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Highlights
- Ethereum restaking services, which offer additional yield and could potentially develop into a robust "internet bond" market.
- EigenLayer, a leading restaking platform, has gained significant attention and recently became available on Coinbase.
- ETH restaking enhances economic growth in the crypto market by allowing Ethereum node operators to validate new services.
S&P Global Ratings recently published a report stating that the Ethereum restaking services offering an additional yield are gaining prominence and could lead to a solid “internet bond” market in the long term.
Similar to the bond market, holders of Ethereum earn additional yield by either pledging or staking their ETH coins to help with transaction verification on the Ethereum blockchain. Similar to lending out securities in fixed-income markets, ETH restaking reinvest the staking rewards and provide compounding returns to investors. Ethereum restaking platforms like EigenLayer have been much in the limelight recently. Amid this popularity, EigenLayer went live on the crypto exchange Coinbase recently.
The Rise of Ethereum Restaking
In a report published on Wednesday, Andrew O’Neill, S&P Global’s digital assets analytical lead, highlighted the importance of restaking in order to enhance economic growth within the crypto market.
O’Neill also stated that restaking allows Ethereum node operators to validate new services by using established tokens thereby eliminating the need for these services to create their own validator with their own, illiquid, and volatile tokens.
As of now, there are only a few active restaking services popular as “actively validated services”. The report by S&P Global also notes that the total value of ETH restaked in the EigenLayer has surpassed 5.3 million Ether, valued at a staggering $19 million. Earlier this week, EigenLayer opened the Phase 2 claims for the EIGEN airdrop.
Risks Associated with Restaking
The risks associated with restaking are primarily operational and specific to each actively validated service (AVS), though financial risks could emerge due to market speculation.
“We do not currently foresee significant ecosystem-level financial risk as staking and restaking are generally non-custodial and there is no rehypothecation of the collateral,” O’Neill writes. “The impact of restaking on system-level leverage must be monitored, particularly through borrowing and leverage metrics on decentralized finance (DeFi) lending protocols”.
Ever since the EigenLayer launch in April, the protocol has gained strong traction within no time. This could inspire more players in the market to bring restaking services.
However, the bigger question is whether the US SEc would allow more restaking protocols in the market. Another doubt is whether the SEC will allow restaking protocols to mature into “internet bond” market without proper regulations.
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