Restaking Yield Explained: Beyond the Points Era

Restaking turned a simple pitch, stake once and get paid twice, into one of Ethereum’s largest DeFi categories within about eighteen months. EigenLayer’s total value locked climbed toward the high teens of billions of dollars in 2025, liquid restaking tokens multiplied across ether.fi, Renzo and Kelp DAO, and Bitcoin holders got their own version of the trade through Babylon. The pitch worked. The yield, in a lot of cases, did not work quite the way early depositors expected.

Two years on, the sector has gone through a real reset. Token prices for EIGEN, SSV and BABY all trade far below their all-time highs, the points programs that promised outsized airdrops delivered a fraction of what farmers modeled, and a liquid restaking token sat at the center of 2026’s largest crypto exploit. This piece looks at where restaking yield actually comes from, why the points farming model broke down, and what EigenLayer, SSV Network and Babylon are each doing to replace speculation with something closer to real, fee backed revenue.

None of this means restaking is dead, or that the underlying idea, letting the same capital secure more than one system at once, was a bad one. It means the easy part, attracting deposits with the promise of an eventual airdrop, is over, and the hard part, actually generating fee revenue large enough to justify the extra slashing risk, is the story that matters now.

What Is Restaking? A Quick Primer

Restaking lets someone who has already staked ETH, or who holds a liquid staking token that represents staked ETH, pledge that same capital a second time to help secure additional services. EigenLayer coined the term and built the first large scale version of it: instead of ETH only backing Ethereum’s own consensus, restaked ETH can also back oracles, bridges, data availability layers and rollup sequencers, collectively known as Actively Validated Services, or AVS. In exchange, restakers earn an extra layer of yield on top of ordinary staking rewards. In exchange for that yield, they also accept new ways their stake can be penalized, since each AVS sets its own conditions for slashing bad behavior.

The underlying idea predates EigenLayer by a few years. Cosmos ecosystem chains had long used interchain security to let smaller chains rent validator sets from a larger one, and merge mined sidechains had experimented even earlier with letting Bitcoin’s own hashpower double up as security for a second network. EigenLayer’s contribution was doing this permissionlessly and programmatically on Ethereum, turning what used to require a bespoke arrangement between two chains’ core teams into an opt in smart contract anyone could use.

Ordinary Ethereum staking already pays a base reward on its own, in the high twos percent annualized as of mid-2026, with roughly a third of ETH’s total supply staked according to StakingRewards tracking. For a closer look at how that base layer actually works, including what it takes to run a validator directly instead of delegating to a pool, see our Ethereum solo staking guide. Restaking sits on top of that base layer, not in place of it, which is exactly why its extra yield needs its own explanation.

How the Mechanics Work: EigenLayer, Babylon and SSV

Three architectures currently dominate restaking, and they handle the same basic idea differently. EigenLayer, rebranded EigenCloud as it pushed into verifiable cloud services alongside pure security, lets ETH stakers and liquid staking token holders opt into slashing conditions for specific AVS. Slashing has been live on EigenCloud’s mainnet since 17 April 2025, and the network counts roughly 190 AVS in various stages of development, about 40 live on mainnet, more than 2,000 operators and over 80,000 depositor addresses participating.

SSV Network took a different route with its Based Applications, or bApps, protocol. Validators opt in using participation keys rather than withdrawal keys, so the underlying 32 ETH principal is never slashable at all; only additional, voluntarily delegated ERC-20 or ETH capital carries slashing risk. SSV calls this a Risk Expressive Model, since each bApp can set its own risk tolerance rather than forcing every restaker into the same terms.

Babylon skips wrapped tokens and bridges entirely. Bitcoin holders lock BTC using Bitcoin’s own native timelock scripting, and that locked BTC secures proof of stake chains that opt in as Bitcoin Supercharged Networks, or BSNs. No custodian, no synthetic BTC representation, and no separate smart contract chain holds the actual coins.

• EigenCloud AVS examples: EigenDA for data availability, Lagrange for zero knowledge state committees securing rollups, and Omni Network for rollup interoperability
• SSV bApps: still a thin, early marketplace as of mid-2026, built around the same participation key model
• Babylon BSNs: proof of stake chains that opt to borrow Bitcoin’s economic security instead of, or alongside, their own token

We covered the full mechanical breakdown of each model, including how EigenLayer’s operator and AVS relationship actually works end to end, in How Restaking Works: EigenLayer, Babylon and the AVS Economy. The part that matters for this piece is simpler: three different architectures, three different risk profiles, and increasingly, three different ways of actually paying stakers.

