In 2024, liquid restaking protocols on the Ethereum network experienced exponential growth, with the total value locked (TVL) surging from approximately $284 million in January to an impressive $17.26 billion by December—a staggering increase of nearly 6,000%.

This growth can be attributed to the rising popularity of liquid restaking tokens (LRTs), which expand the utility of liquid staking tokens (LSTs).

In traditional liquid staking, users who want to maintain liquidity while securing the network receive derivative tokens, such as Lido’s stETH, representing their staked holdings. These tokens can be used in various decentralized finance (DeFi) activities, including trading, lending, or yield farming.

LRTs add an extra layer of functionality, allowing users who have already staked ETH to stake their derivative tokens as well, participating in the security of specific blockchains or layer-2 networks. This approach enhances capital efficiency, enabling staked assets to generate additional yields.

However, it’s crucial to note that while LRTs offer greater flexibility and return potential, they also introduce additional risks. These include potential depreciation or price volatility of derivative tokens, particularly due to exposure to multiple networks. Furthermore, failures in one network can negatively impact restaked assets, leading to compounded losses.

One standout in the liquid restaking market is the Ether.fi protocol, which holds over 50% of the market’s LRT TVL, with approximately $9.17 billion in restaked assets. Experts credit Ether.fi’s success to its user-friendly interface and simplification of complex restaking operations, making them accessible to a broader user base.

In summary, liquid restaking emerged as a significant trend within the Ethereum ecosystem in 2024, offering new opportunities to maximize the utility of staked assets. Nevertheless, participants must be aware of the associated risks and adopt sound risk management practices when exploring these innovative financial tools.