The Rise of Restaking: Project Risks and Investment Suggestions

With the rise of the Restaking concept, multiple projects based on Eigenlayer have emerged in the market. Restaking aims to allow users to share their staking shares with other projects by leveraging the trust of the Ethereum Beacon staking layer, thereby obtaining higher returns, while enabling these projects to enjoy consensus trust and security comparable to the ETH Beacon layer.

To help investors better understand the potential risks between different Restaking projects, we conducted an in-depth research on mainstream Restaking protocols and LST assets, and systematically sorted out the related risks, so that investors can better control risks while pursuing returns.

Restaking Major Risk Analysis

Users participating in Restaking mainly face the following types of risks:

1. Contract Risk:

   • Project contracts may be subject to attacks
   • If the EigenLayer contract is attacked, it may affect the funds of related projects.
   • LST Restaking and Native ETH Restaking differ in the location of fund storage, which may lead to varying levels of risk.
   • Project parties may have high-risk permissions and may misappropriate user funds in certain situations.

2. LST Risk:

   • LST token may become unpegged
   • The LST contract upgrade or an attack may result in a deviation or loss of LST value.

3. Exit Risk:

   • Except for EigenLayer, most mainstream Restaking protocols currently do not support withdrawals.
   • If the project party does not upgrade the withdrawal logic in a timely manner, users may need to obtain liquidity exit through the secondary market.

Mainstream Restaking Project Risk Assessment

We conducted a systematic research on the mainstream Restaking projects in the market and found the following main issues:

1. The project completion rate is generally low, with most of the withdrawal logic still not implemented.
2. Centralization risk is significant, user assets are ultimately controlled by a multi-signature wallet, and there is a potential risk of the project party running away.
3. Internal malicious actions or loss of multi-signature private keys may lead to asset loss.

EigenLayer Special Risk Warning

As the foundation for all Restaking projects, EigenLayer also has the following risk points to be aware of:

1. The contracts deployed on the current mainnet have not fully realized all the functions outlined in the white paper, especially the AVS and slash mechanisms.
2. Native ETH Restaking requires users to run their own Beacon chain nodes and bear the risk of being slashed by the Beacon chain.
3. Due to the AVS and Slash mechanisms not being fully developed, users are advised to use the deleGate function with caution to avoid potential financial losses.

Specific risks associated with some projects

1. EigenPie: Partial contract upgrade permissions are controlled by a single EOA address.
2. KelpDAO: There may be arbitrage opportunities in the calculation of the stETH price.
3. Renzo: The OperatorDelegator configuration may affect users' fund withdrawals.

LST Token Risk Analysis

We also conducted a risk assessment of the mainstream LST tokens in the market, including aspects such as contract upgradability, permission control, and Oracle dependency.

Suggestions for Reducing Restaking Risks

1. Capital Allocation Strategy:

   • Large amounts of funds are recommended to directly participate in EigenLayer's Native ETH restaking.
   • Users seeking liquidity can choose the relatively stable stETH to participate in EigenLayer. Users with a higher risk tolerance can appropriately participate in other projects based on EigenLayer, but they should be aware of exit risks and secondary market liquidity.

2. Risk Monitoring:

   • Configure contract monitoring to pay attention to contract upgrades and sensitive operations by project parties.
   • Use tools like Cobo Argus to set up conditional triggers for multi-signature wallets, automatically adjusting strategies based on factors such as changes in TVL and fluctuations in ETH prices.

Restaking, as an emerging concept, still carries many unknown risks. Investors should remain vigilant, allocate funds reasonably, and continuously monitor project developments and market dynamics to protect their interests to the greatest extent.