Decentralized finance (DeFi) protocol YieldNest is launching a new liquid staking derivative (LSD) called ynLSDe designed to capture restaking yield from EigenLayer, according to an Aug. 21 announcement.
The token “will allow the holders of Ether staked with Lido, FRAX, Origin Protocol, or Mantle to earn additional yield… through restaking,” YieldNest said. Lido, FRAX, Origin, and Mantle are decentralized Ethereum staking platforms, each of which issues its own LSD.
Restaking involves taking Ether (ETH) that has already been staked — posted as collateral with a validator in exchange for rewards — on the Ethereum network and using it to secure other protocols simultaneously. The premise is that in exchange for taking on additional risk, restaking can considerably enhance rewards.
Restaking rose to prominence after the launch of EigenLayer, a restaking protocol on Ethereum that has bootstrapped approximately $12 billion in total value locked (TVL) since 2023, according to data from DefiLlama.
Liquid restaking protocols — such as Ether.fi and Puffer Finance — hold another roughly $11 billion in TVL, the data shows.
Liquid restaking protocols host more than billion in TVL. Source: DefiLlama
Related: Restaking is ‘inevitable,’ but the risks are still uncertain — Ether.fi CEO
EigenLayer hosts a growing constellation of “actively validated services” (AVS) — protocols such as EigenDA, eOracle and Lagrange State Committees — that secure themselves using EigenLayer’s restaked ETH.
“Users get ynLSDe by putting stETH (Lido), sfrxETH (FRAX), or mETH (Mantle), OETH (Origin Protocol) into YieldNest’s restaking pool,” YieldNest said. “ynLSDe acts as a tradable and liquid ‘receipt’ token representing the underlying yield-generating restaked token. The generated restaking rewards are distributed back to ynLSDe holders.”
Receipt tokens such as ynLSDe “allow users to restake their assets while retaining liquidity, meaning they can still use their staked assets in other DeFi activities,” according to YieldNest. However, LSDs can also amplify risks.
“The risk of restaking has not been fully characterized yet,” Mike Silagadze, CEO of liquid restaking protocol Ether.fi, said on Aug. 12.
According to YieldNest, the protocol “aggregates all sources of potential yield for users, which includes EigenLayer Points, YieldNest Seeds, yields from [AVS], and even AVS Airdrops on top of the yield from staked ETH.”