The emergence of Ether restaking protocols that promise investors high passive returns has raised significant concerns about economic sustainability and security. However, according to Jeff Owens, co-founder and CEO of Haven1, the biggest risk associated with Ether restaking is not the technical complexity but rather the lack of understanding among investors.
In a conversation with Cointelegraph, Owens emphasized the importance of investors comprehending the risks involved in asset looping within restaking protocols. Asset looping refers to traders deploying the same capital into multiple protocols. This is made possible by liquid staking, which provides investors with a copy of the underlying Ether token that can be further deployed in other decentralized finance (DeFi) protocols.
Haven1, an Ethereum Virtual Machine-compatible layer-1 blockchain, recently introduced its own liquid staking token called hsETH. Liquid staking has become a popular protocol category among crypto investors due to its ability to enhance capital efficiency. Unlike regular staking protocols, liquid staking allows for the redeployment of staked assets. According to DefiLlama, the combined total value locked (TVL) in the liquid staking category amounts to over $51.1 billion, surpassing the $32 billion TVL of the lending market.
Despite being a robust financial tool, Ether restaking still requires investors to understand the number of asset loops they are adding. Owens stressed the importance of this understanding. Haven1’s restaking portal offers investors an annual percentage rate (APR) yield of up to 25.24%, in addition to the current 3.24% Ether restaking APR. This offering raised concerns as it exceeded the 20% yield offered by Anchor Protocol on TerraUSD (UST) before the collapse of Terra in May 2022.
However, investors need not worry about a similar meltdown, as the 25% yield offered by hsETH is a “pre-mainnet incentive mechanism” from Haven1. This yield will be adjusted over time based on supply and demand. To further enhance the safety of its restaking ecosystem, Haven1 has established a reserve fund consisting of 10% of all application fees earned through the network.
In conclusion, while Ether restaking presents lucrative opportunities for investors, it is crucial for them to have a clear understanding of the risks involved, particularly in terms of asset looping. Haven1’s hsETH token offers a high yield, but it is important to note that this yield is subject to adjustments based on market conditions.