Restake From Anywhere: Pioneering L2 Restaking with Connext
TL;DR:
- In February, Connext introduced “Restake From Anywhere,” which enables users to easily restake ETH and LSTs directly from L2/L3 networks without paying Ethereum Mainnet fees.
- Restaking, an EigenLayer innovation, allows users to earn additional rewards through restaking while maintaining liquidity with liquid restaking tokens (LRTs).
- Restaking today only happens on L1s, meaning the TVL is leaking from L2s back to ETH. Additionally, this means that L2 participants have to choose to leave their chain/ecosystem of choice and go to ETH to participate. With Connext, users can restake on their chain of choice.
- Connext’s collaboration with Renzo Protocol exemplifies the practical benefits of restaking, enhancing DeFi opportunities and user experience while aligning with Ethereum’s scalability and decentralization goals.
- Connext is actively expanding the ability to Restake From Anywhere by adding support for additional chains, further enhancing interoperability and user options on EigenLayer.
Introducing Restake From Anywhere
The pursuit of seamless, efficient, and user-friendly solutions in DeFi is an ongoing endeavor. At Connext, we have always prioritized creating intuitive and simple experiences that look and feel like applications on the web.
As part of that mission, we are thrilled to pioneer the ability to Restake From Anywhere. Our first course of action was to partner with the restaking giant Renzo Protocol, which allows its users to:
- Restake their ETH (and LSTs) from their preferred L2/L3 without having to leave these networks.
- Avoid Ethereum Mainnet (L1) gas fees.
- Skip the complexities of bridging, swapping, and paying multiple gas fees. All of this can be done with just one click!
Curious to learn more? Let’s dive into the details.
Restaking — A Product of EigenLayer’s Innovation
Restaking is a revolutionary utility brought to you by EigenLayer. It allows applications to independently leverage Ethereum’s robust Proof-of-Stake (PoS) security mechanism without relying on the Ethereum consensus layer.
By utilizing their existing PoS deposits, both validators and delegators (a.k.a. Ethereum stakers) can validate transactions on Ethereum non-native dApps known as Actively Validates Services (AVSs). This empowers AVSs with greater security while granting restakers additional rewards (from AVSs) alongside their Ethereum block rewards (underlying rewards that come from staking ETH and/or staking LSTs).
Restaking comes in two primary forms:
- Native ETH restaking
- LST restaking
While users have the option to directly restake on EigenLayer, this often leads to locked liquidity. To overcome this, restaking protocols have emerged, enabling users to maintain liquidity after restaking through a concept called liquid restaking.
Simply put, liquid restaking mirrors how protocols like Lido, Rocket Pool, Swell, and others have successfully addressed the challenges associated with traditional ETH staking by introducing the concept of liquid staking.
Examples of Liquid Restaking Protocols
Currently, several liquid restaking providers in the market have launched on mainnet. Some prominent names include:
- Renzo Protocol
- Puffer Finance
- KelpDAO
- ether.fi
- Swell Network
- ClayStack
When users restake their assets with these protocols, they not only receive restaking rewards but also obtain a liquid restaking token (LRT) as a receipt token (unique to its respective protocol).
These LRTs can be utilized for various DeFi opportunities, such as creating money legos with lending protocols, CDPs, and more!
Current Problems with Restaking
Under current market conditions, EigenLayer is experiencing a significant influx of restaked ETH. Every time they increase the LST caps, they are immediately filled, demonstrating the high level of interest in restaking.
To provide further context, the liquid restaking ecosystem currently represents a $9.6 billion market share. We believe it has the potential to become one of the most significant narratives in DeFi to date.
However, restaking presents several challenges:
- Native Restaking on Mainnet is becoming increasingly expensive.
This is primarily due to high gas prices on Ethereum, which averaged 41.38 GWEI from March 7 to April 7 (source: YChart). This level of expense presents a significant barrier to average users interested in participating in restaking activities on Mainnet, underscoring the need for more cost-effective solutions.
2. Users are compelled to stake and/or restake ETH on Ethereum mainnet, even as economic activity flourishes on L2/L3s where costs are lower and new incentives emerge.
This can be:
- Inconvenient for users who already have funds on L2/L3 networks.
- Disadvantageous for L2/L3 ecosystems, as TVL seeps out when users withdraw funds to L1.
- Disadvantageous for restaking protocols that need to attract fragmented capital from L2/L3 networks to L1.
- In contradiction with Ethereum’s ultimate goal of shifting activity to L2s. The push and pull effect of funds moving between L1 and L2 goes against this goal.
The solution? Restake From Anywhere by Connext.
How Does Restake From Anywhere Work?
“Restake From Anywhere” aims to simplify the complex process of restaking assets across different chains. Currently, users face a complicated and costly process that involves multiple steps and a requirement to restake on Ethereum’s mainnet. If users don’t have funds on Mainnet, they must bridge and swap their assets before being able to restake, requiring multiple transactions across multiple services. All told, the process can be complex, and the gas fees are high for the average user.
Connext’s Restake From Anywhere module streamlines this process into a simple one-click action. It allows users to restake assets directly from any supported L2 network to Ethereum Mainnet or across different L2 networks.
This use case reduces transaction costs drastically and promotes new DeFi activities within the L2 ecosystems that help these ecosystems retain TVL, aligning with Ethereum’s vision for a more scalable and decentralized blockchain future.
Renzo Protocol: A Real-World Application
An excellent demonstration of “Restake From Anywhere” is its seamless integration with Renzo Protocol, a restaking protocol with an impressive TVL of over $2.8 billion. Our recent partnership with Renzo showcases the practical benefits of Connext’s use case, enabling users to effortlessly restake their assets while participating in DeFi opportunities and creating “money legos” with lending protocols, CDPs, and more.
Here’s a quick breakdown of how it works:
- Users can directly restake their native ETH from their preferred L2 on Renzo Protocol, earning them restaking rewards.
- Upon restaking, users instantly receive Renzo’s LRT (ezETH), which can be used for various DeFi activities within the L2 ecosystem they restaked from.
- In the background, the ETH is batched and bridged to the Ethereum mainnet, where it is restaked. The trust-minimized infrastructure provided by Connext ensures that this process can be automated and optimized for cost-efficiency, while maintaining the best possible security, all while minimizing any mainnet fees for the users.
- In addition to the benefits from steps 1 and 2, restakers on Renzo can also accrue ezPoints and EigenLayer Restaked Points, positioning them for future incentives.
Note: In the near future, not only native ETH but also supported LSTs like stETH and WBETH will be restakable on Renzo Protocol.
Through this partnership, we believe that Connext and Renzo are enhancing the user experience on EigenLayer and paving the way for more dynamic and versatile DeFi applications while simplifying the restaking process for our users.
What Next?
We are thrilled to announce that Renzo Protocol will be the first restaking protocol we work with to introduce the “Restake From Anywhere” module. Currently, users can natively restake ETH from Arbitrum, BNB Chain, Mode, Base, and Linea, and we plan to support more chains soon!
To join us on this exciting journey and stay updated with all the announcements and updates, follow Connext and Renzo Protocol on X and join our Discord if you have any questions.
About Connext
Connext is a network for fast, trustless communication between chains and rollups. It is the only interoperability system of its kind that does so cheaply and quickly without introducing any new trust assumptions. Connext is aimed at developers looking to build bridges and other natively cross-chain applications.
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