How Liquid Restaking is revolutionizing yield strategies in DeFi for 2025

Three Levels of Evolution: From Simple Staking to Active Restaking

Cryptocurrency investors today have three fundamentally different approaches to earning rewards. Each offers its own balance between security, accessibility, and potential returns:

Traditional staking remains the basic method — investors lock their tokens in the network, ensuring its security through the Proof of Stake (PoS) mechanism, and receive rewards in return. However, assets remain immovable, and income is limited to a single source.

Liquid Staking has made staking more flexible by introducing liquid tokens (LSTs) — representatives of staked assets that can be traded without losing staking rewards. This allows investors to participate in the DeFi ecosystem and earn staking income simultaneously.

Liquid Restaking goes further — it enables the use of already received LSTs for additional DeFi investment strategies, creating multi-level income without unstaking the primary assets. The result is a new asset — Liquid Restaking Token (LRT), which combines the original income and additional earning opportunities.

Comparative Matrix of the Three Approaches

The key difference between liquid restaking and its predecessors is the combined approach: investors simultaneously participate in securing the network and actively seek additional profit sources without sacrificing their primary position.

Architecture of Liquid Restaking: How It Works in Practice

The process is built from clear sequential stages, each adding a new level of possibilities to the initial capital.

First stage — initial staking. The investor locks their Proof of Stake token (for example, ETH) in a network validator node. This action grants the participant the right to rewards and forms the basis for further asset manipulations.

Second stage — obtaining a liquid representative. For the locked asset, the investor receives a Liquid Staking Token (LST) — not just a receipt, but a fully liquid asset that can be transferred, sold, or used in DeFi protocols. This mechanism is especially useful for ETH: users no longer need a minimum of 32 ETH for native staking — derivatives from liquid staking have significantly lowered the entry threshold.

Third stage — active restaking in DeFi. The received LST becomes a tool for additional strategies. The investor can place the token in yield farming, use it as collateral in lending protocols, participate in liquidity pools, or other DeFi mechanisms. All this occurs alongside the original staking continuing to generate rewards.

Fourth stage — issuing a composite asset. The result of all manipulations is the Liquid Restaking Token (LRT) — a new asset that simultaneously reflects the original staked assets and potential additional income from DeFi strategies.

This architecture of liquid restaking creates a “capital multiplication” effect: the same asset works on multiple fronts simultaneously, generating rewards at different levels of the ecosystem.

Why It Matters: Liquidity and Capital Efficiency

Traditional staking is often criticized for its immobility — assets are frozen, and the investor is deprived of flexibility. Liquid restaking radically solves this problem.

Accessibility: Investors no longer need to choose between participating in staking and activity in the DeFi market. They can do both simultaneously, without compromises.

Multiple income streams: Users potentially receive rewards at three levels: for basic staking, for using LST in DeFi protocols, and for managing LRT. This is fundamentally different from single rewards in traditional staking.

Capital utilization efficiency: Each token works at maximum efficiency, not remaining in a partially loaded state. This automatically increases ROI for active investors.

However, this increased efficiency also comes with more complex risks. While traditional staking exposes investors to slashing and volatility risks, liquid restaking adds further risks related to smart contract security, potential deppegging events for liquid tokens, and cascading risks from interconnected DeFi protocols.

Practical Path to Restaking: Step-by-Step Guide

To start working with liquid restaking, investors should follow a clear scheme:

1. Prepare a staking position. Lock the required amount of PoS token in the network. For Ethereum, this means sending funds to a validator contract or using a staking service.

2. Obtain a liquid token. After locking, you will receive an LST that reflects your staked position and can be used in other contexts.

3. Choose a DeFi strategy. Decide where to use the received LST — it could be yield farming, lending, participating in liquidity pools, or other DeFi opportunities.

4. Active restaking. Place the LST in the selected protocol, ensuring an additional income stream.

5. Monitoring and management. Track the yields of both levels (of basic staking and DeFi strategies), reassess risks, and adjust your position if necessary.

Summary: Why Liquid Restaking Will Be Necessary in 2025

Liquid restaking represents an evolutionary leap in how investors can interact with DeFi and staking simultaneously. It’s not just an improvement of liquid staking — it’s a fundamentally new approach to capital efficiency in the crypto ecosystem.

For conservative investors, traditional staking remains a reliable foundation. For active DeFi participants, liquid restaking offers the opportunity to multiply income without sacrificing the basic security of their position. The key to success is understanding risks at each level and wisely allocating capital between staking, liquid staking, and active restaking strategies.