Staking needs no introduction nowadays even the commons are familiar with this term. It is defined as a cryptocurrency process that the users perform to earn rewards by locking their coins in a wallet and supporting a blockchain network. It is a part of the proof-of-stake (PoS) consensus mechanism. PoS is the alternative to the original proof-of-work model. Let’s explore what is staking.
Restaking is a strategy within blockchain networks that facilitates an opportunity to leverage staked cryptocurrency across multiple platforms to enhance security and trust. Restaking can help maximize the rewards generated from the staked assets and extend the crypto-economic security of large blockchain networks to emerge applications and protocols.
Ethereum Staking
Ethereum staking allows coin stakers to maximize their rewards while playing a pivotal role in maintaining network security. The process involves the usage of staked Ethereum (ETH) to contribute to the security of other decentralized networks in addition to ETH’s primary network. The practice has helped to increase income and offers security for new ventures.
Types Of Restaking
There are two types of Ethereum restaking, they are:
- Native restaking
- Liquid restaking
Both types have their own advantages and stakers can select any one of them depending on their technical expertise and risk tolerance.
Native restaking
Participants of native restaking are ETH validators and they are responsible for running nodes, which is necessary for approving transactions and maintaining the blockchain’s security. Validators must stake at least 32 ETH, which is like a huge barrier for many and it is a key to higher rewards.
Liquid Restaking
This staking method focuses on stakers who don’t have the technical skills or do not possess the minimum 32 ETH required for native staking. Stakers can choose use to stake their ETH with the help of a third-party provider in exchange for LSTs which implies the staked ETH can be traded or used in several Decentralized Finance (DeFi) applications.
How Does Restaking Work?
Restaking is the process involving the staking of an asset again after the initial staking period. The staked asset should be used in another staking program or platform which will enhance the utility and provide the holder with an added set of rewards.
The Ethereum ecosystem can be explained with an example. Let’s see
Ethereum network gained popularity for its high-security Proof of Stake (PoS) consensus mechanism. Staked ETH lays dormant on Ethereum, which paved the way for the development of liquid staking derivatives. Liquid staking transforms staked ETH into liquid tokens, which can be used in decentralized finance (DeFi).
If you need to act as an Ethereum validator, they must stake a minimum of 32 ETH. In return for processing transactions, they receive staking rewards. If the validator/you act dishonestly or do anything that could harm the network, they may lose their staked ETH through a process called slashing.
How To Restake Ethereum?
The process involves ensuring the ETH is reinvested effectively. Follow the below steps to learn how to restake Ethereum.
Step 1: Choose a staking platform
The process begins with choosing a reliable staking platform. Consider several factors before choosing, including the platform’s security, reputation, and user reviews. Check whether the platform offers a transparent fee structure, positive user reviews, and strong security measures. Stakers can consider choosing platforms such as Coinbase, Binance, and Kraken.
Step 2: Transfer ETH to the platform
If you have opted for a custodial solution while choosing a platform for Etyhereuj staking, you need to transfer Ethereum (ETH) to the chosen platform. The process can be initiated by creating an account on the selected platform and completing all the verification steps.
Transfer can be done by visiting the deposit section, finding the Ethereum deposit address, and initialing the transaction. To provide the utmost security for your asset, enable two-factor authentication (2FA).
On the other hand, if you have chosen non-custodial solutions, there is no need to transfer your ETH rather you are allowed to stake directly without moving the ETH. ChainLabo is an example of a non-custodial solution, here the full authority over the funds and decision-making process will be with you, this facility provides robust security and the potential for higher rewards.
Step 3: Restaking Ethereum
This is the main step. After transferring your Ethereum to the chosen platform you can restake to boost your rewards. Navigate the staking section and select Ethereum as the asset to stake. Follow the prompts to either deposit Liquid Staking Tokens (LSTs) or link your staked ETH to EigenLayer’s smart contracts.
Liquid Staking Tokens (LSTs): This will help you to earn rewards from multiple protocols without unstaking your original ETH while linking to EigenLayer pools you staked ETH for additional security and rewards.
Stay informed about the staked assets and to boost the earnings you need to adjust the strategies accordingly. EigenLayer makes the process more efficient and allows you to leverage your ETH for broader protocol support.
Conclusion
The launch of Ethereum restaking has paved another way for earning rewards and thereby increasing user return. The platform mentioned in this article, EigenLayer allows the users to stake ETH in various systems. This platform helps to increase profits and contributes to the security of the Ethereum network. Users can choose either native staking or liquid staking.
Ethereum staking helps to increase individual earnings and plays an important role strengthening Ethereum’s poverall security. Be aware of the potential risks and take measures to eliminate them. restaking is the better way to increase the staker’s involvement in the decentralized finance ecosystem.