Introducing Native L2 Restaking

Etherfi’s weETH token has recently enabled native restaking on Blast and Mode, with plans to extend to Linea, Optimism, Base, and BNB Chain in the near future. In addition, LayerZero has developed a framework that other liquid restaking protocols can utilize to facilitate native L2 restaking.

Furthermore, weETH has adopted the OFT Standard, enhancing its interoperability by allowing users to effortlessly transfer the restaking asset across different blockchain networks.

Let’s dive into how all of this works.

Native L2 weETH Restaking Powered by LayerZero

weETH is the wrapped version of eETH, the natively restaked liquid staking token built on Etherfi– the leading restaking protocol that currently holds $3.5 billion in TVL.

weETH can now be minted natively on an L2 cheaply, securely, and without oracle or bridge lock-in through the L2 Native Restaking Module (L2NRM).

How Minting L2 Native weETH Works

weETH Minting Process for Users

• Step 1: User deposits ETH into Etherfi contracts on an L2.
• Step 2: Etherfi mints a corresponding amount of weETH for user on the L2.

The minting process is very simple for the user. Deposit ETH into Etherfi contracts on an L2 and instantly receive weETH back, which earns rewards just like it does on the mainnet. Since weETH is an OFT, the weETH can be sent/received across multiple chains, as shown above.

weETH Minting Process for Etherfi

• Step 3: The L2 sends a message to Ethereum through LayerZero to mint weETH on Mainnet.
• Step 4: The message is received by the mainnet Etherfi contract and weETH is minted.

If Etherfi on Ethereum does not quickly account for new weETH, it cannot properly reward all users. Therefore, LayerZero is used to maintain proper accounting for the rebasing process, sending periodic messages (triggered by an automated Etherfi contract call) to mainnet to mint weETH to match what was minted on the L2. Typically L1 updating would occur on a daily sync schedule.

In order to expand securely, Etherfi has extended rate limits to the L2NRM so that L2 weETH growth never outpaces mainnet ETH holdings.

Sending ETH from L2 to Mainnet

• Step 5: ETH deposited on the L2 is sent to mainnet to be used by Etherfi validators.
• Step 6: The ETH is received by Etherfi and starts to be used by validators.

Because Etherfi on mainnet rebases properly due to LayerZero messaging maintaining correct rebasing accounting, there is no speed constraint in moving assets from L2 to L1.

Therefore, Etherfi can move ETH from L2 to L1 through native bridges, which only charge gas fees on transfers. Other implementations of native L2 restaking use third-party intent bridges, which cost the end-user 10 bps per transaction and upwards of 150 bps of slippage.

That said, Etherfi maintains the ability to plug any bridge it sees fit into this L2NRM module in case third-party bridges lower costs and/or improve slippage.

LayerZero’s Native Restaking Framework

LayerZero has created a framework for liquid restaking protocols to easily add native minting on L2s. The documentation is here.

As outlined in the Etherfi example above, the L2NRM is particularly useful because…

• Batched syncs: Any interactions with mainnet occur in batches. This is a core feature as it allows for low-cost L2 minting where no high L1 gas fee needs to be incurred on every mint. Both the fast sync and the actual ETH bridged are batched to save gas.
• Fast L1 updating: The L1 update occurs through the LayerZero bridge allowing for the L1 deposit pool to quickly realize that there is more outstanding supply. This usually occurs on a daily sync schedule.
• Cost-efficient native ETH bridging: The actual ETH is transferred over the native L2 bridge, significantly reducing cost (only gas cost) and of course increasing security compared to third party asset bridge solutions.

Additionally, L2NRM is infrastructure built to be entirely configurable.

Any bridge provider (native or third party) can facilitate the transfer of ETH back to Ethereum. Furthermore, The L2NRM price feed is modular, allowing Etherfi to select or replace its price feed provider at any time.

weETH is an OFT

After minting weETH on an L2, the OFT Standard allows users to move the asset across multiple chains.

The OFT Standard is a way to extend a token to many chains through LayerZero — the leading interoperability protocol that has facilitated 125 million messages and $50 billion in value across 64 chains. And weETH has adopted the OFT Standard. At launch, weETH will be live on Mode and Blast, with more chains to come.

How Etherfi Uses the OFT Standard

Everything about the OFT Standard is configurable and controlled by Etherfi.

Security

• Etherfi’s Security Stack verifies messages through decentralized verifier networks (DVNs) run by Nethermind and LayerZero Labs.
• Each weETH transfer requires both DVNs to verify the transaction. Etherfi can reconfigure its Security Stack in the future.

Chain Deployment

• Etherfi is deploying weETH on Mode and Blast, with the option to expand the asset to all 64 chains supported by LayerZero.

Customization

• Etherfi rate-limits the minting and bridging process of weETH.
• weETH on the chains Etherfi chooses. weETH transfers across chains just for the price of gas.

Conclusion

L2NRM takes Etherfi omnichain. Native L2 restaking: the best restaking experience available across many chains.

OFT takes weETH omnichain. Etherfi-owned contracts: an omnichain restaking asset available on many chains.

And now LRT protocols can extend native restaking to L2s through LayerZero’s framework.

LayerZero is just the infrastructure. Etherfi is the application bringing weETH to L2s in the cheapest, most secure manner. The ether.fi protocol controls weETH contracts, chooses its bridge, selects its oracle, and owns its security — as all protocols should.

This is crypto: composable, sovereign, better.

About LayerZero

To learn more about LayerZero:

• Check out the website
• Add on LinkedIn
• Follow on Twitter
• Read the Whitepaper