Post by @lanadingwall • Hey

Can someone explain to me how L2 eth staking works/ the mechanics behind it. Would love to stake more of my eth on L2s, but want to understand it more befo

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Aright so it’s virtually the same for some assets like wsteth & Reth. The only thing is you have L2 risks. Like sequencer down. You also have a situation where oracles go down and prices are different on different layer 2s. You also are abstracting the token from it’s redeemability. Like you have to go to Layer 1 to redeem it natively. Most don’t do this and just sell at market. Which means that there could be arbitrage where prices (in eth terms) are lower because no one will go to layer 1. You also now have native restaking on Layer 2 with Renzo & now Kelp DAO where you can mint it on Layer 2. Assuming they bring redemptions to Layer 2 at some point you would effectively be reducing the risk much of the Layer 2 risk, leaving only the Sequencer or Chain Risks. Overall, I think the majority of projects are looking to reduce risks for stakers on layer 2.
The beauty is you can defi your liquid $ETH into other lending protocols. You can also use it to provide liquidity and some of the protocols might later launch their own tokens. A good example is @lens/ether_fi where I have been staking my $ETH and I have also used to provide liquidity.