The Hype of Restaking Narratives: What are the Restaking Projects Beyond the Ethereum Ecosystem?

Introduction:

Restaking is expanding beyond Ethereum.

Restaking, derived from liquidity staking, has maintained more security for Ethereum and sought higher returns for investors. This field has gradually evolved from Liquidity Staking Tokens (LST) to a nested version - Liquidity Restaking Tokens (LRT).

In principle, LRT acts as a restaking voucher. Swapping ETH for LST through liquidity staking, LST serves as a voucher proving “I have indeed staked ETH”. Exchanging LST for a new restaking voucher through restaking proves “I have indeed restaked LST”. However, the original asset is always ETH itself.

Simply put, staking ETH yields LST, and restaking LST yields LRT, repeating the nesting process known as restaking. LRT can be used for further financial operations, such as restaking and lending, with each additional staking layer offering more opportunities to earn returns from liquidity.

Recently, tokens related to the LRT concept have seen appreciable gains, including the rapidly appreciating Restake Finance ($RSTK), and low-market-cap projects like KelpDAO, which offers an LRT solution built on EigenLayer with rsETH.

Unlaunched projects include Swell, ether.fi, Renzo, Puffer Finance which raised $5.5 million, exocore focusing on multi-chain Restaking, and even lending platforms for staked and restaked assets like Ion Protocol and Astrid.

Although the most common restaking method currently involves staking Ethereum’s LST into EigenLayer to obtain LRT, other ecosystems are also venturing into the restaking space, such as the Bitcoin staking protocol Babylon, and the Solana ecosystem’s Picasso. This article will outline restaking projects beyond Ethereum.

Babylon

On December 7th, the Bitcoin staking protocol Babylon completed a financing round of $18 million, led by Polychain Capital and Hack VC, with participation from Framework Ventures, ABCDE Capital, IOSG Ventures, Polygon Ventures, and OKX Ventures.

Babylon stakes Bitcoin as an economic security token for use in blockchains utilizing a proof-of-stake consensus mechanism. Typically, proof-of-stake chains stake their native tokens, such as Ethereum’s network using ETH for security, which can compromise the security on chains where the native token is not popular. Babylon’s proof-of-stake service utilizes Bitcoin for purposes beyond just being a store of value.

Babylon entered its testnet in January this year and has since integrated 39 chains on its testnet, with plans to launch scalable restaking.

Babylon is a leading project within the Bitcoin ecosystem and the largest Bitcoin staking infrastructure. It originated from a research paper on Bitcoin security, co-authored by co-founders David Tse, Fisher Yu, EigenLayer founder Sreeram Kannan, and other co-authors, representing original scientific research.

Babylon’s Bitcoin staking protocol employs a remote staking method, overcoming the absence of smart contracts through cryptographic innovations, consensus protocol innovations, and optimized use of Bitcoin’s script language. This allows Bitcoin holders to stake their Bitcoin trustlessly on a PoS chain without needing to bridge, wrap, or custody, providing full reducible security assurances for the chain.

A key feature of Babylon is its BTC timestamp protocol, which timestamps events from other blockchains on Bitcoin, allowing these events to enjoy Bitcoin’s timestamping like Bitcoin transactions. This effectively leverages Bitcoin’s security as a timestamp server. The BTC timestamp protocol enables quick stake unbinding, composability of trust, and reduced security costs, maximizing liquidity for Bitcoin holders. Designed as a modular plugin, it can be used atop various PoS consensus algorithms, providing a foundation for building reset protocols.

As a project within the Bitcoin ecosystem, Babylon aims to expand a Bitcoin-centric ecological world, unlocking the earning potential of 21 million Bitcoins and extending Bitcoin’s security to protect more of the decentralized PoS world. With restaking, Bitcoin will not only serve as hard currency but also become a productive asset.

The first phase of staking has concluded, and interested users can look forward to updates in the second phase. Babylon aims to launch its mainnet before Bitcoin’s next halving, with the mainnet deployment largely depending on the security audit results of the Babylon testnet.

