This article was compiled and organized by BlockWeeks
The second installment in the series of reports published by Galaxy Research focuses on Restaking, systematically reviewing this track's implementation methods, scale data, and potential risks across the two major ecosystems of Ethereum and Cosmos. The report also points out that restaking is still in an extremely early experimental and research stage, and its impact on base networks, node operators, and actively validated services (AVS) remains unclear.
Modularity Spawns Security Islands, Giving Rise to Restaking
The industry's attempts to scale blockchains through modularity have spawned a large number of new protocols and supporting middleware. But each network needs to build its own security moat—usually relying on some variant of PoS consensus—which is both resource-intensive and time-consuming, resulting in numerous fragmented security pools.
Restaking is using one blockchain's economic and computational resources to secure multiple chains. On PoS chains, restaking allows a chain's staking weight and validator set to be used for any number of other chains, ultimately forming a more unified and more efficient security blanket shared by multiple ecosystems.
This concept is not entirely new. The Polkadot ecosystem conducted related experiments as early as 2020; Cosmos launched a restaking version called "replicated security" in May 2023; Ethereum followed suit through EigenLayer in June 2023. Currently, the vast majority of value in restaking protocols comes from staked assets on Ethereum. Ethereum is the PoS blockchain with the highest economic security, with total staked ETH value exceeding $100 billion and more than 1 million validators ("validators" here are not equivalent to validating nodes). The report emphasizes that economic security is not equivalent to the degree to which a chain as a whole is free from attack or manipulation.
Scale: Restaked Assets at Approximately $20 Billion
As of June 25, 2024, the total value of restaked assets was $20.14 billion. Ethereum is the largest restaking ecosystem, with ETH and its derivative assets accounting for $19.4 billion in restaking deposits, of which $18.3 billion was deposited by users in 2024. In addition, $58.5 million was restaked on Solana through Picasso and Solayer; $223.3 million in wrapped BTC was distributed across multiple chains including Bitlayer, Merlin, and BSC through Pell Network and Karak.
The leading restaking solutions ranked by total value locked (TVL) include EigenLayer, Karak, Symbiotic, Solayer, Picasso, and Pell Network. In addition, Cosmos Hub validators and their "replicated security" model also carry approximately $1.7 billion in restaked assets.
Key Definitions and Models
The report provides core terms used throughout the text:
Slashing: The penalty a validator receives for failing to properly perform its duties. In addition to losing part of its stake, it may also be temporarily removed from the validator set (jailed) or permanently removed (tombstoned).
Slashing conditions: The basis on which a validator is penalized, including double signing, downtime, or other misbehavior specific to each network.
Liquid Staking Token (LST): A liquid fungible token representing the illiquid assets deposited by validators.
Liquid Restaking Token (LRT): A liquid fungible token representing illiquid ETH, LSTs, and other assets used as restaking collateral.
Node operator: An entity that runs nodes and provides services for actively validated services.
Actively Validated Service (AVS): Any platform that relies on restaked resources to obtain security.
Economic security: The dollar value of assets staked by a network's validators.
Computational security: The hardware and software required to validate a network.
Base network: A network whose staked assets and/or validator set are used to provide economic and computational security for AVSs, also referred to as the "base protocol" or "base chain."
EigenLayer and the Slashing Mechanism of the EIGEN Token
EigenLayer is a set of smart contracts on Ethereum that allows users to restake assets to provide security for external services. One of its core innovations is achieving "intersubjective slashing" through token forking rather than base chain forking. This idea was first proposed by Paul Sztorc in the 2014 Truthcoin whitepaper and later popularized by EigenLayer. It outsources the need for social consensus among base-layer validators, allowing node operators to express preferences regarding intersubjective faults and claims through the EIGEN token.
The slashing process is divided into two categories. Objective slashing targets violations such as double signing and downtime that can be mathematically and cryptographically proven and verified through on-chain protocols; such violations can be slashed from restaked assets without requiring broad agreement among on-chain observers. Intersubjective slashing may require social consensus among on-chain observers. With the EIGEN token, node operators can reach agreement around slashing the EIGEN staking supply (rather than staked ETH). Therefore, EIGEN exists in two "classes": first, ordinary EIGEN that can be held in externally owned accounts (EOAs) or used to interact with DeFi applications; second, bEIGEN, which is staked, forkable, and potentially slashable EIGEN.
Each time bEIGEN undergoes a new fork, its supply decreases—slashing penalties are implemented by removing the violator's bEIGEN from the circulating supply. With the ability to slash tokens and reach social consensus on the next fork, EigenLayer can extend Ethereum PoS security beyond its boundaries more efficiently with less reliance on Ethereum's base layer. AVSs may also choose to use their own tokens instead of EIGEN as the intersubjective token.
Liquidity Rebalancing: LSTs Flow Back to L1, LRTs Accelerate Their Rise
This trend can be clearly seen by comparing LSTs restaked on Ethereum L1 with LSTs circulating on L2. The number of LSTs on L2 peaked in April 2024 and has been range-bound since February after 21 consecutive months of growth; meanwhile, the number of LSTs staked on Ethereum L1 has grown parabolically.
Against the backdrop of flattening LST liquidity on L2 and rising interest in restaking applications, Ethereum L1's daily active addresses (30-day moving average) also hit a 35-month high. The last time this metric reached 460,000 addresses was in May 2021—this is seen as a signal that restaking is "pulling" users back to L1.
While LST liquidity stagnates on L2, LRTs are becoming increasingly important. LRTs have appeared on Arbitrum, Base, Blast, Linea, Mode, OP Mainnet, and Scroll, and measured in native units, 69% of their supply is concentrated on Arbitrum and Blast. On Mode, an additional 24,744 ezETH and 7,396 eETH are not included in the chart.
Although LRTs are increasingly active on L2, LSTs remain significantly higher than LRTs in terms of liquidity and adoption. However, as LSTs are locked into restaking protocols deployed on the base chain Ethereum, their dominance is beginning to weaken. The report cautions that attention should be paid to the potential impact of stagnating LST expansion on the overall liquidity of DeFi applications on L2, especially when LRTs are not yet able to provide the same level of liquidity.
Conclusion: Still in an Early Experimental Stage
Restaking is an important primitive in the evolution of public blockchains, with the goal of creating a more unified and more efficient security model that can be simultaneously derived and shared by multiple protocols. However, its concept and its implementation in the Ethereum and Cosmos ecosystems are still in the early stages of experimentation and research. Many details of how restaking protocols actually operate in practice remain unknown; their exact impact on stakeholders such as base networks, node operators, and AVSs is also not yet clear. The report believes that liquid restaking protocols and other products and services built on top of restaking protocols are directions worthy of further research.
