Stader Labs tests 'Liquid Restaked Token' to amplify ether staking rewards

Multi-chain liquid staking platform Stader Labs has launched its "Liquid Restaked Token," known as rsETH, on testnet. 

The rsETH token builds on EigenLayer's restaking protocol to enable users to stake ether on multiple networks simultaneously — leveraging liquid staking tokens, including Coinbase Wrapped Staked stETH -3.58% (cbETH), Lido Staked ETH (stETH) and Rocket Pool ETH ( rETH -3.69% ), to support network validation, boost security and amplify rewards, according to a statement.

"rsETH is more than just a token; it is an entry point to more rewards and opportunities in the crypto landscape, allowing users to aggregate rewards from various different sources to maximize their holdings," Stader Labs co-founder Dheeraj Borra said. "Furthermore, rsETH provides flexibility, granting users the freedom to transition or modify positions while still capitalizing on DeFi rewards and boosting multiple network protocols."

Liquid staking enables users to earn staking rewards on an underlying asset while unlocking its utility and liquidity across various DeFi applications in the form of a liquid staking derivative token.

How rsETH works

Users deposit select ether liquid staking tokens (stETH, rETH or cbETH) and mint rsETH representing fractional ownership of the underlying assets. These assets are distributed to node operators within Stader's network, with a share of their respective staking rewards accruing to the rsETH holders.

Restakers can then trade rsETH on decentralized exchanges, utilize rsETH on other DeFi applications and redeem the underlying assets at any time.

Restaking challenges and criticism

Despite the introduction of restaking solutions, selecting node operators on differing networks, complex reward structures involving various tokens, high transaction fees when claiming rewards, and the liquidity constraints of locked staked ether remain challenges and add risks, Stader noted. It argues rsETH addresses these issues by providing more straightforward access to restaking without the associated complexities.

EigenLayer went live on Ethereum in June with an initial $17 million deposit limit after raising $50 million in Series A funding in March. EigenLayer’s total value locked now stands at $224 million, according to DefiLlama.

However, restaking drew criticism from Ethereum co-founder Vitalik Buterin in May, noting that there are situations where it could compromise the mainnet’s security. "We should tread lightly when application-layer projects aim to extend the 'scope' of blockchain consensus beyond the validation of essential Ethereum protocol rules," Buterin wrote in a blog post at the time.

What's next?

The rsETH token is live on testnet, with 632 rsETH (approximately $1 million) in deposited funds — comprising 610 stETH and 22 rETH, according to its website. The mainnet roadmap will be announced soon, Stader Labs told The Block.

Stader's existing multi-chain liquid staking platform has attracted $124 million in total value locked, according to DefiLlama data, supporting networks including Ethereum, Polygon, BNB, Near, Fantom and Hedera.