In a rapidly evolving landscape, restaking has emerged as a promising mechanism to fortify the security framework of decentralized finance (DeFi), potentially making it more attractive to institutional traders. With over $12 billion in total value locked (TVL) within major liquid restaking protocols, according to DefiLlama, the concept is gaining traction—moving from niche conversations to the forefront of DeFi infrastructure discussions.
Restaking: A New Layer of Security
Restaking is not a magic bullet for eliminating risk but rather a strategic friction point that deters malicious actors while preserving the composability of protocols. By enabling validators to secure additional protocols with their already-staked assets, restaking adds a secondary validation layer. This approach strengthens middleware components such as oracles, bridges, and data availability layers without necessitating new trust networks.
Unlike traditional validator sets, restaking aligns existing economic incentives with broader infrastructure needs, allowing protocols to share security resources efficiently. This modular security stack is particularly appealing to institutions seeking configurable and auditable exposure per protocol. “Restaking transforms the security game by allowing validators to diversify their commitments across different services,” noted a blockchain analyst.
Slashing as a Calculated Risk
One significant deterrent for institutional involvement in staking has been the risk of slashing—where validator misbehavior or errors can result in capital loss. Restaking introduces slashing segmentation, enabling operators to choose the services they secure, thus confining slashing risks to specific contexts of misbehavior rather than the entire validator lifecycle.
This nuanced approach converts slashing from an unpredictable threat into a quantifiable risk, akin to how fixed-income traders assess default risks. “By segmenting slashing, restaking turns a red flag into a manageable risk class,” said an industry expert. This evolution opens pathways for restaking insurance markets, actuarial modeling, and structured risk products, potentially drawing in risk-averse institutions.
Diversification and Enhanced Credibility
DeFi’s inherent volatility—characterized by price swings and gas spikes—remains an indelible aspect of the market. However, restaking facilitates cross-protocol exposure that is less correlated than holding multiple tokens. Validators engaging in a curated mix of oracle, bridge, and data availability services essentially create a diversified portfolio of security commitments, each with distinct risk and reward profiles.
Moreover, restaking enhances the credibility of oracles, often considered a single point of failure in DeFi protocols. Staking-based oracle models, supported by research from ScienceDirect, significantly mitigate manipulation risks when tied to performance-based incentives and slashing conditions. By allowing oracle operators to secure feeds with economic weight, restaking changes the game theory—misreporting can result in slashed Ether (ETH), aligning truthfulness with profit.
Bridging Traditional and Decentralized Finance
Institutions historically hesitant to delve into DeFi are unlikely to be swayed by community-driven incentives alone. What they require is a clear, quantifiable framework for scoping and mitigating infrastructure risks. Restaking offers a promising step toward this by rendering DeFi security modular and economically aligned. As regulation matures and tokenized finance becomes increasingly interoperable with traditional financial systems, restaking could serve as the crucial link bridging these domains.
Nevertheless, the journey is far from complete. While restaking is a pivotal development, it is by no means the sole solution to DeFi’s security conundrum. The landscape is still in flux, raising questions about how these innovations will mesh with evolving regulations and market demands. Yet, the path to a more secure and institution-friendly DeFi ecosystem appears more tangible than it did a year ago, offering a glimpse into a future where decentralized and traditional finance might seamlessly coexist.
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This article is based on: Restaking can make DeFi more secure for institutional traders
Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
