Why LRT yield is not free 🧵
1/
LRT (Liquid Restaking Tokens) promise “higher ETH yield”
But yield doesn’t appear out of thin air
It always comes from somewhere and carries risk
2/
Base staking yield (~3–4%) comes from Ethereum block rewards
That part is relatively straightforward
Everything above that?
You’re getting paid to take additional risk
3/
Restaking = securing extra services via EigenLayer
Those services (AVSs) pay you
But if they fail or misbehave you can get slashed
Higher yield = higher slashing surface
4/
Most LRT protocols (like https://t.co/QWwBUZ4Rrb or Renzo) stack risks:
• smart contract risk
• AVS risk
• governance risk
• liquidity risk
You’re not just staking ETH anymore
You’re in a layered system
5/
A big part of “high APY” often comes from:
• token incentives
• points programs
• future airdrop expectations
That’s not cash flow
That’s speculation on future dilution
6/
There’s also correlation risk
In a market crash:
• ETH drops
• LRT discount widens
• DeFi leverage unwinds
Yield doesn’t protect you from reflexivity
7/
Think of LRT like this:
You rent out your house (staking)
Then you sublet the basement (restaking)
Then you borrow against it to invest
Income increases
So does fragility
8/
LRT yield isn’t free
It’s a risk premium
If you don’t know what risk you’re being paid for
you’re probably the one paying for it
Trading like any other business is a complex field. No training will ever be as effective as personal practice and learning from mistakes. While business taxes keep rising we steadily move forward and take back our money
Everything has its time!