Restaking, a significant innovation in cryptocurrency from 2024, allows new projects to borrow security from staking protocols by packaging staked tokens into liquid tokens that can be staked elsewhere. It offers a win-win situation by giving projects access to existing security while generating additional yield for stakers. However, restaking differs from rehypothecation, which is a formal borrowing mechanism with associated risks similar to leverage. Rehypothecation can lead to substantial financial loss if borrowers default, as seen in the collapse of Lehman Brothers due to collateralized debt obligations. Unlike rehypothecation, staking and restaking involve putting up collateral without creating a borrower-lender relationship. Restaking entails technical risks rather than financial ones, as a validator can be penalized across multiple systems but does not inherently disrupt multiple parties' balances. Although restaking introduces additional work obligations for stakers, it does not necessarily amplify financial risks like rehypothecation. Nonetheless, the potential for technical instabilities due to slashing risks remains, particularly when single validators or systems face failures. Overall, restaking increases capital efficiency in crypto systems without the extensive risks found in traditional financial borrowing.

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