KoinlyticsAn LRT like eETH looks like a simple wrapper: deposit ETH, earn extra yield. Under it sit six trust layers, each with its own failure mode. Understanding them is the difference between LRTs as core portfolio and LRTs as a leveraged bet you didn't know you took.
Layer 1: Ethereum staking
Standard validator slashing risk. Rare in practice (~0.01% of validators slashed historically). Slashing penalties: partial (missed attestations) or full (double signing).
Layer 2: LST issuance
If the LRT sits on top of an LST (Lido stETH), you inherit Lido's operator set risk. Lido's ~30 operator set has been reliable but any concentration is a risk.
Layer 3: LRT contract
Ether.fi, Renzo, Kelp, Puffer each have their own smart contracts holding user deposits. Contract bug = users lose. Audits help but do not eliminate.
Layer 4: Operator selection
LRT protocol picks operators to delegate to. Bad operator = slashing hits users. Some LRTs concentrate on a few operators (higher yield, higher correlated risk); others diversify.
Layer 5: AVS slashing conditions
Each AVS defines its own slashing rules. Some are conservative (only slash for clear double signing); others are aggressive. Restaker inherits every set of rules for AVSs their operator serves.
Layer 6: Peg / liquidity
eETH/ETH pool depegs during panic. Users trying to exit LRT quickly may take a 5-15% haircut vs waiting for full unstake queue (7-14 days).
How to think about it
- Never size LRT to more than you can afford to lose 20% of instantly.
- Diversify across LRT protocols (eETH + ezETH + pufETH) — different contract sets.
- Follow curator / operator changes.
- Track unstake queue length as a stress indicator.
The correlated tail
The worst case for restakers: a single AVS bug that slashes many operators, cascading through many LRTs simultaneously. Not observed at scale yet. Do not assume never.