• Ether.fi will sever its last structural tie to EigenLayer this quarter, leaving under 1% of assets restaked, and CEO Mike Silagadze says the exit came down to risk with no meaningful yield left in restaking.
• Restaking secures $10 billion but generated just $99,977 in fees over a week, while plain liquid staking earns roughly 53 times more per dollar secured.
• The five largest remaining liquid restaking tokens made $953,350 in combined gross profit last quarter, down from $2.18 million three quarters earlier.

By the end of this quarter, ether.fi will have cut the last structural link between its staking tokens and restaking protocol EigenLayer. Protocol documentation put under 1% of assets still restaked as of August with EigenPod withdrawal credentials due to be removed by the end of the year.

When ether.fi launched in 2024, deposits were restaked on EigenLayer automatically. In August the company stripped restaking out of weETH, the version of its token that circulates and is accepted as collateral across DeFi, leaving it as a plain liquid staking token. Anyone who still wants restaking has to opt into a separate token built on Symbiotic, a rival platform.

Mike Silagadze, ether.fi's chief executive, said the decision came down to risk. "There were no meaningful yield opportunities in restaking and there was some perceived risk from stakers, so we decided it made sense to exit," he told CoinDesk.

What restaking was meant to be

Staking means locking up ETH to help secure Ethereum, in return for a yield. Restaking was the idea that the same locked ETH could do a second job: EigenLayer would rent that security out to other services, such as oracles and data availability layers, which would pay for the protection. Depositors would earn twice on one pot of money. Liquid restaking tokens sat on top of that, giving depositors a tradable receipt that they could sell or use as collateral elsewhere rather than locking their ETH away and waiting. weETH was the largest of them.

EigenLayer held $19.7 billion at its peak and liquid restaking tokens grew more than 1,000% in the first six weeks of 2024. But the services buying security never paid enough to cover both the base staking yield and a premium on top, so the second yield restaking promised never materialized.

On Sept. 8, DefiLlama's restaking category held $10.02 billion and generated $99,977 in fees over the prior week. The liquid staking category, on $51.87 billion, generated $27.35 million. Per dollar secured, ordinary staking earns roughly 53 times more.

Two developments then removed what was left of the incentive to restake. Points programs subsidizing deposits wound down through 2025, and slashing went live in April 2025. Slashing is the penalty that confiscates part of an operator's staked ETH when it misbehaves, by going offline or signing conflicting messages, for example. So restaking suddenly carried a real, priced downside where before the risk had been theoretical. There was no extra yield to compensate.

Set ether.fi aside and the rest of the sector is small. Renzo, Kelp, Swell, Puffer Finance and Bedrock, the five largest remaining liquid restaking tokens, made $953,350 in combined gross profit in the second quarter of 2026. Three quarters earlier the same five made $2.18 million. Puffer, which raised $23 million, recorded $21,590 for the quarter. Swell recorded $22,370.

The income statements also show which part of these businesses was ever profitable, and it was not the restaking. On Kelp's books, EIGEN token rewards appear at $460,600 in gross revenue and $460,600 in cost of revenue: they arrive and pass straight to depositors, leaving nothing with the protocol. Puffer and Swell book staking rewards the same way. Whatever profit these companies made came from the orinary staking fees charged underneath the restaking layer.

The hack

On April 18, an attacker exploited Kelp's cross-chain bridge, the system that moves its token between blockchains, and created 116,500 rsETH in 46 minutes, worth about $293 million, with no ETH backing it. The attacker deposited the tokens into Aave as collateral and borrowed real ether against them. Around $6 billion left Aave in the days that followed, with potential bad debt of $123 million to $230 million. In May, Aave rewrote its collateral listing standards to assess cybersecurity and technical architecture alongside price volatility.

Silagadze objects to reading the incident as a failure of leverage. "The cause of the Kelp hack was poor security practices with respect to cross-chain, not related to leverage," he said. "The ether.fi Aave market has very conservative parameters and we have a strong commitment to security."

