As Ethereum continues to grow, staking is crucial to enhancing blockchain scalability, fortifying DeFi through liquidity, and fostering cross-chain innovation in web3. Traditionally, staking on Ethereum means your ETH is locked up. While it’s playing an important role enhancing scalability and security, you can’t do much else with it.
But like web3 at large, this model has evolved. EigenLayer, introduced on Ethereum in June 2023, has addressed some of these limitations by introducing restaking across different networks and protocols. Liquid Restaking Tokens (LRTs) are integral to this staking ecosystem, setting themselves apart from Liquid Staking Tokens (LSTs) by introducing the selection of Active Validator Sets (AVSs).
“LRTs connect AVSs, operators, and restakers. They play a critical role not only in risk management but also in ensuring that AVSs are successful, which is crucial for a thriving restaking environment,” explains Fahim Aziz, Co-Founder at Affine, a liquid restaking dapp.
This liquid restaking means that staked assets gain increased flexibility within the DeFi ecosystem and can be used across different dapps. They can serve as collateral for lending, enhance security in different layer 2 (L2) setups, or engage in various consensus mechanisms.
“LRTs are crucial because they offer a unique blend of flexibility and efficiency within. By enabling staked assets to remain liquid, LRTs allow users to leverage these assets across various dapps without having to unstake them,” says Maggie Wang, COO of Zypher Network, an assets protocol for ZK verifiable games, incorporating LRTs into its ecosystem. “In any financial system, liquidity is king.”
Decentralized applications are continuing to adopt and innovate when it comes to liquid restaking tokens (LRTs). Here, Linea spoke to two dapps, Affine and Zypher, who are reimagining liquid restaking.
Zypher: Incorporating LRTs in Web3 Gaming
Zypher Network is an assets protocol for ZK verifiable games, secured by a decentralized proof-mining network that creates a new paradigm of trustless games for both developers and gamers. They’re the team behind popular onchain games like Crypto Rumble.
“It all started with a fully onchain poker game,” shares Maggie Wang, Zypher Network’s COO, on Zypher’s inceptions. “The trend towards ZK becoming more prevalent was clear—with better cost efficiency, democratized accessibility, and improved usability. Neo Sun (now Zypher CEO) and I naturally thought of experimenting with a few games.”
While Zypher’s initial Hold’em game was a success as a demo, the game was impractical for production due to high gas costs and the EVM's limitations for complex verification operations. In response, the team focused on infrastructure improvements, and later deployed a fully onchain Bingo game when Linea launched its Mainnet. Now, a year later, Zypher is introducing a Layer 3 on Linea, called Zytron, providing a gasless environment optimized for running zk-based game SDKs.
Serving 3 billion players around the world, Zypher envisions itself to be the infrastructure for truly decentralized games, where assets are fully composable & interoperable, enabling permissionless modding and open economy.
As Wang explains, this vision means Zypher’s core principles and infrastructure rely on verifiable and transparent asset policies, making it akin to DeFi. “In order to build a scalable and interoperable gaming ecosystem, LRTs play a key role in boot strapping this ecosystem,” says Wang.
The Zypher proof mining network utilizes a mix of Proof of Stake and Proof of Work mechanisms with LRT as a staking token, enhancing the reliability and security of the network. Additionally, the Zytron Layer 3 Network is moving towards decentralizing its sequencers, which will accept LRT tokens as staking collateral. Lastly, Zytron will accept LRT tokens in exchange for gaming tokens, functioning similarly to a decentralized gaming guild that operates automatically, injecting liquidity and value into the gaming economy.
“By incorporating liquid restaking, we enable users to maximize their asset usage across different parts of the ecosystem while maintaining the integrity and transparency that are critical in web3 gaming,” explains Wang.
Zypher is beginning to roll out Zytron, a highly customizable L3 rollup stack, and is in the integration process with 20 games and 10 dapps live at launch. “Zytron provides smart-contract-level optimizations like zero gas, wallet abstraction, and chain abstraction,” adds Wang. To participate, gamers can stake LRT tokens in exchange for a gasless SBT for gas redemption eligibility.
Affine: Prioritizing Risk Assessment for DeFi
Affine has set out to build a robust DeFi future, introducing the Affine Risk Engine and two LRTs–one on EigenLayer and one symbiotic–built on top of it.
“My co-founder, Tarik and I were excited about the potential of restaking but also saw the inherent risks in using the same capital to secure networks with varying levels of risk. A cascading slashing event could be catastrophic for the entire industry, much like the 2008 housing crash,” recalls Fahim Aziz, Affine’s co-founder, on the initial building stages.
This market awareness led Affine to develop a risk engine first, built on a Bayesian model that receives inputs from various operators and AVS factors to generate a credit score and a slashing risk audit report.
The risk engine sits at the core of Affine’s restaking. “We believe it’s crucial to manage the risk of rehypothecation so that the industry can grow and progress in a risk-adjusted manner,” says Aziz. Affine also prioritizes smart contract and dapp security through a range of measures, including audits and innovative AVS solutions like Drosera, which involves setting traps to enhance security.
Affine’s LRT, ultraETH, was launched in July 2024 and has recently landed on Linea. UltraETH offers transparent risk management that reduces the chance of cascading slashing as AVSs go live. It also provides clear rewards through ultraETH, Symbiotic/Eigenlayer points, undiluted AVS points, and various incentives from chains and protocols.
“Restaking has incredible potential, and we need to work hard to make it robust. We are collaborating with top operators, AVSs, and chains, and many exciting partnerships will be announced soon,” adds Aziz.
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