A Brief Introduction

Imagine depositing your coin in the bank for interest, but in return, the bank gives you a magic coin. 🪙

This magic coin can be used again for reinvesting in another bank, which can guarantee interest again. So, you see how your interest is getting doubled. Well, it can get increased even more multiple times.

Here, this process of investing or staking your coin multiple times is known as Restaking and these magic coins are known as Liquid Restaking Tokens or LRTs.

More About LRTs

By formal definition, LRTs are tokens received when users deposit ETH in a liquid staking protocol. More on these protocols later. 😉

As a token that represents staked ETH, LRTs allow users to gain the base yield from the ‘Primary Protocol’ and additional yield from ‘Actively Validated Services(AVS)’.

LRTs possess multiple benefits. They not only provide higher yields to users but also ensure security through increased TVL (total value locked) in the protocols.

Features/Benefits of LRTs

1. Increased Yield Opportunities

   • Higher yields as they are coming from two places i.e. the primary protocol and enhanced return from the AVSs.

2. Simplified UX

   • Instead of running the validator node for Native Restaking, the use of LRTs makes the process much more convenient and smooth, given the availability of multiple restaking methods.

3. Lower Capital Requirements

   • As LRTs can be used for restaking across multiple protocols, the capital required for this also decreases manifold.

LRT issuing Protocols

Protocols that accept native ETH or LSTs (Liquid Staking Tokens) for restaking purposes can issue LRTs. Below are some of the major protocols that issue LRTs:

1. Renzo Protocol

   • It is a liquid restaking protocol built on EigenLayer, designed to secure AVS on Ethereum and return higher yields.

   • Renzo stands with a current TVL of $3.32 billion and at a valuation of $25 million at the time of its seed funding.

   • Users can deposit LSTs like stETH and wBETH, and receive ezETH as LRT. ezETH is a reward-bearing token i.e. its value can increase relative to the underlying token.

2. Ether.fi

   • Ether.fi is a liquid staking platform in 2022 to address the lack of traditional staking methods.

   • Users can stake their native ETH and receive eTH as LST.

   • An enhanced security feature that Ether.fi offers is the use of T-NFTs and B-NFTs for the exchange of validator keys.

   • The governance token of Ether.fi, also known as ETHFI currently stands at around $4.25 at the time of writing with market cap of around $480 million.

   • T-NFTs, B-NFTs, Validator Keys.

It’s not too much, let me break it down:

• T-NFT stands for Transferable Non-Fungible Tokens. It represents 30 ETH and is transferrable. Using T-NFT, one can ask for their staked ETH back.

• B-NFT stands for Bound Non-Fungible Tokens. It represents 2 ETH and is like a safety badge that protects you from penalties. Also, it offers higher rewards, but also has more responsibilities.

• Validator keys are the public-private key pairs used by Ethereum validators to participate in the proof-of-stake consensus mechanism.

Wasn’t complicated at all. 😎

1. KelpDAO

   • It is a DAO that focuses on liquidity restaking solutions for public networks.

   • The motto is to ensure great rewards and liquidity while empowering the community in decision-making and governance.

   • The LRT for KelpDAO is rsETH which can be swapped on AMMs for instant liquidity.

   • Current price of rsETH stands at around $3,799 at the time of writing with a market cap of around $952 million.

2. Swell

   • Just like Ether.fi, Swell is also a non-custodial liquid staking platform.

   • Users stake their native ETH in order to receive swETH which is also an interest-bearing token.

   • swETH can be used to earn additional interest through in-app "vaults”.

   • Current price of swETH stands at around $3,959 at the time of writing with a market cap of around $690 million.

3. Puffer

   • Similar to Renzo, Puffer is also a liquid restaking platform built on EigenLayer.

   • Users can stake their ETH and receive pufETH which is also a yield-generating token. pufETH mirrors the yield of wstETH, while also providing with Puffer & EigenLayer points.

   • Current price of pufETH stands at around $3,740 at the time of writing with a market cap of around $556 million.