Where Restaking Yield Actually Comes From

“Anything that restaking can do, already liquid staking can do,” EigenLayer and Eigen Labs founder Sreeram Kannan told CoinDesk back in 2023, adding that he viewed “restaking as a lesser risk than liquid staking.” That framing is a useful starting point, because it forces the real question: what is restaking’s extra yield actually paid out of? In practice, advertised restaking yield comes from three distinct sources, and only one of them is durable.

The first source is token emissions: a protocol mints its own governance token on a schedule and hands it to stakers and operators. This is dilutive by definition, since new supply enters the market regardless of whether anyone is actually paying for the security being provided. The second source is points, non-transferable accounting entries that promise a future airdrop with no guaranteed value; Symbiotic’s own terms of use state plainly that its points “hold no intrinsic cash or monetary value” and cannot be redeemed for currency. The third source is AVS or bApp generated fees, meaning an actual service pays ETH or another asset to consume security, and that payment flows to the people providing it. Only the third category is revenue in the ordinary sense.

In practice most protocols blend more than one source at once, and the blend has shifted hard toward the fee based end of that spectrum since 2025, at least among the protocols that survived long enough to have a token and a real usage number to point to.

The Points Era: 2023 to 2025

EigenLayer set the template before it had a token at all. Deposit ETH or a liquid staking token, accrue points with no market price, and trust that a future airdrop would eventually reward early depositors in proportion to their points balance. Liquid restaking token issuers layered their own points on top: deposit into ether.fi or Renzo, earn EigenLayer points through the underlying restaked position, plus a second stream of protocol specific points, plus sometimes a third stream from wherever the resulting LRT got redeployed inside DeFi. Protocols benefited too, since points let a young network bootstrap deposits and the appearance of security demand without paying real yield upfront, deferring the actual cost to whatever the token eventually turned out to be worth.

The model worked, at least at pulling in deposits. EigenLayer’s TVL climbed toward the high teens of billions of dollars at its 2025 peak by most trackers’ accounting, and the wider liquid restaking token segment crossed $8 billion and then $10 billion in deposits at its own high point. The same playbook got copied across the sector: Symbiotic launched with a points program and no token, and more than two years later, it still has not shipped one. Karak followed a similar path. Neither has publicly confirmed when, or whether, points convert into anything with a market price.

The Reset: When Points Stopped Paying Off

The reset shows up cleanly in token prices. EIGEN trades around $0.23 as of mid-July 2026, down roughly 96% from its all-time high of $5.65 set in December 2024, for a market capitalization near $171 million against a circulating supply of about 741 million tokens, according to CoinGecko. SSV trades around $2.00, down roughly 97% from its March 2024 peak of $65.82. Babylon’s BABY token trades around $0.013, down more than 90% from its April 2025 high of $0.1661. Every major restaking token that actually launched is trading a long way below the price farmers were modeling when they chased points.

TVL followed a similar arc, if a noisier one. Trackers disagree meaningfully on exact figures for this sector week to week, but the direction is consistent: EigenCloud’s TVL fell from a peak in the high teens of billions of dollars into the mid single digit billions by mid-2026, per DefiLlama‘s tracking. The more telling detail sits underneath that headline number. DefiLlama’s own protocol page has shown EigenCloud’s measured annualized protocol revenue at effectively zero even while incentive emissions kept flowing, meaning a large share of the yield restakers were actually earning was still coming from token inflation rather than AVS actually paying for security. That is precisely the gap EigenLayer, SSV and Babylon are each now trying to close, in their own way.

EigenLayer’s Fix: ELIP-012 and Productive Stake

EigenLayer’s governance answer is ELIP-012, an “Incentives Committee” proposal authored by Matt Nelson, Matt Curtis, Robert Drost and JT Rose, merged into the protocol’s live rules on 1 December 2025 and explained in a companion blog post on 18 December 2025. It replaces the old TokenHopper and ActionGenerator emissions logic with a new EmissionsController contract that mints EIGEN weekly through a permissionless pressButton function, and it deliberately directs those emissions toward what the proposal calls “productive stake,” meaning capital actively securing live, fee generating AVS, rather than capital that is simply deposited and idle. See the full proposal on GitHub, also explained in plain language on EigenCloud’s own blog.

