Recently looking at LST and restaking stuff, I feel many people are rushing in without understanding where the returns come from. In short, the extra yield you get either comes from interest paid by others borrowing your ETH, or from the protocol using your assets for other arbitrage, leverage, or even further nesting, taking cuts along the way down to you.

Risks are also stacked. Smart contract risks aside, now there are also liquidity mismatches, slashing mechanisms that haven't been tested in real extreme market conditions, and... what if a region suddenly tightens regulations, causing panic redemptions? Can that "withdraw anytime" liquidity pool really hold up? I've seen too many things that are "theoretically" safe reveal their true nature during a run.

My current approach is to treat restaking like a bond portfolio, not staking on a single protocol, keeping some in pure LST to be able to exit anytime. Next time, I might look into whether those slashing insurance policies have actually paid out any claims — paper terms and real money are two different things.

Would you buy slashing insurance, or do you think it's just another layer of trust assumption?