I have been professionally involved in DeFi for 8 years (as a researcher, LP and advanced user). Today, I would like to talk about one of the major trends of 2023 - restaking. For this, I will try to go step by step, rather than giving the 1001st description of the general processes, of which there are so many in Google search results. So you have ETH, what's next? Let's imagine you have 1 ETH. Not bad. Is its price increasing? In the medium and long term - yes, but in the short term - not always: What to do? The most conservative strategy in this case is HODL, but in this case, DeFi is not yet in the picture. Liquid Staking The next step is liquid staking. To get straight to the point, Ethereum, like many other projects, is now PoS (Proof-of-Stake), which means? It means validators or other super-nodes receive rewards. Since that's the case, these rewards can be... tokenized, turning them into a separate financial instrument (derivative). This is exactly what Lido, Rocket Pool, and a number of other projects have done (today their total number has exceeded a hundred, although barely 10 are truly active): I always use Lido as an example, but only because they are the largest. If you, like me, prefer more decentralization, then Rocket Pool is the right and precise choice. The APR for stETH today is 3%-3.5% (Lido), but at the beginning of the transition era, it was over 10%: No super-knowledge is needed for liquid staking: Go to the page: stake.lido.fi; Authorize with your wallet (Metamask or something else - it doesn't matter); Stake ETH as the base asset and receive a first-order derivative - stETH. A few life hacks right away: Learn to check any asset/project through at least 2-3 sources: My 1st source is pro.similarweb.com: you can quickly check the traffic and when the site became active to avoid obvious scams (you can also add a who-is check here); The 2d source is coinmarketcap.com: any aggregator will do, the main thing is that it updates promptly; The 3d source is any search engine without subjective filtering; Always carefully research the economic conditions (DYOR) during your first transactions: What is the base and derivative asset worth? What is the provider's fee? What is the gas price (even in cheap networks, failures are not uncommon)? Do the APR/APY figures match the stated ones (you can check on the same aggregators)? And always scroll through the news feed: blockchain solutions are rarely hacked, but DNS attacks, simple phishing sites, and other issues happen much more often, as there are always two vulnerable links in decentralized Web3: centralized intermediary services; you → the person. So, you have received the long-awaited stETH, and now your yield on ETH is 3% per year or more. Is that a little? Yes, but it's in ETH, and as we remember, it can rise from $0.03 to $4500 or more. And this is our main hope. But can the yield be increased further? Yes, it can! Restaking "This is a new onchain primitive similar to rehypothecation, allowing either natively staked ETH or Liquid Staking Tokens (LSTs) to be restaked in return for additional yield". So, let's immediately see how this works in practice. We go to kelpdao.xyz and stake the 1 stETH we obtained earlier: And again: Don't be lazy and study the protocol audit: audits themselves may not help much, but it's worse when they're absent; Look at APY/APR: that's why you came here; And then the operation is the same as before: input the base asset (now stETH) and receive the derivative (rsETH). You can also try EtherFI, Renzo protocol and others: it depends more on current rates and your imagination. Life hack: never put 1 to 1. In the sense that if you're going up the ladder of complex derivatives, it's better to go like this: 1 ETH => split into 0.8 & 0.2: leave 0.2 in ETH, and convert 0.8 into stETH; Then divide 0.8 stETH again into 80% and 20% (any slippages, differences in rates, included rewards - keep in parentheses) and so on. Why all this complexity? Because: Protocols get hacked; Individual pools get hacked too; Even individual assets. And don't forget to remove unnecessary approvals through scanners or special services like cointool.app. So, we've progressed: From a hypothetical 0% APR on ETH to 3% in stETH; And then, with the specific implementation of restaking in Kelp DAO - up to 4.28% (don't rush to add percentages, as there are many pitfalls here). What's next? Remember that diversification is decentralization and try to allocate 80% of 0.8 (0.64) stETH through various protocols, for example: ETHERfi; Renzo; Kelp; Swell. In total, we get 0.64/4 = 0.16 for each service. But you are free to act as you wish and, by accumulating loans in AAVE, invest not a part of the whole, but the whole plus a part. Is this risky? Yes. But DeFi