Coinbase Research: Ethereum Staking Ecosystem Thriving, Yet Simultaneously Expanding Potential Risks

Coinbase Research: Ethereum Staking Ecosystem Thriving, Yet Simultaneously Expanding Potential Risks

Coinbase Research: Ethereum Staking Ecosystem Thriving, Yet Simultaneously Expanding Potential Risks

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Ethereum’s booming development in re-staking
Hidden risks of re-staking
According to a research report released by Coinbase on Tuesday, “re-staking” has become the second largest decentralized finance (DeFi) application on the Ethereum blockchain and is expected to become a core part of the ecosystem infrastructure. The report states:
According to data from DefiLlama, EigenLayer is currently the second largest DeFi protocol with a total locked asset value of $12.4 billion, second only to Lido.

EigenLayer allows validators to earn additional rewards by re-staking their “staked Ether” and provides protection through Active Validation Services (AVS). The protocol is built on the existing staking ecosystem and utilizes either “Liquid Staking Tokens (LSTs)” or “Ether directly staked (ETH)” for staking. This mechanism aims to strengthen the foundation of the Ethereum staking ecosystem.
However, Coinbase points out that the development of Ethereum’s re-staking ecosystem may also bring some hidden risks.
Many “liquidity re-staking platforms” have emerged based on the EigenLayer protocol. These platforms deposit user assets into EigenLayer and provide their users with tradable certificates called Liquidity Re-staking Tokens (LRTs), unlocking user liquidity participation in EigenLayer re-staking. However, Coinbase states that compared to existing staking products, re-staking and LRTs may bring additional financial and security risks.
The report also points out that stakers will gravitate towards LRT providers offering the highest rewards. This could lead to additional risks as these providers maximize rewards through multiple re-stakings to attract more users.
Despite these hidden risks, the Coinbase research team still believes that re-staking represents Ethereum’s open innovation and will become a core part of the ecosystem infrastructure.