Renzo (REZ): Analysis of the restaking project supported by Binance
How it works, strengths, weaknesses, opportunities, the role of the REZ token... Independent study of the Renzo project by our team of analysts.
What you need to know 🐳
Renzo is the second project in the restaking sector to launch its token, on 30 April, after EtherFi.
This niche is one of the major trends of recent months and promises new returns and airdrops for users of Renzo and its competitors.
Restaking brings its share of additional risks that absolutely must be identified before any investment is considered.
Renzo is currently suffering in comparison with EtherFi, but Binance's backing is a strong argument in its favour.
Overview 🧬
Launched in December 2023, Renzo is a liquid restaking protocol built on Ethereum.
As a reminder, staking involves immobilising cryptocurrencies to secure a blockchain in exchange for rewards. In the case of Ethereum, ethers (ETH) are blocked and this currently yields between 3% and 4% a year.
Restaking, on the other hand, involves blocking ETH in order to secure other decentralised services in addition to the Ethereum blockchain.
This translates into additional returns (and risks) on top of those from staking. This innovation emerged in 2022 with the EigenLayer project, which is the main restaking protocol (read our analysis).
Renzo brings a simple feature: it allows you to keep your ETH liquid whereas they are normally locked in EigenLayer. When you immobilise your ETH, you receive an equivalent quantity of ezETH, which represents a synthetic version of your stake.
Another advantage: there is no minimum quantity, whereas you need 32 ETH to use EigenLayer directly.
EzETHs can be used in many other decentralised finance protocols (DeFi) and traded at the same price as ETH.
If you're familiar with Lido (read our analysis), it works very similarly.
Financing 💰
Renzo's financing could be more transparent, insofar as the amount raised in the last round in February 2024 has not been disclosed.
This one was strategic though, as Binance Labs, the venture capital arm of Binance, was the only participant.
Binance's weight in this project is unknown, but it could be significant because of the restaking's potential.
Previously, Renzo had announced in January 2024 that it had raised $3.2 million from funds such as Maven 11, OKX Ventures and Robot Ventures. This deal had valued the project at $25 million.
Team and community 👾
American Lucas Kozinski (born in Poland) is the main personality behind the Renzo project.
He describes himself as a "founding contributor" and has a background in financial management at traditional firms such as Lockheed Martin (aerospace) and CACI International (IT security consultancy).
His experience in crypto is summed up by stints at the Tezos Foundation (21 months), tokenisation platform Tokensoft (26 months) and Lunar Labs (19 months), a company that created the Moonwell lending platform (present on Polkadot, Kusama and Base).
The other two co-founders are James Pool and Kratik Lodha. The former is the former CTO of Tokensoft, while the latter worked for Woodstock Fund, which invested in Moonwell.
Lucas Kozinski has stated on several occasions that Renzo operates without a CEO with "decentralised governance" spread around the world (mainly the US, India, Hungary and Australia). Around 15 people work in the development team.
The project has 102,600 followers on Twitter and more than 50,000 members on Discord.
How it works ⚙️
Renzo works in parallel with EigenLayer and wouldn't exist without it.
When you deposit ETH on Renzo, the protocol automatically restakes them on EigenLayer. In exchange, you get as many ezETH as ETH deposited. This amount of ezETH increases regularly to pass on the rewards from restaking.
EigenLayer launched its mainnet at the beginning of April, but there are no restaking rewards yet. The only yield we currently receive comes from restaking on Ethereum and this is lower than the competition (currently less than 1% annual compared with more than 3% for its competitor EtherFi).
This indicates that Renzo is taking a large portion of the revenue for itself, rather than passing it on to its users.
However, it is still worth using Renzo as it collects EigenLayer "points". These points are used as a reference during the various airdrops of the EigenLayer governance token (announced this week), which is one of the most eagerly awaited in recent months.
Like its cousin Lido, Renzo does not stake ETHs itself. He relies on selected professional validators. For the moment, the partner validators are: P2P, Luganodes, Figment, Pier Two and HashKey Cloud.
Risks and limitations 😨
Like any decentralised application, Renzo is susceptible to hacking. Nevertheless, the project underwent an audit in November 2023 (Halborn). A new audit, again carried out by Halborn, will be completed in May.
We raise a point of vigilance here as it is necessary to present audits carried out by different firms to offer maximum security.
Another risk comes from restaking itself. As the rewards obtained via EigenLayer depend on the operators to whom we delegate our ETH, they represent a counterparty risk.
The more services an operator secures, the higher the return it will offer; however, this also increases its risk. Renzo must therefore choose carefully the operators to whom he wishes to delegate users' ETH.
This choice is currently reserved for Renzo's team, but holders of his governance token, REZ, will be able to vote in a while.
The choice of validators will be very important as we risk seeing a dangerous race for returns. Some liquid restaking protocols will choose to offer the highest yields to attract the most users. Except that these higher returns will also come with a higher risk.
Withdrawals in question 🤔
For users who have placed ETH in Renzo, it is currently impossible to get them back in exchange for their ezETH.
The only way to exchange ezETH for ETH is via a decentralised exchange platform like Uniswap.
