ezETH functions as the Liquid Restaking Token (LRT) within the Renzo Protocol, symbolizing the user's restaked position. Participants can stake native ETH or liquid staking tokens (LSTs), like wBETH and stETH, and in return, acquire ezETH. ezETH is a reward-bearing token, implying that its value has the potential to surpass that of the underlying tokens due to its yield enhancement within Actively Validated Services (AVSs). ^[1][2]

Overview

ezETH functions as a reward-bearing token akin to cTokens. The rewards are generated from the underlying restaking positions and are reflected in the value of ezETH. These rewards are anticipated to be ETH, USDC, and Actively Validated Services (AVSs) reward tokens. Consequently, ezETH's value is expected to appreciate relative to the underlying Liquid Staking Tokens (LSTs) as it accumulates more rewards in AVS tokens. The process of unstaking typically requires a minimum of 7 days due to EigenLayer's unstaking requirements, although this duration may vary depending on each AVS. In the event of balanced deposits and withdrawals, the rewards are evenly distributed irrespective of the withdrawn asset. However, if the deposits and withdrawals are imbalanced, the principal amount will be withdrawn, while the rewards will vary for each asset, encouraging balance based on the jump rate model. ^[1]

ezETH Depeg

Renzo Protocol’s restaked Ether token (ezETH) experienced a price depeg on April 24th. The token's price briefly dropped to $688 on Uniswap before recovering to its parity with Ether (ETH), as indicated by Dexscreener data. The incident was likely triggered by a broader sell-off following the conclusion of Renzo Protocol’s season 1 airdrop. According to analysts, similar depegging has led to mass liquidations on leveraged protocols like Gearbox and Morpho Labs, with users who repeatedly used LRTs as collateral to borrow ETH for leverage suffering the most significant losses. ^[3][4][5]