Recently, someone asked me again where the "extra profits" from LST / re-staking come from. To put it simply, there are three parts: first, the basic returns from underlying staking; second, people pay for your liquidity/security (various incentives, fees); third, the protocol itself distributes tokens to attract TVL. The third one is the sweetest but also the most misleading—once the rewards stop, the gains shrink.

Don't just focus on price fluctuations when considering risks: re-staking essentially means "selling the same security multiple times." If a platform encounters a malfunction or gets penalized and confiscated, it might not just lose some profits but could lose the principal. Plus, with recent cross-chain bridge hacks, if the asset wrapping layer is compromised, even on-chain security can't save you. There are also oracle anomalies where everyone waits for confirmation, which is basically betting that the system won't malfunction during liquidation or redemption... Right now, I ask myself about yields: who is paying, and who bears the loss if something goes wrong? Anyway, it's best to think through the worst-case scenario before getting in.