Re-staking in the crypto market is a process by which investors can use their Ethereum(ETH) on multiple platforms connected to different networks.
It has particular features that distinguish the same from the earlier strategies. Users get rewards, especially in the form of tokens for participating in the process.
What is Re-staking
It’s a compounded procedure as the first stake and the collected rewards are re-staked to maximize returns. Users are not required to re-invest every time as the automated protocol will take care of it.
Facilities like EigenLayer are outlined to do security tasks on the network where investors are required to make payments at its branches.
With the same stake-EigenLayer and similar platforms can facilitate permissionless services that are unlimited.
Why Re-staking
Restaking is an easy process without the need for much time and effort, it has the potential to earn passive income. This entire process only requires minimal effort.
Without the need for constant monitoring and active trading, the network can generate steady returns.
Another attractive feature of re-staking is that it does not require a longer period to be locked in a blockchain unlike staking and your tokens can be transferred at any time without losing the collected rewards in most cases. Instead of immediately withdrawing their rewards users can also restake them.
There has been a massive hike among people to stake tokens as there is a high probability of increasing their rewards because of its compound nature.
Restaking is ideal for long-term investors who have a firm belief in the underlying intricacies of the crypto network. Their optimism and trust play a crucial part.
Being a part of the network continuously also enhances the security and strength of the network reducing the threats of fraud and malicious activities.
As stakers develop a collective effort in sharing their ideas, and ways to make the network more secure and collaborate among themselves, it also helps in developing a strong community.
It is different from the Proof-of-Stake(PoS) mechanism so there is no certain minimum stake the user has to invest. This particular feature enhances the inclusivity and opportunity for a wider audience.
Expansion of the network also fosters improving transaction time as there are more people involved. Restaking expands the possibilities of building a portfolio for investors and helps mitigate the volatility surrounding the crypto market.
Since it’s an easy process without the need for much time and effort, it has the potential to earn passive income. This entire process only requires minimal effort.
Without the need for constant monitoring and active trading, the network can generate steady returns.
Know before investing
There are certain things to be careful about before investing in the crypto. Deeply delve into the platform designated to invest and learn about their security policies, authenticity, and mechanisms before investing.
Start small with assets you can afford to lose. Only after some time after understanding more about the platform and ensuring its security, invest more. Some platforms may offer unreal rewards and they are often fraudulent. So investors have to be careful when choosing the platform they are investing in.
Also, have a fair idea about the rules and regulations of the market which keeps on changing.
Drawbacks
Even if it seems more rewarding and can increase the financial capital the security becomes a concern as it is easier to crack into a smaller and less secure network. Like every other aspect of the market, it has its boons and banes.
Risk of loss
Now talking about the downside, there is also a risk of loss since there is no guarantee that the price of the invested token only goes high. According to the market trends the opposite scenario can also take place.
Security Issues
Unlike the traditional form, restaking does not come with complete transparency so there is a potential risk regarding the authenticity of the networks and more possibilities of scams.
Slashing
Restaking is also exposed to slashing which is a penalty system employed by Proof-of-Stake(PoS) blockchains to penalize any misbehavior or misconduct in the network. It can lead to a loss for investors, vulnerable to things out of their control.
Conclusion
Taking into consideration all these factors, re-staking can yield various benefits. Investors have the opportunity to compound their earnings leading to exponential growth.
It can also benefit attracting more users to the market, building a community, and getting more exposure to the market trends. As the market expands, restaking is expected to be a fundamental strategy for maximizing the sustainable development of the blockchain system.
