Skip to main content

Overview

Restaking is an innovative concept in blockchain security that allows users to leverage their staked tokens multiple times to secure not just the underlying blockchain but also additional applications and protocols. Unlike traditional staking, where assets are locked and serve a single purpose—validating transactions and maintaining network integrity—restaking enables those same assets to provide security guarantees to other mechanisms, such as decentralized services, middleware, or alternative consensus layers.

Liquid Restaking is a DeFi mechanism that allows users to stake their assets (e.g., SOL) in a blockchain protocol or validator network to earn staking rewards, while simultaneously unlocking the liquidity of those staked assets. Instead of being locked up, the value of the staked assets can be utilized elsewhere in DeFi, creating more opportunities for capital efficiency.

  • Uninterrupted Staking Rewards: Users continue to earn rewards from the underlying blockchain’s staking process.
  • Liquidity Access: Users can access and use their staked capital for additional activities.
  • Flexibility: Enhances user participation in DeFi while retaining the security benefits of staking.

Think of liquid restaking as depositing money into a bank account to earn interest, and liquid restaking tokens (LRTs) as the debit card that allows you to spend or use the money while it is still earning interest.

glowSOL​

Liquid restaking provides the framework for unlocking staked assets, while liquid restaking tokens (LRTs) are the tools that enable users to access liquidity, earn rewards, and participate in DeFi without sacrificing the benefits of staking.

glowSOL is Glow Finance’s native liquid restaking token, designed specifically for the Solana blockchain. By leveraging Solayer’s restaking infrastructure, glowSOL provides a seamless and efficient way for users to restake their SOL while maintaining access to liquidity and allocating their stake to services with the highest risk-adjusted returns.

glowSOL is designed to revolutionize the way users interact with staked assets in decentralized finance (DeFi). By combining liquidity, tradability, and yield generation, glowSOL empowers users to maximize the utility of their staked SOL holdings without compromising on rewards.

Liquid Restaking Tokens (LRTs)​

Liquid restaking tokens (LRTs) are the financial instruments that enable liquid restaking. When users stake their assets, they receive a tokenized representation of the staked asset in return. These LRTs act as receipts that represent the value of the underlying staked assets while also making them tradable or usable within DeFi ecosystems.

For example:

  • If you stake SOL through a liquid restaking protocol (e.g., Solayer via Glow Finance), you receive an LRT such as glowSOL in return.
  • glowSOL can then be used for yield farming, all while continuing to earn staking rewards.

Core Functions of LRTs:

  • Representation of Staked Assets: LRTs are pegged to the value of the staked assets (e.g., 1 glowSOL = value of 1 staked SOL plus rewards).
  • Tradability: LRTs can be traded on decentralized exchanges or used in DeFi applications.
  • Rewards Accumulation: The underlying staked assets continue to accrue staking rewards, and these rewards are reflected in the LRT's value.

The Relationship​

Liquid restaking is the concept, while liquid restaking tokens are the implementation mechanism that makes liquid restaking possible. Without LRTs, liquid restaking could not function effectively because:

  1. LRTs Provide Liquidity: By issuing tokens like glowSOL, the protocol allows users to trade or utilize their staked assets without waiting for unstaking periods.
  2. LRTs Enable DeFi Integration: The tokenized representation of staked assets allows them to be integrated into DeFi strategies, expanding their utility beyond staking.
  3. LRTs Reflect Staking Rewards: They dynamically represent the value of the staked asset, including accumulated rewards, ensuring users retain full value even while accessing liquidity.

Allocating: Optimizing Risk-Adjusted Returns​

An essential value proposition of liquid restaking tokens (LRTs) is their ability to allocate staked assets strategically to maximize returns while minimizing risks. This allocation process is particularly important for protocols like Solayer, where staking decisions require balancing reward potential and security considerations.

  1. Operator and Service Selection:

    LRT providers, like Glow, allocate user deposits to specific operators (e.g., validators or restaking services) based on risk assessments and expected risk-adjusted returns.

    • Risk Assessment: Evaluating slashing risks, operator reliability, and network security.
    • Return Optimization: Estimating potential yields and adjusting strategies for the best balance of reward and risk.

  2. Automated Allocation for Users:

    Glow LRT takes care of staking and restaking decisions for users by:

    • Restaking assets with Solayer’s optimal services.
    • Dynamically reallocating assets as risk and reward factors change.

  3. Transparent Decision-Making:

    The allocation process is backed by robust dashboards and analytics, providing users with visibility into how their assets are distributed and the risks/rewards associated with them. For instance:

    • Proof of Reserves Dashboard: Displays underlying holdings to ensure transparency.
    • Analytics Tools: Offers real-time insights into the performance of restaked assets.

  4. Example from Glow’s Strategy:

    • Users deposit SOL and receive Glow’s LRT (glowSOL).
    • Glow’s system atomically restakes the SOL with Solayer to earn restaking yield and Solayer Points.
    • A comprehensive risk-adjusted strategy ensures minimal slashing risks while optimizing returns.