Restaking and LRTs: EigenLayer Explained
Restaking, AVSs, operators, slashing and LRTs: how EigenLayer works and why each layer adds risk to your ETH.
The essentials
Reminder: from staking to liquid staking
On Ethereum, staking means locking up ETH to run a validator, which takes part in the network's consensus. In return, the validator earns rewards; if it misbehaves, part of its ETH can be destroyed. This is called slashing.
Liquid staking added a layer: you deposit your ETH with a protocol that stakes for you, and you receive a representative token in return (an LST, for liquid staking token), which you can trade or use in DeFi. If this mechanism isn't familiar to you, read our guide on liquid staking first.
Restaking adds a third layer on top: the ETH (or LST) that already secures Ethereum is committed a second time to secure other services.
What is restaking on EigenLayer?
EigenLayer's documentation distinguishes two ways to restake:
- Native restaking: an Ethereum staker who runs their own validator points their withdrawal credentials (the address to which the validator's ETH will be withdrawn) to EigenLayer's contracts.
- LST restaking: a holder of liquid staking tokens transfers them into EigenLayer's contracts.
In both cases, the assets remain subject to Ethereum's rules (and, for an LST, to the protocol that issued it), but also become subject to the rules of the services they secure through EigenLayer.
The players in the system
| Player | Role |
|---|---|
| Staker | Address that deposits assets into EigenLayer |
| Operator | Entity that receives delegations and runs the services' infrastructure |
| AVS | External service that needs to be verified by operators |
An AVS (Autonomous Verifiable Service in the documentation's current terminology) is a service built outside EigenLayer that requires active verification by a set of operators: a data availability layer, an oracle, a bridge, and so on. Instead of launching its own token and its own validator set, the AVS "rents" the economic security of restaked ETH.
Delegation is the process by which a staker entrusts their assets to an operator of their choice. The staker doesn't run any software themselves: the operator executes the AVSs' tasks. But it is the staker's money that is exposed if the operator is penalized.
Slashing: what you really risk
According to the documentation, slashing on EigenLayer is a penalty decided by an AVS when an operator fails to properly carry out the tasks assigned to it. It results in the destruction (burn) or loss of the funds.
Operator Sets and Unique Stake
To organize this risk, EigenLayer uses two concepts:
- Operator Set: a subset of operators created by an AVS to secure a specific set of tasks, with assets at stake.
- Unique Stake: a portion of delegated assets that an operator allocates to a single Operator Set. Only the AVS that created that Operator Set can slash that portion.
The idea is to isolate risks: an AVS can't take everything delegated to an operator, only what the operator has explicitly allocated to it. To track these allocations, the protocol uses an accounting concept called magnitude, which represents the proportion of an operator's delegations allocated to each Operator Set.
"Maximally flexible" slashing
An essential point for a user: the documentation states that slashing is designed to be "maximally flexible." An AVS doesn't need to prove a fault on-chain and can define its own slashing conditions. The documentation explicitly asks stakers to understand AVSs' slashing conditions and risks before delegating.
In other words, the quality of your position depends on the quality of the code and governance of each AVS to which your operator allocates your stake. It isn't a risk you can assess once and for all: it changes as the operator's allocations change.
What happens to slashed funds
Slashed funds are either destroyed (standard Operator Sets) or redistributed ("redistributable" Operator Sets). The documentation specifies that native ETH can't be redistributed and remains permanently locked in the EigenPod contracts. A resolution delay of about 7 days applies before slashed shares can be processed.
Delays: your liquidity isn't immediate
EigenLayer's reference documentation lists several safety delays on mainnet:
| Delay | Stated duration |
|---|---|
| Withdrawal (staker) | 100,800 blocks, about 14 days |
| Deallocation (operator) | 100,800 blocks, about 14 days |
| Slashing resolution | 50,400 blocks, about 7 days |
In practice, if you restake directly and want to get your assets back, you must queue your withdrawal and then wait about two weeks. During that delay, your assets can still be exposed to slashing for past faults. And if you restake native ETH, you have to add the exit from Ethereum's validator queue.
LRTs: restaking made liquid
An LRT (liquid restaking token) follows the same logic as LSTs: you deposit ETH or an LST with a third-party protocol, which restakes it on EigenLayer (or a similar protocol), picks the operators and AVSs, and hands you a representative token that you can trade or use in DeFi.
Advantages highlighted: no apparent delay to exit (you can sell the token), no operator choice to make, DeFi composability.
