{"id":37984,"date":"2024-04-30T18:00:00","date_gmt":"2024-04-30T15:00:00","guid":{"rendered":"https:\/\/forklog.com\/en\/?p=37984"},"modified":"2025-08-30T00:14:15","modified_gmt":"2025-08-29T21:14:15","slug":"what-are-liquid-restaking-tokens-lrt-for","status":"publish","type":"post","link":"https:\/\/forklog.com\/en\/what-are-liquid-restaking-tokens-lrt-for\/","title":{"rendered":"What are liquid restaking tokens (LRT) for?"},"content":{"rendered":"
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What are liquid restaking tokens?<\/h2>\n

A Liquid Restaking Token (LRT) is a token designed to earn additional yield by restaking<\/a> coins on a Proof-of-Stake<\/a> consensus network.<\/p>\n

LRT protocols combine the security and staking yield of the underlying asset with additional income opportunities via DeFi<\/a> or Actively Validated Services (AVS), including cross-chain bridges<\/a>, oracles<\/a> and sidechains<\/a>.\u00a0<\/p>\n

The LRT concept is akin to merged PoW<\/a> mining (as with Dogecoin<\/a> or Litecoin<\/a>), where the same hardware secures two networks at once.\u00a0\u00a0<\/p>\n<\/div>\n

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What are the advantages of LRTs?<\/h2>\n

One of the main ways to generate yield on ETH without reducing the liquidity of the underlying asset is to run your own validator, which is a complex and costly process.<\/p>\n

The next stage in boosting staking returns was liquid staking tokens (LSTs) such as stETH from Lido Finance<\/a>. But they are still constrained by validator yields. For example, the stETH yield at the end of April 2024 was 3.2%. Further uses for LSTs are largely confined to the DeFi market.<\/p>\n

LRTs, in turn, allow the underlying asset\u2019s yield to be increased further while preserving liquidity. For instance, the EigenLayer protocol offers options to earn by selecting AVS for restaking LSTs. A user can lock stETH again and receive a restaking token redeemable 1:1 for ETH.\u00a0<\/p>\n

By April 2024, EigenLayer already has<\/a> nine active AVS proposals, with more than ten others being tested on Holesky.<\/p>\n

\"What
Data: EigenLayer blog on X<\/a>.<\/figcaption><\/figure>\n

This approach increases Ethereum\u2019s security by employing staked ETH in second-layer systems. For example, an AVS from AltLayer allows LRTs to validate operations in the Optimism<\/a> and Arbitrum<\/a> Layer 2 networks.<\/p>\n

The market for additional-yield mechanisms is still forming. Fee distributions may come in the network\u2019s base asset, as with LSTs, via retrodrops<\/a> for providing liquidity, or in other tokens.<\/p>\n<\/div>\n

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What risks do LRTs entail?<\/h2>\n

The higher yields offered by liquid restaking tokens bring not only opportunities for extra income and new investment strategies, but also risks inherent in building such multi-layered systems.<\/p>\n

The complexity of these smart contracts and untested mechanics under extreme market conditions may expose unidentified or overlooked issues. The main ones include:<\/p>\n