In traditional finance, investors have long relied on methods that require locking up capital to generate reliable income. Certificates of deposit (CDs) and certain mutual funds, for example, offer predictable returns but require funds to be held for a set period, often with penalties for early withdrawal. These systems provide stable income opportunities through committed capital and support financial stability.
Building on principles from traditional finance, the Web3 industry introduced crypto staking as a profitable approach. Users earn rewards by holding and locking up cryptocurrency tokens to support a blockchain network, similar to how traditional investors gain returns through committed capital on financial products.
Why staking works
Previously, staking was limited to niche assets. Ethereum (ETH), one of the largest and most well-known blockchain networks, has significantly expanded its reach. Ethereum’s shift from the energy-intensive proof-of-work (PoW) consensus mechanism to proof-of-stake (PoS) has popularised staking, with Ethereum validators increasing over 30 per cent in the past year, surpassing the one million mark for the first time by mid-2024.
“The rise of liquid staking and more recently restaking has enticed institutions interested in both immediate liquidity and enhanced capital efficiency from restaking,” says Carlos Mercado, data scientist at Flipside Crypto.
Staking is more than a passive income method; it functions similarly to holding shares in a company in terms of decision making, albeit in a more decentralised manner. The more tokens a user stakes, the greater their influence in network governance. This model aligns interests, rewarding those committed to the ecosystem with transparent, automated governance and returns through newly minted tokens or transaction fees.
Challenges in staking
Despite its advantages, staking also comes with some drawbacks. For one, the minimum staking requirement to become a validator is 32 ETH (about US$96,000), which can be a high barrier for individual investors. A further challenge lies in centralisation risks, as validators with large staked holdings can dominate the network, reducing the decentralised aspect of the PoS mechanism.
Also Read: Liquid staking: Bridging the gap with traditional finance
In addition, some assets impose lock-up periods that can limit liquidity. For example, unstaking Polkadot (DOT) requires a 28-day waiting period, while Cosmos (ATOM) involves a 21-day lock-up before assets become accessible. These restrictions can limit investors’ flexibility, as they must wait through the designated periods before accessing their staked assets.
The rise of restaking
Fintech innovations have addressed many of these challenges. Staking pools allow users to combine their assets, effectively lowering the barrier to entry for validators. Platforms are also building shared governance mechanisms to counteract the potential centralisation effect of big stakes.
Restaking builds on staking by letting users leverage staked assets across multiple platforms, boosting their earning potential. Unlike traditional staking, which locks tokens to one network, restaking allows Ethereum validators to secure additional services and earn extra rewards.
Staking and restaking are emerging as niche opportunities in fintech, similar to the evolution of certificates of deposit (CDs) in the past. However, instead of leveraging traditional financial systems, these products rely on decentralised platforms, where yield accumulation and disbursement are managed transparently and efficiently through blockchain technology.
Simplifying staking and restaking with established platforms
Several platforms are advancing staking and restaking with features that optimise rewards and user experience. Here are three leading platforms—Lido, EigenLayer, and StakeEase—that offer diverse solutions for crypto holders seeking flexible and efficient staking options.
Lido
As the largest liquid staking platform, Lido supports assets like ETH, SOL, and DOT. It utilises the Lido DAO to manage governance and employs a set of professional validators to secure the network. It uses liquid staking tokens like stETH for Ethereum, which can be traded or used across different applications, maintaining liquidity while earning staking rewards.
Lido’s growth is reflected in its Total Value Locked (TVL), which has surged from USD 1.48 million in December 2020 to USD 32.17 billion in November 2024.
EigenLayer
EigenLayer, a restaking platform, enables users to leverage their staked ETH to secure multiple protocols beyond Ethereum. By participating in EigenLayer, stakers can extend Ethereum’s security to new services and earn additional rewards.
As of February 2024, EigenLayer has raised a total of USD 171 million over three funding rounds from 27 investors, including notable firms such as Andreessen Horowitz (a16z), Coinbase, and Blockchain Capital.
Also Read: Cross-chain interoperability: The key to unlocking crypto’s true potential
StakeEase
StakeEase simplifies the complex process of staking and restaking across multiple networks and platforms, offering users an intuitive, unified interface that goes beyond Ethereum. Built on Router’s Cross-Chain Intent Framework (CCIF), the platform allows users to deposit any token, including ETH, USDT, or USDC, and receive their desired Restaked Token (RST). Users aren’t restricted to a single chain and can choose from various restaking platforms such as Kelp, Ether.Fi, and Renzo Protocol, or let the platform select the optimal options based on its path discovery algorithm.
StakeEase simplifies the complex process of staking and restaking across multiple networks and platforms, offering users an intuitive, unified interface that goes beyond Ethereum. Built on Router’s Cross-Chain Intent Framework (CCIF), the platform allows users to deposit any token, including ETH, USDT, or USDC, and receive their desired Liquid Restaked Token (LRT). Users aren’t restricted to a single chain; they can choose from various restaking platforms such as Kelp, Ether.Fi, and Renzo Protocol, or restake into an index that includes all of them along with sxETH.
StakeEase brings staking and restaking services together in one platform, making it simple and easy for users. It combines rewards from projects like Etherfi, Swell, and Taiko, so users can earn multiple rewards without hassle. The platform also helps maximise yield while keeping things secure with an insurance pool and a system to manage risks if any Liquid Restaked Token (LRT) becomes unstable.
Looking ahead: The path for staking and restaking
Web3 staking and restaking are creating passive income opportunities, promoting decentralisation and network security. Supported by fintech, these innovations are steadily becoming more accessible, driving the industry toward broader adoption.
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