The credit crunch that followed the 2008 global financial calamity, which was connected to the collapse of Lehman Brothers, made conventional circles of finance wary of the risks of idle money. As a way to amplify margins, the concept of rehypothecation eventually arose, through which collateral was used to facilitate trades. Fast forward to today, and the cryptocurrency industry has birthed its own iteration of financial engineering: restating.
The Evolution from Rehypothecation to Restaking
Rehypothecation, which is like the notion of restaking, is very popular, particularly in the world of Ethereum. An EigenLayer-powered ETH 2.0 staking system means more income for asset holders by realizing locked-up ETH through derivatives. As a staggering amount of ETH is now re-staked, the phenomenon is expanding to other chains, like Solana, with new players like Jito ushering the trend into the market.
Backers, on the other hand, talk about blockchain invincibility, but critics warn that these risks resemble the 2008 financial crisis. Altogether, ETH stakers, despite lower incomes compared to conventional staking rates, are around 3%.
MetaMask Takes on MEV: Protecting Users in the Crypto Wild West
Along with that, the crypto community suffers from an MEV similar to high-frequency trading in a conventional market. In the same line of defense, MetaMask, the most popular Ethereum wallet, introduces a new feature that imitates dark pools’ mechanisms for countering MEV abuse in order to protect users from price manipulation.
As the crypto economy mirrors and diverges from traditional finance, one thing remains clear: the art of making as much money as possible while at the same time protecting your investments is a task of ages.