Restaking no longer looks like the business many protocols once hoped it would become. CoinDesk reported that ether.fi will cut its final structural tie to EigenLayer this quarter, with protocol documentation showing that less than 1% of assets were still restaked as of August. EigenPod withdrawal credentials are due to be removed by the end of the year.
When ether.fi launched in 2024, deposits were automatically restaked on EigenLayer. In August, the company removed restaking from weETH, the circulating version of its token that is used as collateral across DeFi, turning it into a plain liquid staking token. Users who still want restaking now have to opt into a separate token built on Symbiotic, a competing platform.
Mike Silagadze, ether.fi’s chief executive, told CoinDesk the decision came down to risk. He said, 「There were no meaningful yield opportunities in restaking and there was some perceived risk from stakers, so we decided it made sense to exit.」
What restaking was supposed to do
Staking means locking up ETH to help secure Ethereum in exchange for yield. Restaking added a second layer to that idea: the same locked ETH could also be used to secure other services, with EigenLayer renting that security to products such as oracles and data availability layers. In theory, depositors would earn twice on the same pool of capital.
Liquid restaking tokens added a tradable receipt on top. Instead of waiting with locked ETH, depositors could sell the token or use it as collateral elsewhere. At one point, weETH was the largest product in that category.
EigenLayer reached $19.7 billion at its peak, and liquid restaking tokens expanded by more than 1,000% in the first six weeks of 2024. The problem, according to the report, was that the services buying security never paid enough to cover both base staking yield and an added premium. The extra yield restaking promised never really arrived.
DefiLlama data cited in the article showed that on Sept. 8, the restaking category held $10.02 billion and generated $99,977 in fees over the previous week. Liquid staking, by contrast, held $51.87 billion and generated $27.35 million. On a per-dollar-secured basis, plain staking earned roughly 53 times more.
Two changes then stripped away what remained of the incentive. Deposit-subsidy points programs wound down through 2025, and slashing went live in April 2025. Slashing is the penalty that takes part of an operator’s staked ETH when it misbehaves, such as going offline or signing conflicting messages. That turned restaking risk from something largely theoretical into a priced downside, without any added yield to offset it.
Profitability across the sector has fallen sharply
Outside ether.fi, the remaining sector is small. Renzo, Kelp, Swell, Puffer Finance and Bedrock — the five largest remaining liquid restaking tokens — posted combined gross profit of $953,350 in the second quarter of 2026. Three quarters earlier, the same five had made $2.18 million.
Puffer, which raised $23 million, recorded $21,590 for the quarter. Swell recorded $22,370.
The income statements also show where profits actually came from, and it was not restaking itself. On Kelp’s books, EIGEN token rewards appear as $460,600 in gross revenue and the same $460,600 in cost of revenue, meaning the rewards passed straight through to depositors and left nothing with the protocol. Puffer and Swell account for staking rewards the same way. The report’s conclusion was that whatever profit these firms made came from ordinary staking fees underneath the restaking layer.
The Kelp incident exposed wrapper risk, not an EigenLayer failure
On April 18, an attacker exploited Kelp’s cross-chain bridge, the system used to move its token between blockchains. In 46 minutes, the attacker created 116,500 rsETH worth about $293 million without any ETH backing. Those tokens were then deposited into Aave as collateral, and real ether was borrowed against them.
Roughly $6 billion left Aave in the following days, with potential bad debt estimated between $123 million and $230 million. In May, Aave rewrote its collateral listing standards so that cybersecurity and technical architecture would be assessed alongside price volatility.
Silagadze pushed back on the idea that the incident showed leverage had failed. He said, 「The cause of the Kelp hack was poor security practices with respect to cross-chain, not related to leverage.」 He added, 「The ether.fi Aave market has very conservative parameters and we have a strong commitment to security.」
CoinDesk noted that EigenLayer itself did not fail. Nothing was slashed, the restaking mechanism did not break, and the weak point was the bridge. That was precisely why the event was so damaging for liquid restaking tokens. The loss happened in the wrapper — the tradeable receipt layered on top of restaking — rather than in restaking itself. By April, holders of those tokens were taking on extra software risk while receiving no extra yield in return.
Capital moved from ETH exposure to dollar-based products
The report said capital leaving restaking did not leave crypto lending. It moved from ETH into dollars.
