The practice of heavy collateralization brings benefits such as capital efficiency, additional rewards, and the ability to leverage the strong security layer of Ethereum, but it also presents challenges. Cryptocurrency KOL zer0kn0wledge.era discussed these challenges and introduced the Liquidity-Weighted Collateral Tokens (LRT) and EigenETH.
Challenges of staking: 1) Service discovery. As the number of services increases, it becomes more difficult for stakers to find suitable staking services. This requires careful research and a deep understanding of the situation. 2) UI/UX complexity. Managing multiple assets across different platforms and handling different governance tokens can be complex and burdensome for stakers. 3) High gas fees. The rewards for gas fees can significantly affect profits, especially for small investors. 4) Liquidity restrictions. Staked ETH becomes illiquid, meaning it cannot be easily traded before the unlocking period ends, which can be a major disadvantage for those who need immediate access to funds. 5) Decision-making dilemma. Users often face the challenge of choosing between staking and DeFi, balancing risk-return ratios with limited information.
To address these challenges, the Liquid Restake Token (LRT) or EigenETH comes into play. EigenETH is a synthetic token representing staked ETH or other restaked LST, aimed at solving the above issues. EigenETH can access both staking and DeFi simultaneously. This means there is no need to choose between the two, which may change the game in terms of flexibility and financial optimization. It automatically accumulates staking rewards to overcome high gas fees.
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How EigenETH works: Stakers stake ETH or liquid tokens and receive EigenETH, which represents the underlying restaked asset. EigenETH earns ETH staking and restaking rewards (c-token). EigenETH can be deployed on DeFi platforms. The LRT DAO plays a crucial role here, selecting validators and service ETH for restaking. Validators may join in a permissionless manner in the future, promoting decentralization.
Reference: https://twitter.com/expctchaos/status/1679158765529235457
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