endures everything. Can you achieve even higher returns? Yes, but first - some more life hacks: Don't forget about bonuses (via airdrops) from EigenLayer and protocols (like Kelp, calculating points for a reason), which also add to your profitability; You can continue using the assets in DeFi, which also adds extra income (though no one can guarantee it); Finally, don't forget about cross-chain arbitrage: you can always look for a new network and try to bridge (transfer) your assets - currently possible on Scroll, where different restaking derivatives earn so-called marks. And yet, what about ETH itself: can you do something more to improve profitability? The short answer is yes, but implementing this answer is not as simple as it seems. The magical Pendle In fact, there are several services like this, including Asymetrix, but for brevity, I'll focus on Pendle specifically: especially since it has proven itself quite well in the past year (although everyone has their mishaps). And again - headfirst into practice: On the main page, select the asset you need (initially set the mode to simple: once you understand it, you can start experimenting with YT & PT), check the APR/APY, if it suits you - proceed to its staking page: Carefully and as capable as you can, read the terms and lock your assets: again, the choice of percentage is up to you, but I would recommend (if I could) starting with at least an 80/20 strategy everywhere. That's it, now you've learned how to hedge your bet on a complex derivative. It sounds strange, but it's true. Want more? Well, don't linger and follow the primary source: pendle.gitbook.io/pendle-academy. The position will look something like this: So, from zero, we can pull out approximately 7%-10% annually (in the worst case, 4-7%) in ETH, which is already quite substantial. But that's not all. Take another look at the scheme we've walked through: Conclusion Undoubtedly, the presented scheme can be both simplified and made more complex. Moreover, different services (projects) can be used at different stages. However, the main point is that the described scheme is universal in theory on the one hand, and on the other hand, it is implemented in quite specific practice. If this post sparks interest, I will continue. But for today, that's all from me and Ch33r$! I have been professionally involved in DeFi for 8 years (as a researcher, LP and advanced user). Today, I would like to talk about one of the major trends of 2023 - restaking . For this, I will try to go step by step, rather than giving the 1001st description of the general processes, of which there are so many in Google search results. restaking description So you have ETH, what's next? So you have ETH, what's next? Let's imagine you have 1 ETH. Not bad. Is its price increasing? In the medium and long term - yes , but in the short term - not always: yes but What to do? The most conservative strategy in this case is HODL , but in this case, DeFi is not yet in the picture. What to do? HODL Liquid Staking Liquid Staking The next step is liquid staking . To get straight to the point, Ethereum , like many other projects, is now PoS (Proof-of-Stake), which means? It means validators or other super-nodes receive rewards. Since that's the case, these rewards can be... tokenized , turning them into a separate financial instrument ( derivative ). This is exactly what Lido, Rocket Pool, and a number of other projects have done (today their total number has exceeded a hundred, although barely 10 are truly active): liquid staking Ethereum PoS tokenized derivative I always use Lido as an example, but only because they are the largest. If you, like me, prefer more decentralization, then Rocket Pool is the right and precise choice. The APR for stETH today is 3%-3.5% (Lido), but at the beginning of the transition era, it was over 10%: APR No super-knowledge is needed for liquid staking: Go to the page: stake.lido.fi; Authorize with your wallet (Metamask or something else - it doesn't matter); Stake ETH as the base asset and receive a first-order derivative - stETH. Go to the page: stake.lido.fi ; stake.lido.fi Authorize with your wallet ( Metamask or something else - it doesn't matter); Metamask Stake ETH as the base asset and receive a first-order derivative - stETH . stETH A few life hacks right away: Learn to check any asset/project through at least 2-3 sources: My 1st source is pro.similarweb.com: you can quickly check the traffic and when the site became active to avoid obvious scams (you can also add a who-is check here); The 2d source is coinmarketcap.com: any aggregator will do, the main thing is that it updates promptly; The 3d source is any search engine without subjective filtering; Always carefully research the economic conditions (DYOR) during your first transactions: What is the base and derivative asset worth? What is the provider's fee? What is the gas price (even in cheap networks, failures are not uncommon)? Do the APR/APY figures match the stated ones (you can check on the same aggregators)? And always scroll through the news feed: blockchain solutions are rarely hacked, but DNS attacks, simple phishing sites, and other issues happen much more often, as there are always two vulnerable links in decentralized Web3: centralized intermediary services; you → the person. Learn to check any asset/project through at least 2-3 sources: My 1st source is pro.similarweb.com: you can quickly check the traffic and when the site became active to avoid obvious scams (you can also add a who-is check here); The 2d source is coinmarketcap.com: any aggregator will do, the main thing is that it updates promptly; The 3d source is any search engine without subjective filtering; Learn to check any asset/project through at least 2-3 sources : Learn to check any asset/project through at least 2-3 sources My 1st source is pro.similarweb.com: you can quickly check the traffic and when the site became active to avoid obvious scams (you can also add a who-is check here); The 2d source is coinmarketcap.com: any aggregator will do, the main thing is that it updates promptly; The 3d source is any search engine without subjective filtering; My 1st source is pro.similarweb.com : you can quickly check the traffic and when the site became active to avoid obvious scams (you can also add a who-is check here ); pro.similarweb.com here The 2d source is coinmarketcap.com : any aggregator will do, the main thing is that it updates promptly; coinmarketcap.com The 3d source is any search engine without subjective filtering; Always carefully research the economic conditions (DYOR) during your first transactions: What is the base and derivative asset worth? What is the provider's fee? What is the gas price (even in cheap networks, failures are not uncommon)? Do the APR/APY figures match the stated ones (you can check on the same aggregators)? Always carefully research the economic conditions ( DYOR ) during your first transactions: Always carefully research the economic conditions DYOR What is the base and derivative asset worth? What is the provider's fee? What is the gas price (even in cheap networks, failures are not uncommon)? Do the APR/APY figures match the stated ones (you can check on the same aggregators)? What is the base and derivative asset worth? What is the provider's fee? What is the gas price (even in cheap networks, failures are not uncommon)? Do the APR/APY figures match the stated ones (you can check on the same aggregators)? And always scroll through the news feed: blockchain solutions are rarely hacked, but DNS attacks, simple phishing sites, and other issues happen much more often, as there are always two vulnerable links in decentralized Web3: centralized intermediary services; you → the person. And always scroll through the news feed : blockchain solutions are rarely hacked, but DNS attacks, simple phishing sites, and other issues happen much more often, as there are always two vulnerable links in decentralized Web3: And always scroll through the news feed centralized intermediary services; you → the person. centralized intermediary services; you → the person. So, you have received the long-awaited stETH, and now your yield on ETH is 3% per year or more. Is that a little? Yes, but it's in ETH, and as we remember, it can rise from $0.03 to $4500 or more. And this is our main hope . But can the yield be increased further? Yes, it can! hope Restaking Restaking " This is a new onchain primitive similar to rehypothecation, allowing either natively staked ETH or Liquid Staking Tokens (LSTs) to be restaked in return for additional yield ". So, let's immediately see how this works in practice. We go to kelpdao.xyz and stake the 1 stETH we obtained earlier: This allowing either natively staked ETH or Liquid Staking Tokens (LSTs) to be restaked in return for additional yield kelpdao.xyz And again: Don't be lazy and study the protocol audit: audits themselves may not help much, but it's worse when they're absent; Look at APY/APR: that's why you came here; And then the operation is the same as before: input the base asset (now stETH) and receive the derivative (rsETH). Don't be lazy and study the protocol audit : audits themselves may not help much, but it's worse when they're absent; Don't be lazy and study the protocol audit Look at APY/APR : that's why you came here; Look at APY/APR And then the operation is the same as before : input the base asset (now stETH) and receive the derivative (rsETH). And then the operation is the same as before You can also