The recent market volatility, particularly around the anticipation of the Bitcoin spot ETF decision, highlighted an interesting trend: Ethereum-based tokens like LDO and ARB rebounded strongly. Layer 2 solutions and smaller-cap assets even reached new highs. This signals strong market confidence in the Ethereum ecosystem.
While Layer 2 tokens have already surged and many liquid staking projects offer only beta returns, investors are looking for the next narrative within Ethereum. One promising, yet underappreciated, catalyst is restaking and EigenLayer.
Restaking allows users to stake already-staked Ethereum or Liquid Staking Tokens (LSTs) to help secure additional services on Ethereum, earning extra rewards in the process. This has given rise to a new derivative: Liquid Restaking Tokens (LRTs).
LRTs are gaining traction, with several related tokens posting significant gains recently. This article explains the mechanics of restaking and LRTs and explores promising projects—both low-market-cap tokens and those yet to launch.
Understanding Restaking and the Liquidity "Nesting Doll"
Restaking isn’t a new idea. EigenLayer introduced the concept in June 2023, allowing users to restake their staked ETH or LSTs to provide security to other services and earn additional yields.
From an investment perspective:
- Staking helps secure Ethereum and earn rewards.
- Restaking helps secure more services and earn more rewards.
Here’s a simplified version of how it works:
- You stake ETH with a liquid staking provider like Lido.
- You receive an LST (e.g., stETH).
- You restake that LST into EigenLayer.
- You earn rewards from both steps.
This sounds great, but there's a catch: locked liquidity. When you restake your LSTs into EigenLayer, you lose the ability to use them elsewhere. This is where LRTs come in.
LRTs are essentially proof-of-restaking receipts. Just as stETH represents staked ETH, an LRT represents restaked LSTs. You can use LRTs across DeFi—for lending, collateral, or more—while still earning restaking rewards.
Think of it like a nesting doll:
- ETH is the innermost doll.
- stETH (LST) is the next layer.
- LRT is the outermost layer.
Each layer adds liquidity and new yield opportunities. With Ethereum regaining attention, LRTs could be the next major narrative.
Promising Projects to Watch
Several projects are already working on LRT solutions. Rather than focusing on well-known tokens like SSV, we highlight projects with smaller market caps or those that haven’t launched a token yet.
Low-Market-Cap Token Projects
SSV Network ($SSV)
SSV Network, a liquid staking infrastructure provider, has naturally expanded into restaking. On January 4, the team announced that EigenLayer validators can now decentralize their operations using SSV’s network. This improves security and fault tolerance while allowing users to earn extra rewards.
Despite its established reputation, SSV’s market cap remains around $300 million. Given its seamless move into restaking, it could have further upside as the narrative develops.
Restake Finance ($RSTK)
Restake Finance is one of the first modular liquid restaking protocols built on EigenLayer. Users deposit LSTs into the platform, which are then restaked into EigenLayer. In return, users receive rstETH—an LRT that can be used across DeFi—plus EigenLayer points.
The native token, $RSTK, is used for:
- Governance: holders help select node operators.
- Staking: stakers earn a share of protocol fees and rewards.
Since its launch in December, RSTK has risen nearly 20x, yet its market cap is still only around $38 million. Compared to SSV’s $300M+ valuation, there might be room for growth if restaking gains adoption.
👉 Explore more restaking strategies
Stader Labs & KelpDAO ($SD)
Stader Labs is a multi-chain staking platform. Through Kelp DAO, it now offers liquid restaking. Users can deposit stETH to receive rsETH (an LRT), which can be deployed across DeFi for extra yield.
Kelp DAO hasn’t launched a token yet, so Stader’s token $SD is the closest proxy. With a market cap around $35 million and a recent 20% gain, $SD could benefit if Kelp gains traction or announces an airdrop.
Prisma Finance ($PRISMA)
Prisma isn’t a pure LRT play but falls under the broader LSDFi umbrella. It lets users deposit LSTs to mint mkUSD, a stablecoin that can be used across DeFi for yield farming.
Backed by heavyweights like Curve and Frax, PRISMA has a market cap of only ~$17 million. Its price is volatile, but its small size and strong backing make it a potential high-risk, high-reward play.
Picasso Network ($PICA)
Picasso is building restaking for Solana. Through IBC, it allows users to restake Solana LSTs (like mSOL or jSOL) to earn extra yield. Since only ~8% of SOL is currently staked (vs. ~25% of ETH), there’s growth potential.
With a market cap of ~$100 million, it’s larger than Ethereum LRT plays but offers diversification into Solana.
Projects Without a Token (Yet)
Several restaking projects haven’t launched tokens but are worth monitoring:
- Puffer Finance: Lowers the restaking node requirement from 32 ETH to under 2 ETH.
- Swell: Offers liquid staking and restaking; users earn points (possibly leading to a future airdrop).
- ether.fi: Provides a seamless restaking experience; already has ~$120M TVL.
These projects could launch tokens in the future, creating additional opportunities.
Frequently Asked Questions
What is liquid restaking?
Liquid restaking lets users restake their LSTs into protocols like EigenLayer to earn extra yield. In return, they receive LRTs—liquid tokens that represent their restaked position and can be used across DeFi.
How do LRTs improve capital efficiency?
Instead of locking LSTs in restaking contracts, LRTs let users maintain liquidity. They can use LRTs as collateral, lend them, or provide liquidity—all while earning restaking rewards.
What are the risks of LRTs?
LRTs add composability risk. If one protocol in the "stack" fails (e.g., due to a hack), it could affect interconnected protocols. Additionally, restaking adds smart contract risk and dependency on EigenLayer’s security.
Can I restake on networks other than Ethereum?
Yes. Projects like Picasso are bringing restaking to Solana. The core idea—maximizing yield from staked assets—is chain-agnostic.
How do I evaluate LRT projects?
Consider factors like TVL, audit status, team transparency, integration with DeFi protocols, and whether the project has a token or is planning one.
Will EigenLayer launch a token?
EigenLayer hasn’t confirmed a token yet, but it’s widely expected. Participation now may reward users with airdrops or other incentives.
Conclusion
Liquid restaking tokens represent both an innovation and a speculative lever. On one hand, they enhance Ethereum’s security and provide users with more yield opportunities. On the other, they create a complex web of interconnected derivatives—amplifying gains in bull markets but potentially accelerating losses during downturns.
For now, LRTs are a compelling narrative within Ethereum’s evolving ecosystem. As liquidity always seeks yield, projects that unlock new opportunities will continue to attract attention.