Forward the Original Title ‘再质押（Restaking）赛道深度剖析：从再质押发展史到龙头项目EigenLayer’

Restaking is an emerging track that only appeared after the encryption industry has developed to the current specific stage. It is also one of the bull market engines in this cycle. Only by understanding it well can we seize the new opportunities contained in this new track.

What is Restaking? In a nutshell: Restaking is a complex product form after the deepening development of DeFi (decentralized finance). It is also a new type of financial derivative that emerged after the Ethereum consensus mechanism was converted to PoS.If you want to truly understand Restaking, you need to understand a lot of background information and basic concepts first. Therefore, this article will carefully walk you through the re-staking track as deeply and simply as possible by combining it with the development history of the industry. And conduct a detailed analysis of the leading project EigenLayer.

Content overview

01 Basic introduction: History of restaking development

1.1 Let’s start with staking

1.1.1 What is staking?

As the name suggests, restaking is staking again after staking. Therefore, before talking about restaking, we need to talk about what staking is. The concept of staking appears in the PoS consensus mechanism (Poof of Staking, Proof of Stake) of the blockchain. There are currently two mainstream consensus mechanisms: PoW (Proof of Work, proof of workload) and PoS (Poof of Staking, proof of equity). Bitcoin, the originator of the blockchain world, adopts the PoW consensus mechanism. To simply put it this way, Bitcoin is a global distributed ledger. In order to maintain the operation of this decentralized system, someone needs to do the calculation and accounting. No one is always willing to take care of public goods, so who would be willing to do it? The principle of Bitcoin design is: Whoever maintains the operation of this public system can obtain Bitcoin rewards. The total amount of Bitcoin is limited, but the issuance is gradually minted based on this rule. This process is called mining, and the people who mine are called miners. At this time, everyone has the motivation to mine. There are many miners, and everyone starts to compete for the accounting rights. So who can get the accounting rights and get Bitcoin? This requires calculating a “math problem” through computer equipment. Whoever calculates it first will get the accounting rights.What everyone is competing for at this time is computing power. Whoever has a higher proportion of computing power has a higher probability of obtaining accounting rights. Therefore, this process is called PoW (Proof of Work).The new king of the blockchain, Ethereum, also initially adopted the PoW consensus mechanism. However, PoW also has some problems, such as consuming a lot of electricity to calculate mathematical problems and not generating any valuable benefits for the real world. In addition, there have been some problems specifically used for mining. Mining equipment and mining companies with large-scale mining tend to be centralized. Therefore, the PoS consensus mechanism (Poof of Staking, Proof of Equity) later emerged, that is, those who want to obtain accounting rights stake their tokens to a place as a deposit, and whoever holds more tokens and holds them longer , the probability of whoever gets the accounting rights is higher, so that everyone doesn’t have to spend a lot of computing power to calculate useless math problems.The PoS mechanism actually corresponds to the operating mechanism of the real world: whoever owns a company’s stock has more say. Everyone becomes a “direct stakeholder” of the public goods of the blockchain by investing real money. In professional terms: staking allows users to pledge a certain amount of funds as a deposit and then become a node to maintain the security of the project and earn income. If the node does evil, the deposit will be forfeited. From a technical perspective, staking is to maintain the self-operation of the decentralized system.(1) PoW obtains accounting rights through the proportion of computing power; (2) PoS obtains accounting rights through the proportion of assets;From a financial perspective, staking can control the currency issuance of the economic system on the chain.(1) PoW rewards tokens directly to miners, and miners exchange on-chain assets for real-world assets to buy mining machines and continue to invest in mining, achieving the integration of the blockchain world and the real world; (2) PoS converts tokens Direct rewards are given to the pledgers, and the pledgers obtain income through the pledged assets. The pledged assets are transformed into “treasury bonds” with stable yields, and various financial ways of playing are derived.By comparing PoW and PoS, we can intuitively understand what staking is.

