Ethereum’s weETH Decouples from Restaking in Rising Rewards Controversy

Ether.fi’s latest move highlights the difference between regular Ethereum staking and the added risks of restaking, as a proposed change to validator rewards creates disagreement across the staking ecosystem.

The staking platform, which manages around $3.55 billion in deposits, has removed restaking functionality from its main token, weETH. The token will now represent a standard Ethereum staking position, allowing holders to earn only base staking rewards.

Users seeking additional yield from restaking will need to switch to a separate asset called weETHs.

Ethereum staking involves locking ether to support network security and earn rewards, while restaking allows the same assets to be used to secure other blockchain services in exchange for extra returns.

Although restaking can boost yields, it also introduces additional risks. Users may be exposed to penalties from both Ethereum staking and external protocols, increasing the chance of losing some of their deposited assets.

The update gives current users a more transparent choice between safer staking exposure and higher-risk restaking opportunities. It also makes Ether.fi’s products easier for new users to understand.

Previously, weETH automatically combined staking and restaking exposure. After the change, weETH will focus solely on Ethereum staking, while weETHs will provide access to enhanced returns with the trade-off of greater risk.

Ether.fi earns roughly $223 million in annualized fees and about $51 million in annualized revenue. In Q2, the company reported $41 million in gross revenue and nearly $10 million in net income after accounting for rewards and costs. Despite this performance, ETHFI holders received only around $30,000 through token buybacks.

The change arrives as Ethereum’s staking system faces growing debate.

A group of researchers, including an Ethereum Foundation member, has proposed ending staking rewards once 50% of ether supply is staked. They argue that the current model, where rewards continue indefinitely, encourages excessive staking participation and may increase reliance on large custodians.

The proposal would gradually lower staking rewards until they reach zero at approximately 60 million ether staked. Currently, about one-third of all ether is locked in staking.

Ether.fi founder Mike Silagadze has criticized the proposal, warning that it could hurt smaller validators and create challenges for staking-focused services, including Ether.fi itself.