Author: Alexey Morozov | DeFi Risk Analyst | Head of Research at Aegis Capital

EigenLayer launched with a simple promise: make your staked ETH work harder. Stake once, secure multiple networks, earn multiple yields. By late 2024, over $15 billion was locked in restaking protocols. The opportunity was undeniable. So were the risks that nobody wanted to discuss.

The restaking thesis

Let me explain why restaking captured so much capital so quickly.

Ethereum stakers earn roughly 3-4% annually for securing the network. Decent, but not exciting. Restaking says: your staked ETH can simultaneously secure other protocols — oracles, bridges, data availability layers — and you earn additional rewards from each.

The same capital, multiple income streams. From an efficiency standpoint, it's elegant. Why should economic security be siloed when it can be shared?

EigenLayer pioneered this model. Stakers delegate their ETH to operators who validate Actively Validated Services. Each AVS pays for security. Yields stack. Everyone wins.

At least, that's the pitch.

The risks nobody models correctly

Here's what keeps me awake at night.

Slashing correlation is the big one. When you restake across multiple AVSs, you're exposed to slashing conditions from each. If one AVS has a bug or gets attacked, your entire stake could be slashed — not just the portion allocated to that service.

Traditional staking has one failure mode: Ethereum consensus issues. Restaking multiplies failure modes by the number of AVSs you're securing. The math isn't addition — it's multiplication of tail risks.

Operator risk compounds this. You're trusting operators to correctly run validation software for multiple protocols. One misconfiguration, one missed update, one compromised key — and your capital faces slashing across everything.

Then there's systemic risk. What happens when $15 billion of restaked ETH secures dozens of protocols, and a major AVS experiences cascading failures? The interconnections create contagion paths we haven't mapped.

Liquid restaking makes it worse

As if restaking wasn't complex enough, we built another layer on top.

Liquid restaking tokens — eETH, ezETH, rsETH — represent restaked positions. You can trade them, use them as collateral, deposit them in DeFi. Capital efficiency maximized.

But these tokens trade on the assumption that underlying positions remain solvent. A slashing event doesn't just affect direct stakers — it propagates through every protocol holding LRTs as collateral.

We saw a preview in April 2024 when ezETH briefly depegged. No actual slashing occurred — just market panic. The depeg cascaded through DeFi, triggering liquidations across lending protocols. Millions in collateral damage from a non-event.

Imagine what happens during a real slashing incident.

The yield illusion

Let's talk about the economics honestly.

Current restaking yields look attractive — 8-15% advertised on some platforms. But decompose those numbers. Much of it comes from points programs and token incentives, not sustainable protocol revenue.

Points are future token claims. Their value depends on conversion ratios that haven't been set. You're earning yield denominated in promises.

Sustainable AVS revenue — what protocols actually pay for security — is much lower. Most AVSs are pre-revenue. They're paying for security with tokens or VC money, not organic fees. When those subsidies end, yields collapse.

I estimate real, sustainable restaking yields at 1-3% above base staking. Worth having? Maybe. Worth the additional risk? That's the question nobody asks.

What I'm watching in 2025

Several developments will determine whether restaking matures or implodes.

First slashing events. We haven't had a major one yet. The first significant slashing incident will test every assumption about risk isolation, LRT stability, and DeFi contagion. I'm not hoping for it, but it's coming — and the response will be telling.

Insurance markets need to develop. Currently, there's no way to properly hedge restaking risk. Nexus Mutual and others are working on it, but pricing slashing correlation is genuinely hard. Until insurance exists, large allocators can't responsibly participate.

AVS revenue maturation matters enormously. If real protocols start paying real money for shared security, the economics work. If we're still relying on token emissions in 12 months, it's a ponzi with extra steps.

My framework for restaking exposure

Despite the risks, I'm not telling anyone to avoid restaking entirely. Here's how I think about allocation.

Limit exposure. Restaked ETH should be a portion of your staking portfolio, not all of it. I wouldn't exceed 30% until the ecosystem proves resilience through actual stress events.

Diversify operators. Don't concentrate with a single operator, no matter how reputable. Distribute across multiple to reduce correlated failure risk.

Understand your AVS exposure. Know which services your stake secures. Evaluate each for technical maturity and slashing conditions. If you can't explain what an AVS does, you shouldn't be securing it.

Be skeptical of LRT complexity. Every layer of abstraction adds risk. Native restaking is safer than liquid. If you hold LRTs, understand the redemption mechanisms and what happens during stress.

The opportunity is real. So is the risk. Size accordingly.

Alexey Morozov leads risk research at Aegis Capital, focusing on DeFi protocol analysis and staking economics. He previously built risk models for traditional fixed income at Deutsche Bank.