Ethereum's (CRYPTO:ETH) restaking is poised to become a fundamental component of the network, according to Coinbase analysts, who also caution about potential risks associated with this new yield-generating mechanism.

They suggest that while restaking could underpin a variety of innovative decentralised applications, it might also bring unforeseen challenges.

A research report by Coinbase's David Han and David Duong, published on April 2, highlights the pitfalls of restaking and the creation of liquid restaking tokens (LRTs).

Specifically, they discuss the Ethereum restaking protocol Eigenlayer, which rewards users with LRTs for securing validated services through staking derivative tokens.

These tokens are allocated to users who have already engaged in liquid staking protocols like Lido (CRYPTO:LDO), thereby enabling them to earn additional rewards.