What Is a Liquid Restaking Token (LRT)? Explained

A liquid restaking token (LRT) is a tradable token that represents a user's restaked position — capital that is both staked and additionally securing other networks through a restaking protocol — allowing that value to remain usable elsewhere in DeFi instead of being fully locked and illiquid.

Why LRTs exist

Restaking, by itself, ties up capital: it's staked, and it's further committed to securing additional services, both of which typically involve lockups or at least delayed withdrawal periods. That's the same basic liquidity problem that liquid staking solved for plain staking — locking ETH to secure Ethereum meant giving up the ability to use that capital anywhere else, until liquid staking tokens let people hold a tradable claim on staked ETH instead.

LRTs apply the identical fix one layer up the stack. Instead of restaking ETH directly and waiting through lockup and withdrawal periods to access it, a user deposits into an LRT protocol, which handles the restaking on their behalf and issues a liquid token representing that position — its value tracking the underlying restaked ETH plus accrued restaking rewards.

How an LRT protocol typically works

1. Deposit — a user deposits ETH or a liquid staking token into the LRT protocol.
2. Delegation and restaking — the protocol stakes and restakes the pooled deposits across one or more restaking platforms and a set of node operators, spreading exposure across multiple Actively Validated Services (AVSs) or networks.
3. Token issuance — the user receives a liquid token representing their proportional share of the pooled restaked position.
4. Yield accrual — the token's value (or the quantity of tokens held, depending on design) increases over time as staking and restaking rewards accrue.
5. Secondary use — the LRT can be used as collateral in lending markets, paired in liquidity pools, or held directly, all while the underlying position continues earning restaking rewards.

The risk stack you're actually taking on

Holding an LRT means taking on every layer of risk beneath it, plus additional risk at the LRT layer itself:

• Base staking risk — the ordinary risks of proof-of-stake validation, including potential slashing for validator misbehavior at the base layer.
• Restaking risk — additional slashing conditions defined independently by each AVS or network the underlying capital secures, as covered in our restaking explainer.
• Operator risk — the specific node operators the LRT protocol delegates to must correctly run software for multiple services; an operator's mistake can trigger slashing regardless of the depositor's own behavior.
• LRT smart contract risk — the token issuance, accounting, and redemption logic of the LRT protocol itself is an additional contract layer that can contain bugs.
• Peg/liquidity risk — because the LRT trades on secondary markets rather than always being instantly redeemable at par, its market price can trade at a discount to its underlying value during periods of stress or heavy selling, similar to how liquid staking tokens can briefly depeg under pressure.

LRTs vs. plain restaking vs. plain liquid staking

Product	Liquidity	Yield source	Risk layers
Direct restaking (no liquid token)	Locked, subject to withdrawal delays	Base staking + restaking rewards	Base staking + restaking/AVS slashing
Liquid staking token	Liquid, tradable	Base staking rewards only	Base staking + liquid staking contract
Liquid restaking token (LRT)	Liquid, tradable	Base staking + restaking rewards	Base staking + restaking/AVS slashing + LRT contract

Using LRTs elsewhere in DeFi

Because LRTs are liquid, they've become popular as collateral in lending markets and as a component in liquidity pools, letting holders stack additional yield or borrowing capacity on top of restaking rewards. This is convenient, but it compounds risk further: a depeg or slashing event affecting the LRT can simultaneously trigger liquidations wherever it's used as collateral, similar to the systemic risk considerations covered in our guide on avoiding DeFi liquidation.

Bottom line

Liquid restaking tokens exist to solve the illiquidity that comes with restaking, letting holders keep their capital productive elsewhere in DeFi while it continues earning restaking rewards in the background. That convenience is layered on top of every risk in the underlying stack — base staking, restaking/AVS slashing, operator behavior, and the LRT protocol's own contracts — plus the market risk that the token can trade below its underlying value during stress. Treat an LRT's advertised yield as compensation for a genuinely multi-layered risk profile, not a free enhancement over plain staking, and check current rates on the yield dashboard before allocating meaningful capital.