Renzo Restaked ETH

Renzo Restaked ETH (EZETH) is a reward-bearing restaking token within the Renzo Protocol. The protocol was founded in 2023 by Kratik Lodha and Lucas Kozinski, with the mainnet launching on October 30, 2023. It allows users to deposit and stake native ETH tokens, which are then moved to the Beacon Chain Deposit Contract and staked using an Ethereum Beacon chain validator node. The protocol also integrates with EigenLayer to distribute additional returns to users.

In January 2024, the Renzo Protocol raised $3.2 million in seed funding, valuing it at $25 million. This funding round was led by Maven11 and included investors such as OKX Ventures, Robot Ventures, Protagonist, Bitscale Capital, Re7 Capital, Mantle Network, and Karatage. Binance Labs also invested in the protocol in February 2024 with an undisclosed amount.

On April 24, 2024, EZETH suffered a price depeg, briefly falling to $688 on Uniswap before recovering its price parity with Ether (ETH). This depegging incident was attributed to a wider sell-off following the conclusion of Renzo Protocol’s season 1 airdrop. The protocol allocated 10% of its token allocation to the season 1 airdrop, which led to users selling their EZETH to get back to farming other liquid restaking tokens.

The Renzo Protocol has seen significant growth, with over $3.3 billion in total value locked (TVL) as of April 2024. It is the second-largest liquid restaking protocol, after Ether.fi, which has over $3.9 billion in TVL.

Renzo Protocol is a liquid staking platform that allows users to stake native Ethereum (ETH) or liquid staking tokens (LSTs) such as wBETH and stETH. This staking process generates a reward-bearing token called ezETH, which represents the user's restaked position at Renzo. Here's a detailed overview of how it works:

1. Deposit ETH or LSTs: Users deposit native ETH or LSTs into the Renzo Protocol through their MetaMask wallet.
2. Choose Ecosystem: Users select the ecosystem they want to stake in, which includes different actively validated services (AVSs) on EigenLayer.
3. Mint ezETH: The deposited ETH or LSTs are converted into ezETH, which is the liquid restaking token representing the user's restaked position at Renzo.

• Rewards: ezETH earns rewards in ETH, USDC, and AVS tokens, which increase its value relative to the underlying tokens.
• Yield: The yield on Renzo comes from ETH validators and will eventually include restaking yield from AVSs on EigenLayer.

• Withdrawals: Withdrawals are currently disabled but are expected to be enabled soon. When enabled, unstaking will take a minimum of 7 days due to EigenLayer requirements.
• Fees: Renzo charges a 10% fee on rewards generated via restaking, which is split 50/50 between protocol reserves and Renzo node operators.

• ezPoints: Users earn ezPoints by holding ezETH, which determines the number of REZ tokens they will receive following the token generation event.
• Token Generation: The token generation event will distribute REZ tokens based on the number of ezPoints held by users.

• Pendle Finance: Renzo has integrated with Pendle Finance, allowing users to tokenize ezETH into principal tokens and yield tokens.
• EigenLayer: Renzo is built on EigenLayer, which provides the infrastructure for restaking and generating rewards.

• Liquidity Risks: The lack of withdrawals and liquidity issues can lead to sudden price drops and liquidations, as seen in the recent incident where ezETH experienced a sudden rush of sellers.
• Leverage Risks: The use of leverage in restaking strategies can amplify losses and lead to liquidation cascades.

Overall, Renzo Protocol aims to simplify the restaking process and provide users with a liquid staking token that earns rewards across various ecosystems. However, it is essential to understand the risks involved and the complexities of the restaking strategies employed.

Renzo Restaked ETH (ezETH) has several strengths:

1. Higher Yield: The protocol offers higher yields than traditional staking protocols by leveraging the EigenLayer, which allows users to earn more rewards from their staked assets.

2. Flexible Asset Management: ezETH enables users to participate in DeFi transactions while still benefiting from staking on Ethereum. This flexibility expands the investment opportunities available to users.

3. Cross-Chain Staking: The protocol allows for cross-chain staking features, enabling users to re-stake their assets on popular layer two projects using wrapped ETH tokens. This simplifies the staking experience and reduces costs.

4. Enhanced Yield with Multi-Token Support: The protocol has the potential to support multiple tokens, including WBETH and Lasts from other projects, which can further enhance the yield for users.

5. User-Friendly Interface: The Renzo Protocol has a user-friendly interface that requires users to simply connect their wallets, select their assets, and confirm the transaction. This makes it easier for users to manage their staked assets.

6. Reward-Bearing Token: ezETH is a reward-bearing token, meaning its value increases relative to the underlying asset as it earns more rewards. This incentivizes users to hold onto their ezETH tokens.

These features make Renzo Restaked ETH an attractive option for users seeking higher yields and more flexible staking opportunities.

Renzo Restaked ETH (ezETH) faces several risks, including:

1. Liquidity Risks: The lack of withdrawals and limited liquidity pools can lead to price deviations and liquidations, as seen in the brief crash on Uniswap.
2. Smart Contract Vulnerabilities: The protocol relies on smart contracts, which can be vulnerable to exploits, potentially halting operations.
3. Volatility Risks: The crypto market, particularly the price of ETH, can be highly volatile, impacting user confidence and the protocol's performance.
4. Counterparty Risks: Governance issues and dependencies on other protocols can create risks for users.
5. Technology Risks: Risks related to dependencies, Oracle price feeds, and other technical aspects of the protocol can also impact its stability.
6. Illiquidity Discounts: The inability to withdraw assets quickly can lead to illiquidity discounts, making it difficult for users to redeem their tokens at the expected value.
7. Unstaking Delays: The long cool-down period for unstaking assets can limit users' access to funds during that time, potentially causing them to miss opportunities.
8. Slashing Risks: Validator misconduct can result in slashing, which the protocol tries to minimize through its strategy manager.

These risks highlight the importance of careful risk management and ongoing development to ensure the stability and security of the Renzo Protocol and its ezETH token.

• Lucas Kozinski: Founding Contributor at Renzo Protocol, with a background in financial management and experience in crypto from stints at the Tezos Foundation, Tokensoft, and Lunar Labs.
• James Pool: Co-founder and former CTO of Tokensoft.
• Kratik Lodha: Co-founder, previously worked at Woodstock Fund, which invested in Moonwell.