try EtherFI , Renzo protocol and others: it depends more on current rates and your imagination. Life hack: never put 1 to 1. In the sense that if you're going up the ladder of complex derivatives, it's better to go like this: 1 ETH => split into 0.8 & 0.2 : leave 0.2 in ETH, and convert 0.8 into stETH; Then divide 0.8 stETH again into 80% and 20% (any slippages, differences in rates, included rewards - keep in parentheses) and so on. EtherFI Renzo protocol Life hack: split into 0.8 & 0.2 Why all this complexity? Because: Why all this complexity? Protocols get hacked; Individual pools get hacked too; Even individual assets. Protocols get hacked; Individual pools get hacked too; Even individual assets. And don't forget to remove unnecessary approvals through scanners or special services like cointool.app . cointool.app So, we've progressed : So, we've progressed From a hypothetical 0% APR on ETH to 3% in stETH; And then, with the specific implementation of restaking in Kelp DAO - up to 4.28% (don't rush to add percentages, as there are many pitfalls here). From a hypothetical 0% APR on ETH to 3% in stETH; And then, with the specific implementation of restaking in Kelp DAO - up to 4.28% (don't rush to add percentages, as there are many pitfalls here). 4.28% What's next? What's next? Remember that diversification is decentralization and try to allocate 80% of 0.8 (0.64) stETH through various protocols, for example: ETHERfi; Renzo; Kelp; Swell. ETHERfi; Renzo; Kelp; Swell. In total, we get 0.64/4 = 0.16 for each service. But you are free to act as you wish and, by accumulating loans in AAVE, invest not a part of the whole, but the whole plus a part. Is this risky? Yes. But DeFi endures everything . DeFi endures everything Can you achieve even higher returns? Yes, but first - some more life hacks: Don't forget about bonuses (via airdrops) from EigenLayer and protocols (like Kelp, calculating points for a reason), which also add to your profitability; You can continue using the assets in DeFi, which also adds extra income (though no one can guarantee it); Finally, don't forget about cross-chain arbitrage: you can always look for a new network and try to bridge (transfer) your assets - currently possible on Scroll, where different restaking derivatives earn so-called marks. Don't forget about bonuses (via airdrops ) from EigenLayer and protocols (like Kelp, calculating points for a reason), which also add to your profitability; Don't forget about bonuses airdrops You can continue using the assets in DeFi , which also adds extra income (though no one can guarantee it); You can continue using the assets in DeFi Finally, don't forget about cross-chain arbitrage : you can always look for a new network and try to bridge (transfer) your assets - currently possible on Scroll, where different restaking derivatives earn so-called marks. Finally, don't forget about cross-chain arbitrage And yet, what about ETH itself: can you do something more to improve profitability? The short answer is yes, but implementing this answer is not as simple as it seems. The magical Pendle The magical Pendle In fact, there are several services like this, including Asymetrix, but for brevity, I'll focus on Pendle specifically: especially since it has proven itself quite well in the past year (although everyone has their mishaps). And again - headfirst into practice: On the main page, select the asset you need (initially set the mode to simple: once you understand it, you can start experimenting with YT & PT), check the APR/APY, if it suits you - proceed to its staking page: Carefully and as capable as you can, read the terms and lock your assets: again, the choice of percentage is up to you, but I would recommend (if I could) starting with at least an 80/20 strategy everywhere. That's it, now you've learned how to hedge your bet on a complex derivative. It sounds strange, but it's true. Want more? Well, don't linger and follow the primary source: pendle.gitbook.io/pendle-academy . The position will look something like this: pendle.gitbook.io/pendle-academy So, from zero, we can pull out approximately 7%-10% annually (in the worst case, 4-7%) in ETH, which is already quite substantial. But that's not all. Take another look at the scheme we've walked through: approximately 7%-10% annually (in the worst case, 4-7%) Conclusion Conclusion Undoubtedly, the presented scheme can be both simplified and made more complex. Moreover, different services (projects) can be used at different stages. However, the main point is that the described scheme is universal in theory on the one hand, and on the other hand, it is implemented in quite specific practice. If this post sparks interest, I will continue. But for today, that's all from me and Ch33r$! Ch33r$!
