Ethereum restaking is set to become the “bedrock” for a range of new apps on the blockchain, but it could introduce several hidden risks.
Ethereum restaking will form a “core part” of the network in the future — but there are still risks that come along with the new yield-bearing mechanism, say Coinbase analysts.
Ethereum restaking could form the “bedrock” for a wide range of new decentralized applications on the blockchain, but it could also introduce several new hidden risks, says Coinbase., Coinbase analysts David Han and David Duong noted several risks with restaking and the issuance of so-called liquid restaking tokens .
The analysts also warned that the LRT providers and decentralized autonomous organizations would be incentivized to “maximally restake multiple times to remain competitive.”Despite the risks, the analysts said EigenLayer’s restaking protocol looks “poised to become the bedrock for a wide range of new services and middleware on Ethereum, which, in turn, could generate a meaningful source of ETH rewards for validators in the future.
Han and Duong also predicted that despite the amount of restaked ETH continuing to grow in the long term, there could be a reasonable short-term drop in Eigenlayer’s TVL when point farming comes to an end or if early AVS rewards are below expectations.met with controversySpot Bitcoin ETF trading volume tripled in March to $111 billion
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