Staking ETH secures the Ethereum network and provides a modest return. The restaking concept aimed to let the same locked ETH earn a second reward by leasing its security to services such as oracles. Liquid wrappers, like Ether.fi’s weETH, turned that double-layered exposure into tradable tokens that could be used as collateral.
Profitability collapse
Data from late September shows that the restaking market, holding roughly $10 billion, produced only $99,977 in fees over a single week, while traditional liquid staking on $51.87 billion generated $27.35 million. On a per-dollar basis, ordinary staking yields about 53 times more than restaking.
The five largest liquid restaking tokens – Renzo, Kelp, Swell, Puffer Finance and Bedrock – posted a combined gross profit of $953,350 in Q2 2026. That figure is less than half of the $2.18 million recorded three quarters earlier. Most of the revenue for these protocols still came from the underlying staking fees, not from the restaking premium, which never materialised.
Security breach highlights structural weakness
In April, a cross-chain bridge owned by Kelp was compromised, allowing an attacker to mint 116,500 rsETH tokens worth about $293 million without any ETH backing. The counterfeit tokens were deposited on Aave as collateral, triggering a cascade that pulled roughly $6 billion from the platform and left potential bad-debt estimates between $123 million and $230 million.
The incident was traced to poor bridge security rather than the leverage mechanics of restaking. Nevertheless, the loss exposed the fragility of the wrapper layer that sits atop the restaked ETH, which had ceased to provide any extra yield.
Ether.fi’s exit from restaking and new direction
Ether.fi announced that it will remove the last structural link to EigenLayer by the end of the quarter, reducing its restaked assets to under 1 percent. CEO Mike Silagadze cited risk and the absence of meaningful yield as the primary reasons for the move.
To replace the dwindling staking revenue, the firm has expanded a card-based spending product on Optimism, added tokenized stocks, metals and fiat rails, and rebranded itself as a crypto neobank. Revenue from the card service grew from 17 percent of monthly income in January to 46 percent in July, offsetting a 70 percent decline in staking-related earnings. Silagadze expects the neobanking segment to lift overall run-rate revenue by about 38 percent this year.
Why it matters
The rapid decline of restaking illustrates how speculative layers built on top of core staking can evaporate when additional rewards fail to materialise and security risks become tangible. Ether.fi’s strategic shift underscores a broader trend of DeFi projects diversifying into more traditional financial services to sustain growth. Investors and developers should reassess the risk-reward profile of liquid restaking products and monitor how emerging neobanking models reshape revenue streams in the Ethereum ecosystem.
