Ethereum's largest liquid restaking protocol is exiting the restaking business entirely, citing vanishing yields and mounting risks. Ether.fi will sever its final structural ties to EigenLayer this quarter, reducing its restaked assets to under 1%, according to CEO Mike Silagadze.
The restaking sector, once heralded as a way to generate dual yields by securing multiple services simultaneously, has collapsed economically. As of late September 2026, restaking protocols held $10.02 billion in assets but generated only $99,977 in fees over one week. By comparison, conventional liquid staking on $51.87 billion generated $27.35 million over the same period—earning roughly 53 times more per dollar secured.
Profitability Erodes Across the Sector
The five largest remaining liquid restaking tokens—Renzo, Kelp, Swell, Puffer Finance, and Bedrock—generated $953,350 in combined gross profit in the second quarter of 2026, down from $2.18 million three quarters earlier. Puffer, which raised $23 million, recorded $21,590 in quarterly profit. Swell recorded $22,370.
The original restaking premise promised that staked ETH could simultaneously secure Ethereum and earn additional income by providing security services to oracles and data availability layers. Services buying this security never paid enough to cover both base staking yields and a premium, so the promised dual returns never materialized.
Risk Without Reward
Two developments eliminated what remained of restaking's appeal. Incentive programs that had subsidized deposits wound down through 2025, and slashing—penalties that confiscate an operator's staked ETH for misbehavior—went live in April 2025. Restaking suddenly carried real, quantifiable downside risk without corresponding yield increases.
Ether.fi's decision also followed the April 2025 Kelp hack, in which an attacker exploited the protocol's cross-chain bridge to create 116,500 unsecured rsETH tokens worth approximately $293 million. The incident highlighted vulnerabilities in the wrapper layer—the tradeable receipt sitting atop restaking infrastructure—rather than the restaking mechanism itself. By holding a liquid restaking token, depositors were accepting additional software risk while receiving no additional yield.
A Business Model Transformed
With restaking no longer viable as a primary business, Ether.fi pivoted to crypto banking services. The protocol now operates a spending card, borrowing markets on Ethereum's Optimism layer, and curated vaults. Card fees represented 46% of monthly revenue by July 2026, up from 17% in January.
EigenLayer itself has undergone a similar rebranding. Now marketed as EigenCloud, it emphasizes verifiable computing—allowing applications to prove off-chain work was completed correctly—with restaked collateral as foundational rather than the primary product. EigenLayer's holdings fell to $5.10 billion from $22.06 billion in August 2025.
Unresolved Questions
The restaking market has contracted approximately 75% from its peak, though it continues securing the same services it once supported at higher valuations. Whether this represents market failure or correction remains unsettled among remaining participants in the sector.
