ETH Restaking Surge Driven by Lower Annual Staking Rates

August 30, 2024 09:11 PM AEST | By Team Kalkine Media

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ETH Restaking Surge Driven by Lower Annual Staking Rates — Image source: shutterstock

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Artemiy Parshakov, head of staking at P2P.org, has highlighted that the growing popularity of Ethereum restaking is primarily driven by competitive dynamics among staking service providers. Restaking involves reusing staked tokens, which are otherwise locked and idle, to generate additional rewards. This practice is gaining traction due to a decline in annual percentage rates (APRs) for staking.

Staking, an essential component of proof-of-stake(PoS) blockchains, involves locking cryptocurrency in a smart contract to receive rewards and contribute to network security. Traditionally, staking has attracted participants due to its higher APRs compared to traditional savings accounts. However, as decentralized finance (DeFi) has advanced, the strategy of restaking has emerged, allowing users to leverage their staked {Ethereum} (ETH) more than once. This not only enhances reward but also reinforces network security.

On August 15, the supply of ETH surpassed 120 million, reflecting the increased adoption of restaking. This rise in supply is linked to the growing demand for restaking, as users seek to maximize their rewards by restaking their tokens. This demand has contributed to a higher issuance of ETH.

Parshakov notes that the surge in restaking is influenced by broader trends in network participation. As participation increases, individual staking rewards can become diluted, prompting a decrease in ETH staking APR. Restaking presents an attractive solution for users aiming to enhance their returns amidst these lower APRs.

Additionally, Parshakov explains that restaking allows protocols to bolster security without incurring significant operational costs or developing new mechanisms. The introduction of the permissionless restaking protocol Symbiotic has further contributed to the rise in restaking, positioning itself as a viable alternative to existing solutions like EigenLayer.

Overall, the trend towards restaking reflects the evolving landscape of staking and DeFi, as users and protocols seek to optimize rewards and enhance network security.

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