Recently, I was asked again where the returns from LST/re-staking come from.

To put it simply, those LST yields are based on staking rewards plus possible MEV/block rewards,
plus an additional layer of "bill discount/premium" fluctuations;
re-staking more is like taking the same security and using it to engage in multiple activities,
the returns are what others pay you in service fees/incentives, but the risks also stack up:
contract/intermediary layer runs the risk of runs, more complex penalty conditions (some are beyond your control),
and when liquidity tightens, discounts may widen.
I also see everyone linking ETF capital flows, US stock risk appetite, and crypto market rises and falls all together…
I always react a bit late, and by the time I do, the on-chain sentiment trading has already played out.
Anyway, what I care more about now is:
whether these yields are sustained by new incentives,
whether the exit depth is sufficient, and
if the packing order/nonce gets stuck, whether scripts can let me exit gradually.