The mechanics have two sides. On the emissions side, a 20% fee on AVS rewards paid to incentive subsidized stake, plus 100% of EigenCloud’s own cloud fees from EigenAI, EigenCompute and EigenDA, net of operator costs, flow into a buyback and reduce supply contract, a direct attempt to offset dilution with real revenue. On the supply side, total inflation stays fixed at 7%, plus up to 1% at the Eigen Foundation’s ecosystem discretion, with the Protocol Council retaining sole authority over the overall rate. It is a more disciplined model than the open ended points era, though it is still early: a scheduled cliff unlock released roughly 36.8 million EIGEN tokens, worth about $8.7 million at the time, on 1 July 2026, a reminder that supply pressure from earlier fundraising rounds has not fully worked through the system yet.

The rebrand from EigenLayer to EigenCloud reflects the same bet, that fee revenue has to come from somewhere beyond pure restaking security, extending the platform into verifiable compute products such as EigenCompute and EigenVerify, positioned as infrastructure for applications well beyond restaking alone.

SSV’s Fix: cSSV and the ETH Accrual Model

SSV Labs founder and CEO Alon Muroch made the same diagnosis about his own token, bluntly, in a post explaining the redesign: “the SSV token isn’t reflecting that growth. The token’s value is largely detached from ETH staking rewards.” His proposed fix, since shipped, was to “change all network fees to ETH,” so that “ETH collected by the protocol gets distributed to SSV stakers” directly, making SSV what he called an “ETH accrual token” rather than a pure governance token, with the goal that “SSV holders don’t just govern or speculate, but earn ETH as Ethereum grows,” according to his own published explainer.

That redesign shipped as cSSV and the Genesis Boost program, launched 29 April 2026. Staking SSV converts it into cSSV, a liquid, non-rebasing ERC-20 token that accrues ETH denominated rewards instead of more SSV. An original generation snapshot taken 22 April 2026 offered up to a 50% boost, with new holders eligible for up to 25%, running through 29 May 2026 or until a $75,000 boost pool ran out, with a 90-day lock attached. Fees themselves run on a three tier structure: a flat F1 fee around 1% of ETH staking APR, a per-bApp F2 fee, and an F3 fee on bApp-chain transactions. SSV token minting itself ended in December 2025, and the DAO has floated further supply deflation between 2027 and 2029.

Muroch’s own worked example, published alongside the redesign, modeled healthy yields for cSSV holders “even with SSV priced at $10 to $100.” SSV has not traded anywhere near that range since; it sits around $2.00 in mid-July 2026. The fee model may well be more mechanically honest than the old governance token structure, but it launched into a token price the model’s own author did not anticipate.

Babylon: Bitcoin Restaking Skips the Points Game

Babylon’s genesis mainnet and its BABY token launched on the same day, 10 April 2025, according to The Block‘s reporting at the time, alongside an airdrop of 600 million BABY, 6% of total supply, split across Phase 1 stakers, base and bonus staking rewards, Pioneer Pass NFT holders and open source contributors. That is a meaningfully different shape than EigenLayer’s multi-season points meta-game, a single, bounded distribution event rather than an open ended promise that kept extending.

Babylon’s own dashboard showed nearly 56,900 BTC staked and roughly $5.6 billion in total value locked as of mid-July 2026, by its own count the largest Bitcoin staking system by that measure, per Babylon Labs. BABY itself has not been spared the sector wide price compression: around $0.013 in mid-July 2026, down more than 90% from its April 2025 all-time high of $0.1661. But Babylon’s yield model was straightforward from day one, stakers earn a share of whatever rewards the BSNs they help secure actually pay out, plus BABY emissions, rather than an ever extending points ladder. A planned Aave V4 integration would let native BTC serve directly as lending collateral, though the timeline depends on Aave V4’s own launch schedule.

Liquid Restaking Tokens and Yield Stacking

Liquid restaking tokens, or LRTs, let depositors keep a tradeable claim while their underlying ETH sits restaked. ether.fi’s eETH remains the largest by a wide margin, with deposits above $3.2 billion, followed by Renzo’s ezETH around $2.0 billion, Puffer’s pufETH around $1.3 billion, and Kelp DAO’s rsETH back near $1.5 billion following its 2026 recovery, all figures that move meaningfully with ETH’s price and net deposit flows. Advertised yields commonly land in the 8% to 12% range, blending base ETH staking, EigenCloud restaking rewards and, while they lasted, points.

The furthest stretch from real yield happens once an LRT gets reused as collateral elsewhere in DeFi. Depositing an LRT on a money market like Aave, borrowing ETH against it, and buying more of the LRT with the proceeds, commonly called looping, can turn a mid single digit base yield into something in the low teens, at the cost of liquidation risk if the LRT’s price against ETH ever slips. That rehypothecation loop is also exactly where the sector’s worst 2026 incident happened.

