Ethereum’s liquid restaking sector is facing mounting profitability challenges as limited demand for additional security yields, declining protocol revenues, and increased slashing risks undermine the business model that fueled its rapid expansion in 2024. Ether.fi is now removing the remaining structural links between its main liquid staking token and EigenLayer, highlighting a broader shift away from automatic restaking.
When ether.fi launched in 2024, deposits were automatically restaked through EigenLayer. In August 2026, the protocol removed restaking from weETH, its widely used liquid staking token that circulates across decentralized finance applications and serves as collateral. Users who want exposure to restaking must now opt into a separate token built on Symbiotic, a competing protocol. According to ether.fi’s documentation, less than 1% of its assets remained restaked through EigenLayer in August, with the removal of EigenPod withdrawal credentials scheduled to be completed by year-end.
Ether.fi CEO Mike Silagadze attributed the decision to an unfavorable balance between potential returns and risk. He said restaking offered no meaningful additional yield while introducing concerns for depositors, making an exit the more practical option.
Restaking was designed to let staked ETH secure additional services, including oracles and data availability networks, in exchange for extra rewards. Liquid restaking tokens provided users with tradable claims on deposited assets, allowing them to participate in decentralized finance without giving up liquidity. The model promised a second source of yield on top of ordinary Ethereum staking.
The sector expanded rapidly during early 2024, with EigenLayer’s total value locked reaching a reported peak of $19.7 billion and liquid restaking tokens growing by more than 1,000% in their first six weeks. However, demand from services purchasing this additional security did not generate enough revenue to consistently cover base staking rewards and provide a meaningful premium to restakers.
The gap between the two business models is reflected in fee data. On September 8, the restaking category held approximately $10.02 billion and generated $99,977 in fees over the previous week. The liquid staking category held $51.87 billion and generated $27.35 million in fees over the same period. Based on these figures, ordinary staking generated roughly 53 times more fees per dollar of value secured than restaking.
The economics became less attractive as deposit incentive programs wound down through 2025 and slashing went live in April of that year. Slashing allows a portion of an operator’s staked ETH to be confiscated for certain forms of misconduct, including going offline or signing conflicting messages. Restaking therefore introduced a more tangible downside without consistently delivering enough additional yield to compensate users for the added exposure.
Financial results from five major remaining liquid restaking token protocols—Renzo, Kelp, Swell, Puffer Finance, and Bedrock—also show declining profitability. The group generated a combined $953,350 in gross profit in the second quarter of 2026, down from $2.18 million three quarters earlier. Puffer Finance recorded $21,590 for the quarter despite having raised $23 million, while Swell reported $22,370.
The reported accounts also indicate that restaking rewards have not necessarily translated into protocol earnings. Kelp recorded approximately $460,600 in EIGEN token rewards as gross revenue, with an equal amount recorded as the cost of revenue, leaving no gross profit from those rewards. Puffer and Swell use similar accounting for staking rewards. As a result, much of the protocols’ reported profit comes from fees generated by the underlying liquid staking business rather than the restaking layer itself.
Ether.fi has also challenged aspects of the reported revenue figures. Silagadze said cashback subsidies previously paid by third-party partners were no longer part of the company’s current revenue reporting, although the relevant data adapter continued to record cashback amounts as both revenue and cost of revenue. He also said users were notified about changes to cash vaults and opted into their migration to Aave, which replaced a custom-built debt manager and, according to the company, reduced risk.
The sector’s financial difficulties do not necessarily mean its underlying technology has failed. EigenDA, EigenLayer’s data availability service, reportedly operates on mainnet at 100 MB per second and remains its largest service by value secured. Symbiotic has integrated more than 50 networks. These developments suggest that infrastructure can continue to operate even as the economics of restaking tokens come under pressure.
EigenLayer has also shifted its positioning under the EigenCloud brand, emphasizing verifiable computing—technology designed to demonstrate that off-chain work was performed correctly—rather than selling restaking as the primary product. Its reported holdings have fallen to $5.10 billion from $22.06 billion in August 2025.
The central question for the sector is whether restaking was fundamentally unable to generate sufficient revenue or whether its earlier expansion exceeded the actual demand for additional blockchain security. For protocols whose businesses depended heavily on liquid restaking tokens, declining fee generation and added risk have made that distinction increasingly important. Ether.fi’s decision to separate its main staking token from restaking reflects the pressure to prioritize sustainable yields and risk management over growth driven by incentives.
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