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To secure the Ethereum network, token holders are required to lock away their tokens for a long time through the native staking process that powers the proof of stake (PoS) consensus mechanism on the platform. While this structure helps keep the network liquid and secure, it’s a bit rigid regarding capital efficiency.
To counter this limitation, liquid staking protocols such as Rocket Pool and Lido introduced the concept of liquid staking, which allows staked ETH to be used for other decentralized finance (DeFi) activities, earning token holders extra rewards by issuing liquid staking tokens (LSTs).
However, liquid staking only allows assets to be staked in a single PoS blockchain. This limitation has led to the development of liquid restaking on platforms such as EigenLayer. It allows you to use staked assets to secure and earn rewards from multiple protocols through the use of liquid restaking tokens (LRTs).
One of the liquid restaking protocols operating on EigenLayer is Eigenpie, which lets you stake your staked assets to node operators in exchange for LRTs so you can earn rewards.
Let's examine Eigenpie more closely to see how it’s shaping the liquid restacking narrative in the DeFi ecosystem.