The Price of Yield: Slashing and Smart Contract Risk

Vitalik Buterin flagged the systemic version of this trade-off early, in a May 2023 post titled “Don’t overload Ethereum’s consensus”, warning that “any expansion of the ‘duties’ of Ethereum’s consensus increases the costs, complexities and risks of running a validator,” and that “blockchain communities’ social consensus is a fragile thing… each such extension makes the core itself more fragile.” Kannan’s own response to that critique, in the same 2023 CoinDesk interview quoted above, was to warn against treating any restaking protocol as “too big to fail,” arguing Ethereum’s actual backstop against a catastrophic restaking failure would simply be to “fork around” it rather than bail it out.

Below that systemic layer sits a more mundane risk: every additional AVS, bApp or BSN integration is new smart contract surface area, and every new bridge is a new place for a cross-chain message to be forged or misconfigured. There is also an operator concentration question underneath both slashing and smart contract risk, since a relatively small number of professional operators run a large share of validated stake across EigenCloud, SSV and the liquid staking tokens that feed into them, meaning a single operator’s misconfiguration can affect a disproportionate share of restaked capital at once. Audit coverage varies widely by protocol and by how recently a given integration shipped; for a look at how crypto’s audit industry actually operates, including cases where audited protocols still got hacked, see our explainer on CertiK and crypto auditing. An audit reduces the odds of a given bug, it does not eliminate bridge, oracle or governance risk sitting a layer above the code itself.

Case Study: The Kelp DAO and Aave Contagion

On Saturday 19 April 2026, attackers exploited a misconfiguration in Kelp DAO’s cross-chain bridge to mint 116,500 rsETH out of thin air, worth roughly $292 million at the time, rather than draining existing deposits outright, according to CoinDesk‘s reporting. The attackers deposited the newly minted rsETH as collateral on Aave V3 and borrowed against it, leaving Aave with roughly $196 million in bad debt once the fraudulent collateral was recognized as worthless. Aave’s total value locked fell from about $26.4 billion to roughly $20 billion over the following weekend, and AAVE’s token price dropped about 16% to around $92.

Aave founder Stani Kulechov moved quickly and publicly. “rsETH has been frozen on Aave V3 and V4, the asset does not have any borrowing power as a measure due to KelpDAO bridge exploit that happened outside of Aave,” he wrote, adding “Aave is my life’s work and we’re working nonstop to find the best possible outcome for users,” according to CoinDesk. Kulechov personally pledged 5,000 ETH toward the recovery, joined by contributors from Lido, ether.fi and Consensys under an informal “DeFi United” banner. By around June 2026, 117,132 rsETH had been burned on Arbitrum, rsETH’s backing was restored across every chain it existed on, and Kelp had migrated its bridge from LayerZero’s OFT standard to Chainlink’s CCIP, now requiring four independent attestors and 64 block confirmations per transfer. LayerZero publicly disputed responsibility, arguing the exploit stemmed from Kelp’s own bridge configuration rather than a flaw in the base protocol. rsETH’s market capitalization has since climbed back to roughly $1.5 billion, above its pre-incident deposit base.

A second, unrelated incident the previous month showed a quieter version of the same collateral pricing risk. On 10 March 2026, Aave’s Correlated Asset Price Oracle briefly misjudged the wstETH to ETH exchange rate by about 2.85%, a stale reading rather than an attack, triggering roughly $26 million to $27 million in otherwise avoidable liquidations across 34 accounts before Aave’s risk provider backstopped the shortfall, per CoinDesk. Chaos Labs CEO Omer Goldberg called price oracles “critical infrastructure for Aave” that “have secured hundreds of billions in loans, liquidations, and markets since go-live.” For a deeper look at how DeFi’s price feeds get attacked, and how they sometimes just break, see our oracle manipulation explainer.

Restaking Yields and TVL, Compared

Put side by side, the sector’s five biggest names show a consistent pattern: whichever protocols actually launched a token are trading far below their debut pricing, while the points only holdouts still have nothing concrete to show for roughly two years of deposits.

Prices per CoinGecko; TVL figures are directional rather than exact given how widely trackers disagree for this sector, and should be read as ranges rather than precise snapshots. The pattern that survives the noise is simple enough: a live, trading token is not the same thing as a valuable one, and a large TVL number is not the same thing as proof that restaking yield is sustainable. If anything, the gap between TVL and token value across every name in the table above is the single clearest argument for judging restaking yield by its fee revenue rather than its deposit totals.