This strategic choice (which is explained by a desire to maintain the value tied up in Renzo) resulted in the price of ezETH against ETH being de-indexed on 23 April because the liquidity pools were not sufficient to absorb any selling movements.
As long as Renzo does not allow withdrawals, there will be a risk to the value of ezETH. The team says this will be possible "from May onwards", with no further details.
The REZ token 🪙
The REZ token was distributed on 30 April to its first users in the form of an airdrop. Its price was around $0.16 a few hours after its launch ($187 million in liquid capitalisation, $1.6 billion in capitalisation including all tokens).
Holders will soon be able to participate in the protocol's governance. However, this is not yet completely decentralised. For example, REZ holders cannot yet choose the EigenLayer operators on which Renzo relies.
10 billion REZ tokens have been issued (1.1 billion are liquid at the moment).
12% are intended to be distributed in the form of an airdrop. The first airdrop distributed 7% of REZ tokens. The second airdrop will distribute the remaining 5%. The date of this second operation is scheduled for around 30 July.
20% of the tokens are allocated to the project team and 31.56% to private investors. They cannot be sold until 30 April 2025.
10% of their tokens can then be sold and the remainder will be progressively unlocked over one year (for investors) and two years (for the team).
The fact that more than 50% of the tokens will be reserved for the team and investors will therefore create significant selling pressure within 12 months.
The project was the subject of major controversy on 24 April, when details of the token distribution were published. The chart downplayed the share reserved for the team and investors.
This error (corrected and accompanied by an increase in the number of tokens reserved for the first airdrop) highlighted this less than advantageous distribution.
This is not necessarily worse than the competition, as EtherFi's team and backers reserved almost 56% of ETHFI tokens for themselves.
Competition ⚔️
Renzo currently has the second highest total locked value (TVL) among liquid restaking protocols at $3.3 billion. The market leader is EtherFi with $3.9 billion (the latter launched its ETHFI token in mid-March, you can read its analysis here).
The latter has the advantage of offering withdrawals of its eETHs (the equivalent of ezETHs on EtherFi) which offers more security on indexing the price of its synthetic token with ETH.
In third place, Puffer Finance has $1.4bn of TVL.
Kelp DAO has $830m of TVL. The protocol has introduced the KEP token, which is the representation of EigenLayer points, making it possible to exchange these points, which are normally non-transferable.
Regulation ⚖️
Renzo, operating in the staking sector, could attract the interest of the US regulator, which has been examining this activity since mid-2023. Are staking and its rewards akin to financial securities? This question has yet to be decided in the United States.
Staking is not regulated in Europe either. This should be settled in the next version of the MiCA regulation, as announced by ECB President Christine Lagarde, in mid-2022. Most specialists believe that European regulators have a more open attitude than the United States.
The Renzo system is based on the pooling of ETH from users all over the world regardless of nationality. Potentially, the assets of US investors can be mixed with those belonging to Iranians or North Koreans.
The SEC considers that a token that allows income to be received for no consideration is akin to a financial security and should therefore be regulated as such, as it resembles dividends.
Roadmap 📝
Renzo's priority is to integrate ezETH as much as possible into decentralised finance applications so that it becomes a reference asset against which other assets can be borrowed. To date, the biggest markets are on Pendle and Thruster. This will soon be the case on Aave following a vote by its governance.
Renzo's team is also working hard to make it available on as many Ethereum layers 2 as possible. To date, ezETH works on Ethereum, Arbitrum, BNB Chain, Base, Mode and Linea.
Renzo is involved in securing (via EigenLayer) nine projects and they should soon be joined by others: EigenDA, eoracle, AltLayer, Brevis coChain AVS, Lagrange, Witness Chain, Omni Network, Automata Multi-Prover, Xterio Mach.
Renzo users will therefore be likely to receive airdrops from these in the near future.
Where can you buy the REZ token? 🛒
The REZ token is not available on a large number of exchange platforms, but you can find it on at least one regulated platform in Europe: Binance.
This is because Binance funded the Renzo project.
It is also possible to acquire it on the decentralised exchange Uniswap.
The Big Whale's view 🐳
Renzo is one of the most important projects in the restaking ecosystem and it looks like one of the most relevant investments to gain exposure to.
The presence of Binance Labs among its investors is an additional token of confidence.
However, Renzo suffers from the comparison with its competitor EtherFi due to the impossibility of being able to "exchange" its ezETHs for ETHs. As long as this option has not been activated, there is a risk of "depeg" of the value of the ezETH.
In addition, the return on staking is surprisingly low compared with the competition (currently 1% annual compared with more than 3% on EtherFi). This indicates that Renzo is taking a large portion of the revenue for itself at the expense of its users.
The botched presentation of its token distribution has left some marks in the community, highlighting the large amount of tokens reserved for the team and investors (more than 50%). This distribution puts selling pressure on the REZ token once it becomes liquid for them (from 30 April 2025).
The REZ token does not plan to offer anything other than governance, unlike EtherFi's ETHFI, which should enable a share of the revenue generated by the protocol (this is not yet active).
Our other analyses 🔍
Avant d’investir dans un produit, l’investisseur doit comprendre entièrement les risques et consulter ses propres conseillers juridiques, fiscaux, financiers et comptables.
