LRT Battle Situation: ether.fi, Puffer Finance, and Kelp DAO in the Top Three, What's the Story Behind Staking and Restaking?

A series of derivative protocols stemming from Ethereum's PoS staking has recently reached another peak. Known as the Liquid Restaking Protocol, in collaboration with the staking project EigenLayer, it has opened up a new battleground for DeFi players seeking to improve capital efficiency and anticipate airdrop rewards: the LRT (Liquid Restaking Token).

Opportunities Arising from Lido PoS Dominance

It all starts with Ethereum PoS staking services.

Among all PoS staking service providers on Ethereum, including exchanges and on-chain protocols, Lido holds the highest market share at 31.7% as of the deadline, with a total of 9.46 million ETH staked on Ethereum through Lido, valued at approximately $21.7 billion at the current price; followed by Coinbase at 14.5%, demonstrating the difference in scale. Detailed Data

Lido provides Ethereum staking services to the community, shares staking rewards, and also issues staking certificates stETH to allow users to unlock their capital liquidity for other purposes; protocols like Lido are also known as Liquid Staking Protocols.

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With the emergence of stETH, there have been various applications attempted, such as using it as collateral for stablecoins, in interest rate trading protocols, or incorporating it into investment portfolios, but it has not brought significant network effects.

EigenLayer Creates a New Path for stETH

It wasn't until EigenLayer's discourse emerged that the rationale for "re-staking" stETH was further justified. EigenLayer also accepts tokens from many other staking service providers.

EigenLayer aims to address the challenges of "high difficulty in establishing a consensus network" and "fragmentation of DApp security" to serve projects that need to construct their own consensus networks: actively validated services, AVS.

EigenLayer has built a new decentralized network that allows AVS projects to extend Ethereum's security without issuing their own tokens, ensuring that using external infrastructure does not compromise the security of DApps.

What is EigenLayer: How will the re-staking project EigenLayer change the Web3 infrastructure ecosystem?

In this narrative, with the integration of EigenLayer's anticipated airdrop mechanism, 190,000 stETH have already been staked, although this accounts for a small portion of total stETH.

The Appeal of Points: Compared to token rewards, on-chain points provide teams with more flexibility and room for adjustments

Reproduce! Aggressively Absorb stETH, LRT Points Stack Up Again

Let's reorganize this story from the beginning, and you will understand why the Liquid Re-staking Protocol emerged –

• stake: you stake ETH as an ETH holder, and with Lido, you become an ETH staker;
• liquid staking: Lido provides you with stETH, freeing up the liquidity of the staked ETH;
• restake: for the AVS story and the anticipation of points, you take stETH to EigenLayer for re-staking, becoming an stETH re-staker;
• liquid restaking: to unlock stETH liquidity, the Liquid Restaking Protocol emerges, allowing you to re-stake with EigenLayer while enjoying capital liquidity and additional points anticipation.

The earnings from liquid restaking are equal to: ETH staking annual percentage yield + staking service provider bonus + EigenLayer points + re-staking service provider points, which has attracted the attention of many.

Fierce Competition for LRT, Marketing War Begins

For instance, the current TVL second-ranked Puffer Finance is a typical case mentioned above, absorbing stETH to attract re-staking for EigenLayer, releasing liquidity for users, and providing them with its liquid re-staking certificate pufETH. Note: Puffer Finance's long-term plan is to launch native re-staking services.

On the other hand, the TVL first-ranked ether.fi has its own Ethereum PoS staking service, coupled with its in-house re-staking EigenLayer, offering users the liquid re-staking certificate eETH, hence not directly absorbing Lido's stETH.

The third-ranked Kelp DAO can accept multiple Ethereum PoS staking services: Stader ETHx, Lido stETH, entering EigenLayer for re-staking, and providing users with its liquid re-staking certificate rsETH.

Liquid Restaking Data

All these LRTs will provide users with points based on staking quantity and duration, encourage community activities for bonus points, and leverage the anticipation of airdrops. For instance, Puffer Finance uses many KOLs to attract liquidity, along with the support from EigenLayer's founders, resulting in a rapid increase in its TVL.

The Combinatorial Imagination of EigenLayer Creates New Opportunities

By aggressively absorbing Ethereum staking certificates, EigenLayer aims to use this capital to provide consensus networks for other infrastructures, extending to other blockchains. Therefore, many L2 solutions are declaring partnerships with EigenLayer, possibly due to EigenLayer's limitless imagination, allowing the Liquid Restaking Protocol to flourish, with everyone wanting a piece of the pie on EigenLayer.