Liquid Restaking takes the capital efficiency of liquid staking to its logical and arguably risky extreme. With standard liquid staking, you deposit ETH, receive a receipt token like stETH, and use that receipt in DeFi while your underlying ETH secures the Ethereum network. Restaking, pioneered by EigenLayer, allows you to take that staked ETH and pledge it a second time to secure entirely different networks - bridges, oracle networks, or specialized sequencers - called Actively Validated Services (AVSs). You expose your capital to multiple slashing conditions in exchange for compounded yields. Liquid Restaking Tokens (LRTs) automate this complexity. You deposit ETH into an LRT protocol like Ether.fi or Puffer, and the protocol delegates your underlying assets across a portfolio of AVSs. You receive an LRT receipt token which remains fully liquid and can be deployed into DeFi. The capital efficiency is extreme: the same underlying ETH secures the base layer, secures multiple middleware networks, and acts as collateral for DeFi loans simultaneously. The systemic risk is equally serious. A single slashing event on a minor middleware protocol could cascade through the ecosystem, unwinding leverage across multiple layers of synthetic assets. LRTs represent DeFi's ultimate balancing act between maximizing yield and compounding systemic fragility.
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