Cancun upgrade completed, does the LRT track catalyze the Ethereum ecosystem?

With the completion of the Cancun upgrade, Ethereum and its ecosystem tokens have performed remarkably. The modular concept and Layer 2 projects have successively launched mainnets, further boosting market optimism towards the Ethereum ecosystem. The narrative of liquidity re-staking (LRT) has also attracted capital attention due to the explosive popularity of the EigenLayer project.

This article elaborates in detail on the current situation, opportunities, and future of the LRT track ecosystem. Currently, LRT projects are severely homogenized, with most yet to issue tokens. Projects with clearly differentiated development paths, such as KelpDAO, Puffer Finance, and Ion Protocol, are more promising. The LRT track is still expected to be a rapidly growing niche market in the future, but it is anticipated that only a few leading projects will stand out.

LRT Track Background

As the Cancun upgrade approaches, Ethereum ecosystem tokens are performing well. Modular and Layer 2 projects are being launched one after another, boosting market optimism for the Ethereum ecosystem. Liquid staking occupies a large share, while "re-staking" has started to gain attention with the explosive growth of EigenLayer.

The concept of "re-staking" was proposed by Eigenlayer in June 2023, allowing users to re-stake their staked Ether or LST, providing additional security for decentralized services on Ethereum and earning rewards. Based on Eigenlayer's re-staking service, the LRT project was born.

Is LRT a nesting doll? Let's take a look at the evolution path of LRT.

LRT is the "re-staking certificate" obtained after staking LST. We trace the evolutionary path of LRT:

Phase 1: Ethereum Native Staking

After Ethereum transitions to PoS, validators need to stake 32 ETH to maintain network security.

Phase 2: LST Protocol Emergence

The staking platform lowers the threshold and releases liquidity, such as Lido allowing the staking of any amount of Ether and receiving stETH.

Phase 3: Restaking Agreement Emergence

LST can be staked to other networks for more returns. Eigenlayer promotes shared security in the ETH ecosystem, as users seek higher yields.

Phase 4: LRT's Birth

The project helps users to put LST into the Restaking protocol for re-staking, issuing "Re-staking Certificate" LRT to solve the liquidity lock-up problem.

Phase 5: Pendle Protocol Boosts LRT Explosion

Pendle offers financial operation solutions for LRT, allowing users to pre-sell or arrange long-term airdrop opportunities.

LST

LRT Track Ecological Situation

EigenLayer - Re-staking Middleware

EigenLayer is a restaking pool on Ethereum that allows stakers to validate new software modules within the Ethereum ecosystem. Through smart contracts, it enables restakers to participate in the validation of different networks and services, saving costs for third-party protocols while enjoying the security of Ethereum, providing restakers with multiple benefits and flexibility.

EigenLayer introduces the concept of AVS( Active Validation Service ), abstracting the process of validating Ethereum Rollup L2 state data. The target market includes projects such as Dapp Rollup, oracle networks, and cross-chain bridges, which have lower consensus security requirements.

Currently, about 13 AVS projects have joined EigenLayer, such as EigenDA, AltLayer, Near, etc., primarily serving the security, scalability, interoperability, and decentralization of Rollup projects.

Ethereum LRT project overview

There are about 15 LRT protocols on Ethereum, 9 of which are online and 6 are in testing. They are mainly divided into 3 categories:

1. Liquid-LSD Restaking: Unify the management of LST and place it into an external Restaking protocol.
2. Liquid Native Restaking: Provides small amount Ether node services
3. Optimize based on Eigenlayer to provide secure verification services

Most of the innovations of the LRT protocol:

• Provide stronger security
• Optimize allocation strategy
• Lower the staking threshold

Main Projects:

• Renzo: Optimize the Eigenlayer process with no deposit limit
• KelpDAO: Provides fast redemption for AMM liquidity pools
• Restake Finance: The first modular LRT protocol
• Puffer Finance: Anti-forfeiture mechanism, reducing the threshold to 2 Ether
• SSV network: Distributed Non-Custodial Nodes
• Swell/Ether.fi: The original liquid staking project transformation

Other projects: Eigenpie, Ion Protocol, Rio Network, etc.

Future Predictions for the LRT Track

LRT is a rapidly growing niche market, but the project homogeneity is severe, and it is expected that only a few leading projects will stand out.

Risk:

• Increased risk of fines
• Centralized risk
• Contract Risk
• Multilayered risk accumulation

Future Opportunities:

• Combine with other DeFi protocols
• Enhance security using DVT technology
• Multi-chain expansion