Trade-offs:
- The LRT's price isn't guaranteed. On a secondary market, the token can trade below the value of the underlying ETH, especially if direct withdrawals are slow or closed.
- You delegate risk decisions. The LRT protocol chooses the operators and therefore, indirectly, the AVSs and their slashing conditions.
- You add a contract and a governance layer. The LRT protocol has its own smart contracts, its own admin keys and sometimes its own price oracles.
The stacking of risks
An LRT built on an LST accumulates, from the bottom up:
- Ethereum: validator slashing at the consensus level.
- The liquid staking protocol: contracts, node operators, LST governance.
- EigenLayer: contracts, withdrawal delays, slashing mechanism.
- AVSs and operators: slashing conditions specific to each service, operational quality of the operators.
- The LRT protocol: contracts, delegation strategy, withdrawal handling, token valuation.
- The surrounding DeFi: if you use the LRT as collateral to borrow, a liquidation risk is added.
A failure at any level can affect your position, and the upper levels can amplify a problem that started lower down.
Demand driven by points
Much of restaking's growth happened in the context of points programs: protocols award points to depositors, in the hope that they will later convert into a token airdrop. This mechanic has two effects worth knowing:
- It attracts capital chasing points rather than real yield, which can leave abruptly when the campaign ends.
- It encourages leverage: borrowing against your LRT to buy more LRT and accumulate more points. This leverage turns a small discount into a cascade of liquidations.
Points are not a yield: their conversion, their value and even their future existence depend entirely on the protocol's decisions.
A concrete example: the ezETH depeg in April 2024
On April 23, 2024, ezETH, the LRT of the Renzo protocol, briefly fell to about $700 on some markets, a drop of roughly 79% in under an hour, while ETH was worth about $3,100, according to DL News.
Several factors combined, according to the same article:
- Airdrop disappointment: the allocation of the announced governance token was judged unfavorable by ezETH holders who had been accumulating points for months.
- Withdrawals not yet open: Renzo did not yet allow direct withdrawal of the underlying ETH. To exit, you had to sell ezETH on the market, which put pressure on the price.
- Leverage: users had borrowed heavily to accumulate points. More than 250 users were liquidated, for about $56 million in total across two lending protocols.
The token subsequently returned to a price close to ETH's. But the liquidated positions suffered a permanent loss. The lesson: even without slashing or a hack, an LRT can trade at a steep discount if direct exit is impossible and many holders want out at the same time.
Checklist before restaking or buying an LRT
- I know whether I'm restaking directly (withdrawal delay of about 14 days) or via an LRT (dependence on the secondary market).
- I know which operator(s) my stake is delegated to, and which AVSs it is allocated to.
- I have read those AVSs' slashing conditions, or I accept not knowing them.
- For an LRT: I know whether direct withdrawals to ETH are open, and how long they take.
- I know the LRT's real liquidity on DEXs (pool depth, not just the displayed price).
- I know whether the protocol has been audited, who controls the admin keys and whether there are delays (timelocks) on upgrades.
- I'm not using the LRT as leveraged collateral, or I understand at what price I would be liquidated.
- I treat points as an uncertain option, not as income.
Mistakes to avoid
- Confusing advertised yield with real yield. A stated rate may include points or tokens estimated at a hypothetical value.
- Ignoring the exit. Before entering, ask yourself how and how quickly you can exit, including in a panicked market.
- Looping leverage to farm. Borrowing ETH against an LRT to buy more LRT works as long as the price holds; a discount of a few percent can be enough to trigger a liquidation.
- Putting everything in one LRT. Concentration increases exposure to a single set of contracts and decisions.
- Signing without checking. Fake restaking sites and points "claim" sites are a classic phishing vector; check the address and the permissions you grant.
- Forgetting withdrawal delays. EigenLayer's roughly 14-day delay adds to any delays at the LRT protocol or in Ethereum's exit queue.
This guide is general information and does not constitute investment, legal or tax advice.
Key takeaways
- Restaking reuses already-staked ETH to secure external services (AVSs), with an additional slashing risk decided by those services.
- On EigenLayer, an operator allocates part of its stake to Operator Sets; only the AVS concerned can slash that "unique stake."
- Direct withdrawals are subject to a delay of about 14 days on mainnet, according to the official documentation.
- An LRT adds liquidity but also a protocol, a governance layer and a risk of discount on the secondary market.
- Points programs and leverage amplified episodes like the ezETH depeg in April 2024.
- The more layers there are, the more you need to understand each one before putting funds in.