Alpha Report: Restake Finance

Built on top of Eigen Layer, Restake Finance allows users to restake their LST’s for a liquid restaked token while earning yields from staked ETH and Eigen Layer rewards.

I gave my thoughts and a brief rundown on Restake Finance here, but wanted to give a more in depth look into their protocol. Restake Finance is built on top of Eigen Layer. In order to understand what Restake Finance looks to achieve, you need to have a general idea of what Eigen Layer is.

Eigen Layer is the first Ethereum restaking protocol that allows ETH stakers to restake their ETH on their protocol to validate and secure software modules built on top of Ethereum. Some examples of a module are a new blockchain, data availability layers, bridges, oracle networks, and keeper networks.

Users can restake their LST’s (liquid staking tokens) with Eigen Layer to continue earning yield from staked ETH, plus native yield from Eigen Layer. This is just speculation, but there may be an Eigen Layer airdrop coming. I say this because right now the native rewards for current restakers are “Restake Points”, which makes me believe they may be paying out yield in their own native token in the future. Or maybe rewards from the different software modules built on top of Ethereum that utilize Eigen Layer for security.

Additionally, ETH node validators can restake their staked ETH natively by pointing their withdrawal credentials to the EigenLayer contracts.

More info about Eigen Layer here.

Now that we have a general understanding of Eigen Layer, we can jump into what Restake Finance aims to accomplish. For the sake of my sanity, I will be referencing Restake Finance as ReFi.

ReFi looks to grab the first mover advantage in the liquid restaking sector. Users will be able to restake their LST’s with ReFi and earn yield from staked ETH (LSD), and Eigen Layer rewards. ReFi will only accept Lido’s stETH to start off, as they have over 70% market share in Ethereum liquid staking, but we can expect more LST’s to be accepted in the future.

By restaking with ReFi you can earn 3-5% from ETH staking and 10%+ from Eigen Layer rewards. Can’t you get the the same yields as staking on Eigen Layer? Yes, but let’s get into why you would want to restake using ReFi opposed to EL.

Restaking with ReFi will have a few benefits.

When a user restakes on Eigen Layer, their LST’s/staked ETH is staked and they can only claim rewards. When restaking with ReFi, users mint rstETH (restaked ETH).

rstETH is a yield bearing token that earns 3-5% from stETH and 10%+ from EL rewards. On top of that rstETH is a liquid token, allowing users access to instant liquidity, and other protocols to use it as a building block in DeFi. For example, protocols can use rstETH as collateral in lending protocols, yield aggregators and optimizers, derivatives, and other financial instruments.

I believe this will be one of the main drivers for ReFi adoption. Say a protocol like Pendle allows users to trade yields on rstETH, or DEXes and yield aggregators incentivize LPing for rstETH. This would help grow TVL and adoption immensely. Let’s hope the team is able to attract quality partners!

rstETH will be fully backed by LST’s and redeemable 1:1 with any LST (1 rstETH = 1 stETH).

When rstETH is redeemed for the underlying LST, rstETH is burned.

Eigen Layer currently has a 7-day withdrawal delay, but this should only be during the "early stages of the Eigen Layer mainnet, to optimize for the safety of assets.” If EL does have an exit queue in the future, rstETH:LST redemptions will be finalized on an address by address basis.

Similar to stETH, rstETH earns ETH staking yield via a rebase mechanism. This means while you hold rstETH, the number of tokens will increase as per the validator’s performance.

Eigen Layer restaking yields will be claimable through the Restake Finance dApp. These yields accrue over time and can be claimed at any time.

$REFI is the utility and governance token of Restake Finance (DAO). $REFI holders will be able to govern the protocol, boost their yields, and share the protocol’s revenue.

$REFI utility in V1.0:

This is where I believe ReFi has the ability to gain TVL opposed to just restaking on Eigen Layer. Aside from the liquid restaking option and other DeFi protocol’s ability to incorporate rstETH, $REFI stakers will receive boosted Eigen Layer yields, alongside a share of protocol revenue.

We’ll have to see how $REFI stakers can get boosted rewards, but its definitely piqued my interest. I’m also a fan of real yield and as EL adoption grows, ReFi adoption grows, meaning more fees, and more revenue share for $REFI stakers!

EL currently has 3 vaults where users can restake their LST’s. All three vaults - stETH, rETH, and cbETH - are filled with 15,000 of each LST respectively. EL will progressively increase the caps on their vaults but I’m unsure if they will take off the caps completely.

From their docs: the next protocol upgrade will enable operators to register with EigenLayer, and enable restakers to delegate to those operators.

This means ReFi will allow restakers to choose which modules they would like to restake into. Stakers might delegate to operators that offer maximum rewards on delegated stake.

Restake Finance will be have the first mover advantage when it comes to restaking and utilizing Eigen Layer. Users can restake their LST’s with ReFi, earn 3-5% APR from their LST + 10%+ APR from Eigen Layer rewards, and get a liquid restaked token (rstETH). Opposed to staking/locking with Eigen Layer.

rstETH is liquid and can be used as a building block in DeFi. rstETH is also redeemable 1:1 with stETH or any future underlying LST’s.

$REFI can be staked for revenue share and to boost your rstETH yields.

I’m personally bullish on ReFi because I believe they will start of a new narrative, something us degens are always itching to find. With the launch of Restake Finance will come forks, innovation, and new developments in DeFi utilizing liquid restaking tokens.

Article posted @August 5, 2023