Ether.fi on Why Restaking Is Having a Moment

The Ethereum network has evolved so rapidly since launching in 2015, it’s easy to forget we are less than a decade away from its inception. Crypto years are like dog years, with the rise and fall of bull markets, rug pulls, and new projects all being analyzed closely in real time, making weeks feel like years.

A quick pause allows us to assess how far the ecosystem has come. Since 2012, staking, particularly with Proof of Stake (PoS) consensus, has been crucial. It enhances blockchain scalability, fosters cross-chain innovation, and fortifies DeFi through liquidity, governance tokens, and yield farming across protocols.

Typically, staking on Ethereum means your ETH is locked up. It’s putting in some important work by enhancing the security and stability of the network. But, you can’t do much else with it.

Like web3 at large, staking has evolved, addressing pain points and adding new layers. EigenLayer, introduced on Ethereum in June 2023, has disrupted this model by introducing restaking across different networks and protocols. This liquid restaking means that staked assets gain increased flexibility within the DeFi ecosystem. They can serve as collateral for lending, enhance security in different layer 2 (L2) setups, or engage in various consensus mechanisms.

A frontrunner in the wave or restaking protocols is ether.fi. The native restaking protocol, built on L2 blockchain Linea, manages to innovate even further, allowing stakers to control their keys in place of node operators  – who typically retain ownership in other restaking protocol models. This means that even if the protocol is compromised or the node operator encounters issues, you can still recover your ETH.

Adding layers upon layers, the ether.fi protocol allows users to maximize rewards with base staking rewards, ether.fi points, and EigenLayer points.

*Linea sat down virtually with ether.fi co-founder Rok Kopp and here’s what we learned.*

Linea: What is ether.fi’s origin story?

Kopp: We began building in early 2023. We were running an ETH staking fund and we staked our ETH with Lido. As we were digging into it, we just realized there were some centralization issues and maybe a better way to create it. This is post-FTX. It became very clear, you should never give up custody of your keys. Even with the most trusted brands, you should always be able to get your assets out.

So Ether.fii was born with two key directives. One is that stakers need to control their keys and have control of existing validators at any point. The second aspect was the potential to generate higher rewards beyond Ethereum's basic staking yield.

Linea: Did you have a sense restaking was going to take off in the way it has?

Kopp: We crossed paths with Sreeram Kanan from EigenLayer in 2023. He told us about what he was building. And so in our initial blog, we actually already mentioned building on top of EigenLayer. We had no idea restaking would take off as much as it did, even in our wildest dream. But we’d been building for a while with that in mind. So it allowed us to get to market first, we built it the right way, we didn't have to take shortcuts.

Linea: From your view, what’s behind the restaking hype?

Kopp: People get attracted to yield. That's the honest answer. The launch of EigenLayer and its token launch were massive. It just kind of took off.

But the most interesting part of DeFi is the building block factor. How you can take an asset and basically start to layer different things on it. You can use it as collateral and go into different DeFi protocols.

We’re just another layer on top of that. Users on ether.fi receive base staking rewards, but then you also get ether.fi points, EigenLayer points, and soon restaking rewards, while maintaining composability to go into DeFi to lend and do whatever you want.

Linea: Why did you decide to build on Linea?

Kopp: There’s tons of demand for users to be on L2 and it’s important for us to give our users a great experience. L1 is just getting too expensive to transact on, so you have to go to L2.

The Linea team is super focused on having good user experience and we want to align with people like that because we’re super user focused. We wanted to make sure there’s a bunch of protocols we’re integrated from day one, so there’s good utility.

Linea: What’s the benefit of native restaking?

Kopp: Native restaking is ETH that is in the Beacon Chain, where that withdrawal address is getting pointed at EigenPods or AVSs. So there's no added risk. With a non-native, so that'd be a liquid staking token like S2E, that withdrawal address is getting pointed there, so it's not native. So there's an added level of risk. Maintaining the integrity of the peg and then security of the ETH is the most important thing for us.

Natively minting is just head and shoulders above. It’s the most secure cost efficient solution that is out there. So you can have your ETH, and you can natively mint wrapped eETH (which is ether.fi’s ETH on Linea). And then you can also bridge to other L2s.

Linea: When trying to navigate the restaking frenzy, what should users look for in a protocol?

Kopp: I think one is the utility of the token and where it's integrated. Two is the security of it, making sure that it's super secure and how you're minting is good. The less bridges you have to deal with, the better. And three is the economics on it. How much slippage are you paying, are you having to pay to get cross-chain?

-Visit ether.fi to stake, restake, and maximize your rewards, all while maintaining control of your keys.