1.1.2 Stake plan

How to implement stake specifically? There are mainly 4 options on the market: (1) Independent staking: running a node and becoming a pledger requires 32 ETH. This is the most basic staking mode; (2) Staking as a service: running a node is troublesome and needs to be online all the time. , so the pledge-as-a-service emerged, which also requires 32 ETH, but there is no need to run the node, and the node operation is entrusted to a third-party operator; (3) Joint pledge: the threshold of 32 ETH is still very high, so the joint pledge appeared The pledge platform does not require 32 ETH. Each person can pledge any amount of ETH with others and entrust the node operation to a third party; (4) Centralized exchange: There are still certain thresholds for using joint pledge platforms. Users need to know how to use blockchain applications. At the same time, such applications may have contract risks, such as loopholes in smart contracts, hacker attacks, etc. Therefore, there is a need for centralized exchanges to help users pledge, and users will completely hand over their funds to the exchange. Therefore, the exchange performs pledge.We can see that the threshold of these four solutions is constantly getting easier to cross over, and the operations are becoming simpler, so that more users can be reached. Of course, the risks faced by user assets are also getting bigger. It is not under the control of the users themselves.

1.1.3 Liquidity Staking (LSD)

After users pledge their assets, the assets are locked on the chain. At this time, the capital utilization efficiency was very low, so Liquid Staking Derivatives (LSD) appeared, such as Lido. When you pledge 1 ETH, The platform will give you a pledge certificate at a ratio of 1:1, which is 1 stETH. This type of liquidity staking platform generally adopts a joint pledge model. Users can deposit any amount of ETH to help users perform node pledges. Users can obtain pledge certificates, allowing users to trade, lend, and provide liquidity in DeFi. operation, improving the efficiency of fund use. In fact, this can be similar to a bank deposit. When you deposit cash in a bank, the bank will give you a deposit certificate, and then you can continue to use this deposit certificate to do other things, such as transactions, mortgage loans, etc.

1.2 What is Restaking?

1.2.1 Why is it necessary to restake?

Let’s first look at the background of re-staking and the problems it solves. In addition to the PoS mechanism adopted by the blockchain, which requires users to pledge assets, many projects also require Staking to ensure project security, such as cross-chain bridges, oracles, data availability layers, zero-knowledge proofs, etc. Then, every time a new project is launched, the project requires users to lock in a certain amount of funds, and users only have so much liquidity, which creates competition between different projects.Various projects have to compete for limited liquidity in the market for project security. As the pledge yields given by different projects become higher and higher, the risks borne by the projects themselves are also getting higher, turning into a vicious cycle.On the other hand, users can only pledge limited funds into limited projects to obtain limited returns, and the utilization rate of funds is low. As there are more and more public chains, applications, and various projects, liquidity is becoming more and more fragmented. Therefore, there is a demand for “shared security” in the market. There is a need for a platform that can provide security for multiple projects with users’ pledged assets. This is the background of the emergence of restaking. Analogous to the real world, some weak countries will introduce the military power of powerful countries, without spending more money to build their own exclusive military power.At present, the most secure PoS mechanism public chain is Ethereum. A large amount of funds are pledged on Ethereum and it has extremely strong security. Therefore, it is very worthwhile to share the security of Ethereum with other projects. On the other hand, restakeing can expand more application scenarios for pledging certificates such as stETH, and realizing the “financial Lego ‘’ of the Ethereum ecosystem through the composability of various protocols.

1.2.2 Definition of restaking

Based on the background of restaking and the problems it solves, we can give a definition of restaking:The essence of restaking is to establish a shared pledge pool to achieve shared security.This shared fund pool can pledge a share of funds for multiple projects at the same time to ensure security, thereby achieving the effect of killing two birds with one stone and changing the relationship between funds and projects from 1:1 to 1:N. On the one hand, users can obtain excess returns, and it reduces the pressure on projects to compete for pledged funds. Another way to understand it is: Restaking is merged mining in the POS field.In the PoW mechanism, miners can benefit more by mining the main chain and auxiliary chain using the same Hash algorithm, but merged mining only increases a certain amount of income but does not inherit security; but in the PoS mechanism, because PoS has a penalty mechanism, that is, the pledged funds of the perpetrator node will be forfeited, so in Restaking, the evil behavior in the auxiliary chain will be transmitted back to the main chain for the forfeiture of the pledged funds. At this point, the security of the main chain can be inherited.

