Ethereum’s weETH Breaks from Restaking as Reward Debate Intensifies

The change separates standard Ethereum staking from the added risks of restaking, as a new proposal to cap validator rewards fuels debate across the staking ecosystem.

Ether.fi, one of the largest staking platforms with about $3.55 billion in user deposits, has removed restaking from its flagship token, weETH. The token now functions as a straightforward staking product that earns only regular Ethereum rewards.

Users seeking higher yields must now hold a separate token, weETHs.

Staking involves locking up ether to support the Ethereum network in return for rewards, while restaking uses the same assets again to secure additional services, offering extra yield.

However, this approach increases risk, as users can face penalties from either system if something goes wrong, effectively doubling potential downside.

For existing holders, the change offers a clearer distinction between simple staking exposure and the added risk-return profile of restaking. For new users, it simplifies the Ether.fi ecosystem and makes it easier to navigate.

Previously, all weETH holders were exposed to both staking and restaking risks, regardless of whether they wanted the additional rewards. Now, they can choose: hold weETH for basic staking, or opt for weETHs to access higher yields along with increased risk.

Ether.fi generates roughly $223 million in annualized fees and about $51 million in annualized revenue. In the second quarter alone, it reported $41 million in gross revenue and nearly $10 million in net earnings after rewards and expenses, while only about $30,000 was returned to ETHFI token holders through buybacks.

This shift comes amid a broader debate over Ethereum’s staking model.

A group of researchers, including one affiliated with the Ethereum Foundation, recently proposed halting staking rewards once 50% of all ether is locked. Under the current system, rewards never fully disappear, which they argue encourages excessive staking and concentrates control among large custodians.

Their proposal would gradually reduce rewards, eventually eliminating them entirely when total staked ether reaches around 60 million. Currently, about one-third of the supply is staked.

Ether.fi founder Mike Silagadze has criticized the idea, warning it could drive out smaller participants and undermine staking-based products, including those offered by his own platform.