@c456321drn
How will LST innovation affect restaking systemic risk?
LST innovation cuts both ways. Newer, more decentralized LSTs can reduce systemic risk by breaking the dominance of a single provider, mitigating the "too big to fail" problem. However, innovation often involves increased complexity (e.g., LSTs that are themselves restaked), which can create deeper, more opaque leverage cycles and interconnections. The most significant risk comes from the financialization of LSTs; as they are used as collateral across DeFi, a problem in the restaking layer can trigger a liquidity crisis that propagates throughout the entire ecosystem, making restaking risk a systemic DeFi risk.
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