LiNEAR

LiNEAR is a liquidity staking protocol on the Near Protocol. The NEAR mainnet, which launched in August 2020, is a sharded, proof-of-stake (PoS) Layer 1 (L1) blockchain. Its design centers around the concept of sharding, which divides the network’s infrastructure into several segments, allowing nodes to process only a small portion of the network’s transactions.

A key advantage of LiNEAR is its ability to automatically monitor and adjust validator delegations to ensure competitive and stable overall yields, currently at an annualized rate of 8.35%, the highest in the Near ecosystem.

LiNEAR introduces a re-staking mechanic involving three tokens: $NEAR, $LiNEAR, and $bLiNEAR. To fully engage users in LiNEAR’s decision-making and development, a governance token, $LNR, is being introduced for the LiNEAR protocol.

Users staking $NEAR can receive $LiNEAR, which can be further used in various DeFi protocols within the NEAR/Aurora ecosystem, significantly improving the capital efficiency for $NEAR stakers. $bLiNEAR, a liquidity re-staking derivative token launched by LiNEAR, allows users to deposit $NEAR into a $bLiNEAR staking pool, receiving $bLiNEAR in return, indicating the re-staking of $NEAR.

$bLiNEAR can be used in additional financial activities within any DeFi protocol, such as re-staking for loans or providing liquidity. A notable benefit of $bLiNEAR is its rapid exchangeability back to $NEAR, avoiding the typical lengthy unbonding and withdrawal delays.

As the protocol’s governance token, $LNR can be deposited into an insurance fund, with stakers receiving $sLNR as a representation of their share in the fund. $sLNR holders have the authority to set fees for the $LiNEAR and $bLiNEAR staking pools, manage authorization strategies, oversee the protocol’s treasury, and earn a portion of the protocol’s income, which increases as the ecosystem grows. New $LNR tokens will be regularly introduced to the insurance fund to promote liquidity related to $bLiNEAR and strengthen governance.

LiNEAR is preparing an airdrop for existing $LiNEAR users and early $bLiNEAR adopters. Users can lock in $NEAR by a specific date to enjoy staking income from the LiNEAR protocol until maturity, automatically receiving $bLiNEAR upon expiration. The earlier the $NEAR is locked before expiration, the larger the $LNR airdrop amount.

In addition to LiNEAR, the Octopus Network is another re-staking project on Near Protocol.

On December 17, the Octopus Network launched its first Cosmos SDK application chain, Ottochain, indicating that its innovative NEAR Restaking shared security service and NEAR-IBC cross-chain service are operating stably, with Octopus 2.0 officially going live. Octopus 2.0 introduces a NEAR Restaking mechanism, allowing $NEAR holders to re-stake their tokens to the NEAR protocol or to Ottochain and other application chains for additional $OCT rewards from Ottochain. Unlike LiNEAR, re-staking NEAR to Octopus does not provide liquidity tokens (LRT), meaning the staked NEAR cannot be further utilized in DeFi.

Picasso

Picasso Network aims to support multiple L1s, mainly facilitating cross-ecosystem blockchain communication (IBC) among ecosystems like Polkadot, Kusama, Cosmos, and extending to other networks such as Ethereum and Solana. However, the project currently targets the liquidity re-staking niche within the Solana ecosystem, attempting to enable re-staking through its IBC capabilities.

Picasso has introduced LST$DOT and $lsDOT for secure re-staking. Specifically, Picasso is launching a Restaking Vault plan, similar to EigenLayer on Solana, by providing a Solana-facing validator through Picasso’s Solana<>IBC connection. Users can re-stake LST tokens like mSOL, jSOL, Orca LP, bSOL from Solana liquidity staking projects (e.g., Marinade, Jito, Orca, Blaze) to the validator, earning re-staking profits while ensuring network security.

A potential opportunity lies in the relatively low liquidity staking rate of SOL compared to ETH, with about 8% of SOL still unstaked. This situation benefits both liquidity staking and liquidity re-staking.

Given the previous general rise in Solana’s liquidity staking projects, if Ethereum’s re-staking narrative gains traction, market funds might similarly spill over to the same narrative in Solana.

Layerless

Layerless is an Omnichain Liquid Restake protocol supported by EigenLayer and LayerZero. To understand Layerless, let’s first briefly introduce the assets on Omnichain.

