If liquid staking was DeFi’s first financial innovation on top of Ethereum staking, liquid restaking is the second layer — a financial layer built on top of a financial layer built on top of base-layer staking. Liquid Restaking Tokens (LRTs) are receipts for ETH deposited in EigenLayer, and they became one of the hottest DeFi categories in 2024.
The nesting works like this: ETH is staked on Ethereum (earning ~3-4% staking yield) → staked ETH is deposited in EigenLayer (earning additional restaking yield and points) → the restaking position is wrapped into a liquid token (LRT) that can be used in DeFi (earning additional yield through lending, liquidity provision, or further restaking).
Major LRT protocols include: Ether.fi (eETH), the largest by TVL, which became a massive hit partly through aggressive points marketing and a well-received ETHFI token airdrop. Puffer Finance (pufETH), which focused on lowering barriers for solo stakers. Renzo (ezETH), which grew rapidly through cross-chain expansion. Kelp DAO (rsETH) and Swell (rswETH) also captured significant market share.
The yield stacking was compelling: base staking yield + EigenLayer restaking yield + LRT protocol yield + points/airdrops could combine to offer 10-20%+ effective APY on ETH — in a period when traditional savings accounts offered 5%. But the risk stacking was equally real: smart contract risk at each layer, liquidation cascades if LRTs depeg, slashing risk at both the Ethereum and EigenLayer levels, and the uncertainty of points-to-token conversion ratios. Critics called LRTs “yield matryoshka dolls” — each layer adding both yield and risk, with users often not fully understanding the compounding risk they were taking. The LRT category demonstrated DeFi’s ability to rapidly build financial infrastructure — and the industry’s tendency to create increasingly complex risk structures in pursuit of yield.
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