AutoLayer Bulletin #1: Intro to Liquid Restaking
In DeFi, new narratives are always emerging. EigenLayer is at the forefront of one such narrative with its introduction of Liquid Restaking. If you’ve ever staked your Ethereum (ETH), you know it means locking up your ETH to earn rewards. But what if you could still use your staked ETH to generate layers of security for new applications? Bridges, oracles, networks, and a whole ecosystem of new applications can benefit from Ethereum’s security. That’s where EigenLayer comes in.
Let’s break it down in simple terms:
What is Liquid Restaking?
Restaking on Ethereum is a process where staked ETH or liquid staking tokens (LSTs) are utilized to secure additional layers of the blockchain or other applications, thereby enhancing security and utility while earning more rewards. This involves committing your already staked assets to further smart contracts, allowing for the creation of derivative tokens such as Liquid Restaking Tokens (LRTs), which can be traded or used in DeFi protocols.
How about EigenLayer?
EigenLayer is a protocol built on Ethereum that introduces restaking, a new primitive in cryptoeconomic security. This primitive enables the reuse of ETH on the consensus layer. Users that stake ETH natively or with a liquid staking token (LST) can opt-in to EigenLayer smart contracts to restake their ETH or LST and extend cryptoeconomic security to additional applications on the network to earn additional rewards. (Source: EigenLayer)
One challenge with EigenLayer is that once your LSTs are staked, they become illiquid. Additionally, some issuers have created Liquid Restaking Tokens that conserve the yield generated by EigenLayer and allow you to use them like any other token, especially in DeFi. Many LRT operators have emerged, and you can find most of them in AutoLayer.
Why is it important in the DeFi and Crypto ecosystem?
Liquid Restaking is important in the crypto space due to its innovative approach to yield generation. Currently, EigenLayer and most LRT operators utilize point systems and airdrops, typically in phases, to distribute rewards. However, in their next stage, as they begin to validate more services, they will enhance yield generation by compounding layers of yield, offering even greater returns and benefits to users.
So, if we analyze a Liquid Restaking Token (LRT), we will see that it generates at least four layers of yield:
- The staking rewards for securing the Ethereum Network.
- The EigenLayer points that give access to airdrops.
- The AVSs rewards, which can be various, and will give access to more points, airdrops, and yield.
- The LRT points that also provide points and airdrops.
All within a single token, creating numerous opportunities for users.
Why use AutoLayer for LRTs?
AutoLayer generates another layer of yield on top of those, composed of its own points. Aside from that, LRTs have a drawback: their issuers do not allow withdrawals. With AutoLayer, you can always sell your LRTs with just a click.
AutoLayer lets you compare all LRT offerings, stay up to date with your points, the airdrops involved, and all significant KPIs. Currently, AutoLayer provides comprehensive information about APRs, but in our next version, we will amplify all the LRT information so our users can better understand what’s inside each LRT and their risk/reward profile.
Should you have missed our recent article:
About AutoLayer
AutoLayer is the premier Liquid Restaking Tokens (LRT) Finance app on Arbitrum. Harness the potential of EigenLayer by restaking into various LRT/LST options with just one click while conserving and compounding your yields effortlessly. All LRTfi. One interface.
