Ethereum Staking Token weETH Splits from Restaking as Rewards Debate Heats Up

Ether.fi has removed restaking exposure from its flagship token weETH, converting it into a plain Ethereum staking token and shifting restaking functionality to a newly introduced token, weETHs. The change allows users to choose between standard staking rewards through weETH or higher-yield but higher-risk restaking exposure through weETHs.

The restructuring arrives amid an intensifying debate over Ethereum's staking economics. A group of Ethereum researchers, including one from the Ethereum Foundation, proposed this week that the network cease paying staking rewards once half of all ether is locked up. Ether.fi founder Mike Silagadze has been among the proposal's critics, arguing it would disproportionately harm smaller stakers and undermine staking-based products.

Liquid staking has grown into one of the largest sectors in decentralized finance, with providers such as Lido, Ether.fi, and Rocket Pool collectively holding tens of billions of dollars in deposited ether. Tokens like weETH are widely used as collateral across lending and trading protocols, meaning changes to their risk profile ripple beyond direct depositors to the broader DeFi ecosystem.

Ether.fi Separates Staking from Restaking

Ether.fi, which holds approximately $3.55 billion in customer deposits and ranks among the largest staking businesses in crypto, has stripped restaking out of weETH, its primary product. The token now functions as a plain vehicle earning ordinary Ethereum staking rewards. Users seeking the additional yield associated with restaking must now hold the separate weETHs token.

Staking involves locking up ether to help secure the Ethereum network in exchange for compensation. Restaking deploys that same ether a second time to secure additional services — a concept popularized by EigenLayer, which attracted tens of billions in deposits after launching its restaking protocol. The tradeoff is elevated risk: restaking doubles the avenues through which a holder can be penalized, as a failure on either system can result in a partial loss of deposit.

Until this week, anyone holding weETH was exposed to both risk profiles regardless of whether they sought the extra rewards. Under the new structure, users can hold weETH for plain staking exposure or weETHs to capture restaking rewards along with the associated additional risk. The move also positions Ether.fi to appeal to more risk-averse institutional users who may want staking exposure without the added slashing risk of restaking, while keeping a dedicated product for yield-seeking depositors.

Ether.fi explained the rationale in a post on X:

For current holders: You now have a clearer choice between basic staking exposure and additional restaking exposure depending on your goals

For new users: This simply makes the EtherFi stack easier to understand

— ether.fi (@ether_fi), August 6, 2026

https://x.com/ether_fi/status/2085410805042880647

Financial Performance

Ether.fi has captured roughly $223 million in annualized fees and approximately $51 million in annualized revenue. In the second quarter, the platform earned $41 million in gross revenue and nearly $10 million in earnings after rewards and other costs. Of that amount, only $30,000 in value was distributed to ETHFI token holders through buybacks.

Ethereum Staking Rewards Proposal Draws Criticism

The token split comes as Ethereum's staking economics face growing scrutiny. A group of Ethereum researchers, including one affiliated with the Ethereum Foundation, proposed this week that the network stop paying rewards for staking once half of all ether is locked up.

Under the current design, staking payments never fall to zero regardless of how much ether is staked, creating a perpetual incentive to stake more. The researchers argue this dynamic concentrates ether holdings with a small number of large custodians.

Their proposed fix would destroy a growing share of rewards until payments disappear entirely at approximately 60 million ether staked. Currently, about one-third of ether's total supply — roughly 40 million ether — is staked, meaning the threshold remains roughly 20 million ether away. Whether staking participation continues climbing toward that level, and how major liquid staking providers respond, will shape the competitive landscape for protocols like Ether.fi that depend on staking rewards as a core revenue driver.

Ether.fi founder Mike Silagadze was among the proposal's critics, arguing it would push out smaller stakers and weaken products built on staking rewards — his own included.