Understanding Cryptocurrency Restaking: How to Earn More Safely
Date: 2023-12-23 Author: Dima Zakharov Categories: BLOCKCHAIN
What is Restaking in Cryptocurrency?
Restaking is a concept closely related to regular staking. In traditional staking, users lock their tokens in a specific pool and earn interest in return. These locked coins are typically inaccessible during the staking period, similar to a bank deposit.
With restaking, however, users have the flexibility to re-stake their tokens in different pools, opening up new opportunities for earning.
An Example: EigenLayer
One prominent example of restaking is EigenLayer, a service offering opportunities to earn Ethereum (ETH) across three pools: Lido, RocketPool, and Coinbase's native pool.
The Birth of Restaking
Previously, Ethereum did not support restaking until the Shapella upgrade came along. This upgrade removed certain limitations and paved the way for this innovative staking approach.
Similar Concepts: Merged Mining
For Proof of Work cryptocurrencies, there is a similar concept called "merged mining." In merged mining, coins that share the same algorithms can be mined simultaneously using the same computational power. Dogecoin and Litecoin are examples of cryptocurrencies that can be mined efficiently using this method.
Restaking in Omni Network
The Omni network aims to enhance the functionality of rollups designed for Ethereum, such as Arbitrum and Optimism. It allows developers to create applications accessible on various rollups, facilitating data and asset exchange between them. Users can lock their cryptocurrency in one network to borrow funds in another, offering more flexibility and investment opportunities.
As restaking gains popularity, it's essential to understand its potential benefits and risks, especially in the ever-evolving world of cryptocurrency.
