The Future of DeFi: Introducing Liquid Restaked Tokens (LRT)

By Bassey Iniobong, 9th August, 2023

In the ever-evolving crypto space, liquid staking stands out as the dominant player by total value locked (TVL). With Ethereum’s shift to Proof-of-Stake (PoS) and subsequent upgrades, the landscape of liquid staking has changed dramatically, creating an array of opportunities. Enter Stader Labs’ latest innovation: the Liquid Restaked Token (LRT).

Deciphering Restaking: What and Why?

In essence, restaking allows crypto enthusiasts to stake their ETH to support validation across multiple networks at once, such as Ethereum and other protocols integrated with a restaking system. By tapping into Ethereum’s robust security layer, it boosts capital efficiency throughout the crypto realm, granting stakers a golden ticket to earn extra rewards.

A notable player championing restaking is EigenLayer. It’s a groundbreaking protocol built atop Ethereum. With EigenLayer, stakers can restake their ETH to amplify the security of numerous applications on the network while enjoying enhanced compensation.

The Benefits & Opportunities of Restaking:

1. Economic Security: Developers can effortlessly bootstrap economic security for new protocols without breaking the bank, thanks to EigenLayer.
2. Flexibility: Protocols maintain total control over consensus and slashing conditions while honing their unique application features.
3. Optimized Capital Efficiency: Stakers enjoy the luxury of raking in rewards from various validation services without locking in extra capital.

However, with every silver lining comes a cloud. Restaking, while innovative, presents certain challenges.

The Challenges of Restaking:

1. Discovery for Node Operators: With multiple services to run nodes, the onus is on restakers to understand which operators align with their risk appetite.
2. Complex Reward Dynamics: Juggling rewards from multiple sources with fluctuating market values can be overwhelming.
3. Soaring Gas Fees: The expense of claiming rewards, especially for small investors, is often burdensome.
4. Liquidity Issues: Once ETH is restaked, accessing or trading it becomes a waiting game until the unbonding period concludes.
5. Opportunity Costs: Stakers grapple with the decision of whether to venture into staking-and-restaking or other DeFi possibilities.

But worry not, for Stader Labs presents a solution to these problems: The Liquid Restaked Token (LRT).

LRT Unveiled:

LRT is a synthetic token tailored for restaked ETH and its variants. Here’s how it reshapes the game:

• Restakers deposit their ETH or liquid tokens, minting LRT tokens that signify a share of the underlying assets.
• LRT contracts disperse the tokens among chosen Node Operators aligned with the LRT DAO.
• As rewards accumulate from diverse services, the LRT token price mirrors the value of these rewards.
• Restakers have the freedom to trade LRT tokens or reclaim their original assets through LRT contracts.
• In the expansive DeFi realm, LRT tokens further amplify their utility and compositeness.

A pivotal part of LRT is its DAO-driven tokenomics, which determine stake allocations and onboard new services and validators. The overarching aim? To facilitate a robust restaking ecosystem akin to Stader’s ETHx.

A Closer Look at ETHx:

A robust staking system is crucial for Ethereum’s resilience and security. That’s where ETHx, powered by Stader Labs, steps in as a beacon of decentralization.

ETHx introduces a modular multi-pool architecture:

• A permissionless pool democratizes node operations by slashing capital barriers.
• A permissioned pool features operators with a proven track record to guarantee scalability.
• The DVT pool bolsters validator resilience and minimizes risks.

With these innovative strides, Stader Labs reinforces its commitment to making the Ethereum ecosystem more decentralized, scalable, and secure for everyone. The future of DeFi, it seems, is brighter than ever.