He is right that EigenLayer itself did not fail. Nothing was slashed, no restaking mechanism broke, and the weak point was a bridge. But that is exactly what made the hack so damaging for liquid restaking tokens. The money was lost in the wrapper, the tradeable receipt sitting on top of the restaking, rather than in the restaking itself. By April, anyone holding one of these tokens was accepting an extra piece of software that could be attacked, and getting no extra yield in return. The wrapper had stopped paying for itself.

Where the money went

The capital leaving restaking did not leave crypto lending, it moved from ETH into dollars.

In 2024 the pattern was: stake ETH, restake it, wrap it in a liquid restaking token, borrow against that and buy more, stacking exposure to a single asset. By 2026 the same behavior runs through curated vaults. A curated vault is a lending pool where an outside firm, known as a curator, rather than the lending protocol itself, decides which assets the pool accepts and on what terms, in exchange for a share of the fees. Morpho, the largest venue for this, holds around $5.8 billion.

As in restaking, the token a depositor holds is a receipt whose risks are set by someone else and accepted as collateral by a third party.

Curated vaults have already produced their own version of the Kelp collapse. On Nov. 4, 2025, Stream Finance disclosed roughly $93 million of losses and froze withdrawals. Its xUSD token, a yield-bearing dollar token meant to hold its value at $1, fell 77% in a day. Curators had built vaults on Morpho where depositors supplied real stablecoins against xUSD, and the borrowed stablecoins were used to buy more xUSD, inflating the token far beyond what actually backed it. Those markets valued xUSD at a fixed $1 rather than its market price, so when the real price fell, the automatic liquidations that should have closed the loans never triggered. 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.

The exit from restaking left ether.fi with the question every liquid restaking protocol now faces: What is the business, once the thing it was built on stops paying? Its answer was to stop being a staking company.

Ether.fi’s second act

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, and describes itself as a crypto neobank. In August it added tokenized stocks, metals and fiat rails. Silagadze puts the neobanking market at roughly $300 billion in annual revenue, about 300 times DeFi's.

The card took its share of monthly revenue from 17% in January to 46% in July. "Neobank revenue has fully replaced the revenue lost from restaking and lower ETH price," Silagadze 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."

DefiLlama's figures show a different trend over roughly the same period, with 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. Both can be true, since gross revenue is not gross profit and a forward run rate is not a trailing quarter, but ether.fi has not published the basis for the 38%.

Card fees produced $3.14 million of gross profit in the second quarter. EigenLayer restaking produced $2.87 million, ahead of core ETH staking and ahead of vault fees, borrowing and management fees combined. On DefiLlama's accounting, restaking was ether.fi's second most profitable line at the point it decided to leave.

Silagadze disputes one input into DefiLlama’s figures. Cashback, the rewards paid to card users, appears in DefiLlama's figures at $5.83 million in both revenue and cost of revenue, which means it adds nothing to profit "That was back when third-party partners were paying the cashback rewards," he said. "That's no longer the case, so current revenue reporting doesn't include cashback subsidy grants." DefiLlama's adapter still books it on both sides through the most recent quarter.

He also says users were told about changes as ether.fi made them. Moving the cash vaults onto Aave replaced a custom-built debt manager and reduced risk, he said: "Users were notified multiple times and opted in to this change."

The technology was never the problem

None of this is to say 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, has integrated more than 50 networks.

The question was never whether restaking works. It was whether it generates enough revenue to justify building a business on it, and for the protocols that made restaking their entire product, the answer has been no.

EigenLayer has also stopped selling restaking as the product. Rebranded as EigenCloud, it now markets verifiable computing, which lets applications prove that work done off-chain was carried out correctly, with restaked collateral as the layer underneath rather than the thing on sale. Its holdings stand at $5.10 billion, down from $22.06 billion in August 2025.

What the sector has not settled is whether a market that shrank roughly 75% while continuing to secure everything it secured before has failed, or whether it was simply four times larger than the work required. Silagadze did not wait to find out. He moved ether.fi out of restaking while the argument was still running.