(Bloomberg) -- The emergence of restaking services on the Ethereum blockchain, where investors can earn additional yield on their cryptocurrency, could lead to an “internet bond” market, according to S&P Global Ratings.  

Holders of Ether earn a yield by pledging, or staking, their tokens to be used to help verify transactions on the network, similar to in the bond world, where investors earn a baseline rate by lending their funds to a borrower. In restaking, rewards are compounded by reinvesting them into other protocols, akin to lending out securities in the fixed-income markets. 

“Restaking promises a more robust economic security market,” Andrew O’Neill, S&P Global’s digital assets analytical lead, wrote in a report dated Wednesday. “It enables new services to be validated by Ethereum node operators using established tokens. That averts the need for the services to build their own validator set using their own tokens, whose illiquidity and volatility limit their effectiveness as an economic security tool.”

There are only few currently active restaking services, referred as “actively validated services,” so analysts like O’Neill are anticipating their growth in rewards. The total amount restaked in the most prominent protocol — EigenLayer — exceeded 5.3 million Ether, valued at about $19 billion, and representing over 16% of the total amount of Ether staked, S&P said. 

The risks of restaking are mostly operational and unique to each AVS, but financial risks could arise due to speculation.  

“We do not currently foresee significant ecosystem-level financial risk as staking and restaking are generally non-custodial and there is no rehypothecation of the collateral,” O’Neill writes. “The impact of restaking on system-level leverage must be monitored, particularly through borrowing and leverage metrics on decentralized finance (DeFi) lending protocols,” O’Neill said.”

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