Where US Regulation Stands

The SEC’s current, more permissive posture toward staking does not automatically cover restaking. A Corporation Finance staff statement issued 29 May 2025 concluded that ordinary protocol staking, whether solo, delegated or run through a custodian, is generally not itself a securities transaction, paired with a companion statement from Commissioner Hester Peirce titled “Providing Security is not a ‘Security’”. A follow-up statement on 5 August 2025 extended that same logic to liquid staking and to staking receipt tokens in the mold of stETH.

Neither statement explicitly reaches restaking or liquid restaking tokens, and both remain non-binding, staff level interpretations rather than formal Commission rules, meaning a future Commission could narrow or withdraw them, and no court is bound to follow them. A broader March 2026 interpretive release reinforced the general direction, describing staking rewards as compensation rather than a profit share, provided the platform exercises no discretion over the size of returns, with SEC Chair Paul Atkins summarizing the approach in the agency’s own press release: “This is what regulatory agencies are supposed to do: draw clear lines in clear terms.” Whether an EigenCloud style productive stake incentive, actively steered by a Protocol Council toward specific AVS, or a fee sharing arrangement between a bApp and its restakers, would still qualify as pure compensation under that framing has not been tested. Commissioner Caroline Crenshaw, the sole Democrat on the Commission until her term expired on 2 January 2026, dissented from both the May and August 2025 staking statements, part of a broader pattern of dissents against the Commission’s lighter touch approach to crypto generally, and her departure left an all-Republican Commission for the first time in the agency’s modern history. Broader market structure legislation could eventually settle the restaking question directly; see our explainer on the CLARITY Act for where that bill currently stands in Congress.

Is Restaking Yield Finally Real?

The honest answer, in mid-2026, is partially. EigenCloud’s ELIP-012 redesign is a genuine attempt to route real cloud and AVS fee revenue toward stakers instead of pure token printing, but the same tracking data that shows the redesign’s intent also shows measured protocol revenue still near zero relative to TVL, meaning emissions are still doing most of the work. SSV’s cSSV model is arguably more mechanically honest, since ETH denominated fees cannot be diluted the way a governance token can, but it is running at a small scale, and SSV’s own price sits well below the floor its architect once modeled. Babylon’s model is the simplest of the three, real BTC and BSN rewards rather than a multi-season points ladder, but it faces the same gap between total value locked and token value that has hit every other restaking token that actually launched.

Symbiotic and Karak remain the clearest open question. Both have run points programs for roughly two years without shipping a token, which means their yield, such as it is, still is not yield in any conventional sense, it is an unpriced claim on a future that has not arrived yet. For everyone else, the multiples that points farmers modeled in 2023 and 2024 were never going to survive contact with an actual listing. The protocols still standing in mid-2026 are now competing on whether they can make the fee side of the yield equation, not the emissions side, carry the weight. Anyone evaluating a restaking position in the second half of 2026 is better served asking what specific fee revenue backs the advertised yield than asking how large the points balance has grown.

Frequently Asked Questions

What is the difference between staking and restaking?

Staking locks ETH, or BTC through Babylon, to help secure a single base layer blockchain and earns a base protocol reward. Restaking takes that same staked capital, or a token representing it, and pledges it a second time to help secure additional services such as oracles, bridges, data availability layers or rollups, in exchange for extra yield and extra slashing risk.

Is restaking yield guaranteed?

No. Restaking yield can come from token emissions, which dilute supply and are not backed by real usage, from speculative points programs with no confirmed cash value, or from actual fees paid by services that consume the security. Only the fee based portion is close to real, sustainable yield, and even that depends on continued demand from AVS, bApps or Bitcoin Supercharged Networks.

What happened to EigenLayer’s TVL and EIGEN price?

EigenLayer’s total value locked peaked in the high teens of billions of dollars in 2025 during the points farming boom and had fallen into the mid single digit billions by mid-2026, though exact figures vary by tracker. EIGEN traded around $0.23 in mid-July 2026, down roughly 96% from its December 2024 all-time high of $5.65, according to CoinGecko.

Is restaking safe?

Restaking adds new slashing conditions on top of ordinary staking risk, plus smart contract and bridge risk from every additional AVS, bApp or Bitcoin Supercharged Network integration. The April 2026 Kelp DAO and Aave incident, in which a cross-chain bridge exploit led to roughly $196 million in Aave bad debt, is the clearest example of how liquid restaking token risk can spread into the wider DeFi ecosystem.

Does the SEC regulate restaking?

The SEC’s 2025 staff guidance says ordinary protocol staking and liquid staking are generally not securities transactions, but that guidance does not explicitly extend to restaking or liquid restaking tokens. It also remains non-binding, staff level interpretation rather than a formal rule, so a future Commission could revisit it.

By the HOGE Wire Research Desk.