I touched a bit on this top level yesterday in my article called Ethereum Restaking Is Going A Little Too Far and in todays article I want to take the positive vision of all of this and how it very well could be a major catalyst for the bull run we are most likely about to see.

First off let me say this article is for entertainment purposes and is not financial advice. Do your own research before investing and understand the risks.

Ethereum Staking

Currently or well what most are used to is that Ethereum went to proof of stake just a year ago. However it wasn't until a few months ago that people had the ability to unlock those tokens if they wanted to. A unstaking period. Before this you pretty much locked up your funds not knowing when you were going to be able to unstake the tokens. So you can imagine once that release was done staking started to go crazy.

To run a node yourself you will need at least 32 ETH or roughly $52,000 at todays price point at the time of writing this article. That's all you could do, is lock up your funds run a node and make about 4% or so APR on that Ethereum. Not the greatest when you start to think about bank accounts paying you 5% (also side note that's why no ones really investing in the stock market right now)

Ethereum was the leading in the DeFi wave as well and it seems like it's going to be on the front lines once again in a good way or a bad way with this new what many are calling a game changes for Ethereum holders.

So what's the new big change?

New Ethereum Staking Options

With Ethereum nodes and really any staking token there's a lot of times when your hardware is sitting idle simply waiting to be picked to process a block. This so called "downtime" could be used instead to be more productive and that's a new method of Ethereum staking that's currently gaining traction.

The term "restaking" now being pushed heavily be Eigen Layer is gaining a lot of traction.

This is how Ethereum staking looked before

Now instead with all of the downtime your computer has it could be used for things like running other blockchains, layer2 solutions for Ethereum, powering oracles, indexers, data availability etc. Now your setup would look like this

This essentially now allows you to earn far higher APR on your staked Ethereum tokens. Which does sound great but it does come with new risks.

There Are Risks

Native Restaking - Is where you lock your Ethereum tokens 32 plus node on to that platform. For example locked them on to Eigenlayer and getting what is called a EigenPod.

Have under 32 ETH like most people? Well you're in luck you can still earn on these through other systems. For example Rocket Pool, Lido (a popular choice for a while) and even our good old friend Coinbase.

These are known a liquid staking tokens and I went into detail about those here Liquid Staking Tokens The Next Evolution?

But long story short you put your ETH into a smart contract in which they give you one of their native tokens and then stake that new token into other pools called liquid staking.

You could also leverage those tokens in something like AAVE but there's another level of risk associated with that. While you would be leveraging your staked ETH to get more funds to put into more places and borrow it. However, if the value of the those tokens if something changed quickly your tokens could very well simply be liquidated and you end up with nothing.

This is another reason why many are starting to focus on restaking now. Minimal risk with lots of reward at the moment.

Slashing risk is another thing to worry about with restaking. What this does is helps remove bad actors from the network so if they are not doing a good job at providing value to the network or doing something they shouldn't be doing they risk getting slashed. Otherwise losing some or all of those staked ETH tokens.

Now take that risk and multiply it because that's exactly what you get when you start to run restaking. If you fail or start to not do a good job etc on ANY of the protocols you are a part of you now have a higher chance of getting slashed.

Do you currently Liquid stake or restake? Let me know your thoughts in the comments.

Posted Using InLeo Alpha