Liquid Restaking Token
A liquid restaking token (LRT) is a receipt token issued by a restaking protocol that represents a user's restaked position — typically Ether or a liquid staking token deposited into EigenLayer or a similar restaking platform — granting the holder liquidity while the underlying collateral continues to earn both base staking rewards and additional restaking yield.
Restaking, while lucrative, creates a new illiquidity problem: capital deposited directly into a restaking protocol to underwrite Actively Validated Services may be subject to withdrawal queues and slashing conditions that make it difficult to exit quickly. Liquid restaking tokens address this by issuing a transferable token — analogous to how liquid staking tokens represent staked positions — that can be used in DeFi while the underlying restaked collateral remains deployed.
Prominant LRT issuers include EtherFi (eETH), Renzo (ezETH), Kelp DAO (rsETH), and Puffer Finance (pufETH). Each protocol accepts deposits of Ether or established LSTs such as stETH, deposits them into EigenLayer on the user's behalf, and issues an LRT representing the combined yield stream from base Ethereum staking, EigenLayer points or rewards, and AVS-specific rewards.
The capital efficiency argument for LRTs is compelling: a holder of an LRT theoretically earns three stacked yield streams simultaneously — base Ethereum staking rewards, restaking AVS rewards, and any DeFi yield from deploying the LRT itself as collateral in lending markets or liquidity pools.
However, LRTs layer risk on top of risk. They aggregate the smart contract vulnerability of the LRT protocol itself, the slashing risks from each AVS opted into by the underlying restaking strategy, the liquidity and depeg risk inherent to any derived receipt token, and the systemic concentration risk that arises if a large fraction of total restaked Ether flows through a single LRT.
The 2024 growth period for LRTs was also characterized by significant speculation around EigenLayer points programs, in which protocols issued non-transferable points in anticipation of future token airdrops, creating incentive structures that attracted capital based on speculative future value rather than current yield. This drew regulatory scrutiny regarding whether points programs constitute anticipatory securities issuances. U.S. participants should exercise careful diligence regarding the tax treatment of LRT yields and the regulatory status of the underlying protocols.