In 2024, a common pattern was to stake ETH, restake it, wrap it in a liquid restaking token, borrow against it and buy more, stacking exposure to the same asset. By 2026, similar behavior had shifted into curated vaults.
A curated vault is a lending pool where an outside firm, known as a curator, decides which assets the pool accepts and on what terms, taking a share of the fees. Morpho, the largest venue in this segment, holds around $5.8 billion.
As with restaking, the depositor ends up holding a receipt whose risks are set by someone else and accepted as collateral by a third party.
Curated vaults have already had their own version of a collapse. On Nov. 4, 2025, Stream Finance disclosed roughly $93 million of losses and froze withdrawals. Its xUSD token, a yield-bearing dollar token designed to hold a $1 value, dropped 77% in a single day. Curators had built vaults on Morpho where depositors supplied real stablecoins against xUSD, while the borrowed stablecoins were used to buy more xUSD, pushing the token far beyond what actually backed it.
Those markets valued xUSD at a fixed $1 instead of its market price. When the actual price fell, the automatic liquidations that should have closed the loans did not trigger. Researchers later mapped roughly $285 million of debt exposure across lending platforms. A second dollar token, 65% backed by loans to Stream, fell about 98% and was wound down.
That left ether.fi with the same question now facing every liquid restaking protocol: what is the business once the core product stops paying? Its answer, according to the article, was to stop being primarily a staking company.
ether.fi’s next phase
ether.fi now runs a card that lets users spend against their crypto without selling it, a borrowing market on Ethereum layer-2 network Optimism, and a set of vaults. It describes itself as a crypto neobank. In August, it added tokenized stocks, metals and fiat rails.
Silagadze put the neobanking market at roughly $300 billion in annual revenue, about 300 times the size of DeFi’s revenue base.
The card’s share of monthly revenue rose from 17% in January to 46% in July. Silagadze said, 「Neobank revenue has fully replaced the revenue lost from restaking and lower ETH price.」 He also said, 「We are on track to increase revenue overall run rate this year by about 38%, while staking and restaking revenue has declined by 70%. Diversification of our revenue has been a huge success.」
CoinDesk contrasted that with DefiLlama figures over a roughly similar period, showing ether.fi’s gross profit falling 47%, from $18.71 million in the third quarter of 2025 to $9.99 million in the second quarter of 2026. The report noted that both sets of figures can be true because gross revenue is not the same as gross profit, and a forward run rate is not the same as a trailing quarter. ether.fi, however, has not published the basis for the 38% figure.
DefiLlama’s accounting showed that card fees produced $3.14 million of gross profit in the second quarter of 2026. EigenLayer restaking produced $2.87 million, ahead of core ETH staking and ahead of vault fees, borrowing and management fees combined. At the point ether.fi chose to leave, restaking was still its second most profitable line by that accounting.
Silagadze also disputed one component in DefiLlama’s numbers. Cashback paid to card users appears as $5.83 million in both revenue and cost of revenue, leaving no profit contribution. He said, 「That was back when third-party partners were paying the cashback rewards. That’s no longer the case, so current revenue reporting doesn’t include cashback subsidy grants.」 The article said DefiLlama’s adapter still books it on both sides through the most recent quarter.
He also said users were informed as ether.fi made product changes. Moving the cash vaults onto Aave replaced a custom-built debt manager and reduced risk. In his words: 「Users were notified multiple times and opted in to this change.」
The technology still works. The economics do not.
The report does not argue that the technology failed. EigenDA, EigenLayer’s data availability service, runs on mainnet at 100 MB/s and remains the largest service by value secured. Symbiotic, where ether.fi moved its own restaking option, has integrated more than 50 networks.
The real question was not whether restaking functioned. It was whether restaking generated enough revenue to support businesses built entirely around it. For protocols that made restaking the whole product, the answer in the article was no.
EigenLayer itself has also changed the way it presents its business. Rebranded as EigenCloud, it now markets verifiable computing, which allows applications to prove that off-chain work was carried out correctly. Restaked collateral sits underneath that stack rather than being the product sold on its own. Holdings stand at $5.10 billion, down from $22.06 billion in August 2025.
The sector still has not settled whether a market that shrank by roughly 75% while continuing to secure the same services should be viewed as a failure, or as a market that had been four times larger than the work required. Silagadze did not wait for that debate to end. He moved ether.fi away from restaking before the argument was settled.