there’s the code. A single bug in any one of the dozen protocols you’re touching—the staking service, EigenLayer, the restaking app, or the network you’re securing—could create a fatal exploit.
Worse, the whole system might centralize around a few huge operators. If one of them fails, the pressure on Ethereum to hit the rewind button and “bail them out” would be immense, threatening the entire network’s credibility.
2025’s collision course
Two major forces are set to collide in 2025, potentially turning restaking into the trade of the year.
First of all, the AVS ecosystem is finally growing up. As EigenLayer’s tech matures, these new networks can actually start generating real revenue, which means real yield for restakers.
Second, Wall Street is coming. Spot Ethereum ETFs opened the floodgates in 2024. If regulators approve ETFs that can stake their ETH, a tidal wave of institutional money could pour in. This would create a feedback loop – Big money buys ETH, driving up its price and making the security it provides more valuable, which in turn could make restaking rewards even richer.
Source: Coinglass
A bearish hangover?
Worth pointing out though that the skeptics have a strong case. They argue today’s returns are a mirage, propped up entirely by airdrop hype that will eventually disappear.
Once the freebies stop, will the actual revenue from AVSs be enough to keep anyone interested? The headline-grabbing “Total Value Locked” (TVL) figures are also misleading, often counting the same dollar multiple times as it moves through the system, creating an illusion of size.
And, don’t forget governance. A handful of insiders or large token holders could easily change the rules to benefit themselves, leaving regular users holding the bag.
Greed or Genius?
Liquid restaking is DeFi at its most ambitious and reckless. It’s a bet that you can squeeze more out of your capital by layering risk on top of risk. The gamble could build a more efficient, secure foundation for the decentralized web.
Or, it could be the fuse that lights the next multi-billion dollar implosion. The outcome depends on whether the tech can outrun the hype, and whether users can stomach the risks when the free money runs out.