Kraken Introduces Ethereum Restaking via EigenLayer, Allowing Users to Earn Additional Staking Rewards

The new feature could allow ETH token holders to potentially earn additional staking rewards by using their staked ETH – Ether that's already being staked to help secure the Ethereum network's Proof-of-Stake mechanism – to help secure decentralized applications built on EigenLayer.

Major cryptocurrency exchange Kraken has announced a new service that will allow users to restake their already-staked Ethereum (ETH) to help secure decentralized applications (dapps) and earn additional staking rewards.

The new feature, which is being introduced in collaboration with EigenLayer, will enable ETH token holders to further contribute to the network’s security by using their staked ETH to help validate transactions on dapp networks. In return, users will be eligible for additional rewards, which will be paid out in the native tokens of the respective dapps.

“Restaking allows you to further contribute to the security of decentralized applications (dapps) built on Ethereum, called Actively Validated Services (AVSs),” Kraken explained in a blog post. “In doing so, you're entitled to earn additional rewards on top of the regular Ethereum staking rewards, which are paid out in the respective dapp's token.”

According to Kraken, the rewards will be denominated in AVS tokens, which represent the dapp networks that the restaked ETH helps to secure. These can include tokens from sidechains, data availability layers, oracles, bridges and other dapp ecosystems.

However, users should note that restaking their ETH will incur some additional trade-offs, including a minimum 7-day escrow period that is added to the unbounding period required to unstake assets on the Ethereum blockchain. This means that restaking will reduce the immediate availability of users’ ETH.

Moreover, restaking ETH also introduces some additional risks compared to simple ETH staking, such as smart contract risks. This is because more smart contracts are involved in the operation, which increases the potential for flaws in code, bugs or backdoors to be present.

Additionally, due to the varying conditions imposed by each AVS, restaked funds may be subject to increased slashing of their rewards, which could lead to potential losses. Finally, the involvement of other third-parties introduces an element of counterparty risk.

Kraken’s subsidiary, Staked, which is a leading EigenLayer operator, will serve as the validator for ETH that is restaked through Kraken. This service, which is typically only offered to the firm’s institutional clients, will now be made available to all Kraken users.

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