Omnichain is a multi-chain application built on LayerZero, capable of separating the underlying multi-chain architecture from the unified application layer, allowing end-users to overlook the complex differences between different public chains and consider the entire blockchain ecosystem as a complete whole. In the Omnichain ecosystem, the assets held by users will be more unified, secure, and importantly, possess the composability crucial to blockchain products.

Assets on Omnichain can be categorized into Omnichain Fungible Token (OFT) and Omnichain Non-Fungible Token (ONFT) based on whether the Token is homogenized.

Layerless is creating an Omnichain Restaked Token (ORT). When users deposit LST (such as stETH, cbETH, or rETH) into EigenLayer, they receive an ORT, which represents their share in EigenLayer, making it liquid, composable, and usable in DeFi protocols.

Layerless utilizes the LayerZero OFT (Omnichain Fungible Token) standard to enable these ORT tokens to be used across many chains. EigenLayer restaked tokens can be found in use cases beyond Ethereum, such as L2 Arbitrum, Optimism, Base, Metis, zkSync, Linea, etc.

Currently, Layerless plans to launch a testnet in the first quarter.

“Enshrined Restaking”

In Polygon 2.0, POL is staked in the staking center and can be restaked to validate any number of chains in the network, a method known as “enshrined restaking.” POL itself can be used to stake any number of chains and participate in any number of roles. This allows stakers to achieve higher returns with the same staking capital.

POL is a major technical upgrade of MATIC. Initially, Polygon’s founders and researchers introduced a redesigned Polygon protocol architecture to improve Polygon’s infrastructure and transform it into the internet’s value layer, including the new token POL.

POL is described as a new generation token. Simply put, Bitcoin is the first-generation token, although it played a significant role in the Bitcoin protocol, it is a non-productive asset, neither granting its holders any role in the protocol nor incentivizing them to perform such roles. ETH improved upon this, establishing the second-generation native protocol asset—productive tokens.

Productive tokens allow their holders to become validators in their respective protocols, perform useful work, and be rewarded for it. Polygon’s POL takes the next step in this direction, introducing the third-generation native asset—super-productive tokens. Similar to productive tokens, POL enables its holders to become validators and be rewarded, but with two improvements: validators can validate multiple chains, and each chain can offer validators multiple roles (and corresponding rewards).

POL offers the benefits of multi-chain staking without increasing the risk of restaking. Through the Polygon 2.0 proposal, the Polygon ecosystem will expand from a single chain to an L2 ecosystem that can easily interoperate and share liquidity.

For example, Polygon POS will become an L2 network supported by Polygon zk. Validators can secure the hub, run provers to generate proofs, and act as sequencers to batch transactions. The increase in the number of roles validators can play and the number of chains they can validate requires a new token design to power the network.

POL’s utility revolves around validators, aiming to coordinate and incentivize them to perform useful work. Validators need to stake POL to join the validator set. Once validators stake POL, they enter the validator pool and are eligible to subscribe to validate any Polygon chain. In return for performing this useful work, validators can establish at least three incentive streams:

• Protocol Rewards: The staking protocol continuously issues a predefined number of POLs and distributes them to all active validators as basic protocol rewards. These rewards will replace the current MATIC protocol rewards received by Polygon validators.
• Transaction Fees: As mentioned, validators can validate any number of chains and typically collect transaction fees from all these chains.
• Additional Rewards: To attract more validators, some Polygon chains may introduce additional rewards. These rewards can be any token, including but not limited to POL, stablecoins, or the native tokens of these Polygon chains.

When discussing validator incentives, it’s important to note that the concept of validation in Polygon is broader than the usual narrow definition. This further enhances the value proposition of the validator role—besides validating multiple chains, validators can also perform multiple roles on a single chain. These roles include: (i) narrow validation, i.e., accepting transactions and generating blocks, (ii) generating zero-knowledge proofs, (iii) participating in the DAC (Data Availability Committee), and any other useful work on any Polygon chain.

According to official sources, upgrading from MATIC to POL requires sending MATIC to an upgrade smart contract, which will automatically return an equivalent amount of POL. Token holders will have ample time to upgrade, such as 4 years or more. If the community reaches a consensus to support the proposal, migration could begin within a few months.

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