1.2.3 Revenue

(1) Opportunities in new tracks. First of all, re-staking is a blue ocean market, everything has just emerged, and it is a big cake. Currently, there are nearly 30 million ETH pledged on Ethereum, amounting to nearly 65 billion U.S. dollars. It is conservatively assumed that only 10% of the pledged Ethereum is used for restaking, which can provide $6.5 billion in crypto-economic security for middleware projects. (2) Ethereum’s moat, ETH, may evolve into the underlying asset for network effects in all fields. The Ethereum re-pledge protocol is a partial incarnation of Ethereum’s security services. It can not only provide security services for Ethereum ecological projects, but for the Cosmos ecosystem, other high-performance L1 public chain (EVM compatible) ecosystems, and even Bitcoin L2 projects ( EVM compatible) provides security services. Although the probability of being adopted by other ecological projects in the early stage is not necessarily high, if it really takes such a path, then Ethereum will gradually evolve into an underlying asset with a full-field network effect and provide security services for the entire field.This will be an extremely deep moat for Ethereum. (3) User income superposition. For users, pledging ETH will get LST (Liquid Staking Token), such as stETH obtained through liquid staking protocols such as Lido; pledging LST for the second time will get LRT (Liquid Restaking Token), and users will use stETH as this LST-like assets are entrusted to the liquidity restaking protocol. The protocol deposits LST into EigenLayer for users and then pledges it to obtain mortgage certificate tokens, that is, LRT assets. LRT can perform financial operations such as transactions, loans, etc. Every additional pledge is an additional opportunity to use liquidity to earn profits.

1.2.4 Risks

(1) Matryoshka risk In the bull market rising cycle, the risk will be hedged; but in the bear market, the risk will be amplified in the down cycle.With multiple pledges, the returns will be superimposed, and the risks will also be superimposed.This is what Ethereum founder Vitalik calls “consensus overload”: after sharing security, inferior projects are at risk, ultimately bringing unpredictable risks to Ethereum. The future of Ethereum is to become an underlying chain, so it cannot be too complex and needs to be kept simple. This type of restaking technology may cause serial explosions and affect the security of Ethereum. (2) Forfeiture risk: There is a 50% penalty risk in the Ethereum staking mechanism, and the restaking agreement also has a 50% penalty risk for nodes. Therefore, user funds will still encounter the risk of confiscation of funds, but the risk will be shared evenly. (3) Sustainability risk Projects that do not have the ability to serve as verifiers may have relatively high project risks. This is just like loans in the traditional financial world. If a project is unable to borrow from a bank, it means that such projects generally have poor qualifications and higher risks, and can only borrow high-interest loans from other channels. Although the interest rates offered by the project are high, the risks are also very high.New products on the restaking track rely on airdrops to attract pledge funds in the early stage, and project risks need to be managed and controlled in the later stage.The most important thing is that the products of the re-hypothecation track can generate positive cash flow, so as to prove that its model is sustainable.

02 Project Analysis: EigenLayer

2.1 Project positioning

EigenLayer is a protocol built on Ethereum, which introduces the concept of restaking to the Ethereum ecosystem. Users can restake the pledged ETH or LST to extend the security of Ethereum to other applications in the Ethereum ecosystem. The concept of “shared security” is not the first one created by EigenLayer. Polkadot’s slot solution, Cosmos’ inter-chain secure sharing, and Avalanche’s subnet are all old players in secure sharing. And EigenLayer introduces shared security into the Ethereum ecosystem for the first time. In a word, EigenLayer is a large-scale deposit order-taking platform. EigenLayer provides an open market mechanism that allows service buyers to freely choose the services they need based on their own risk preferences. EigenLayer, as a service intermediary, will benefit from the redistribution of LSD to middleware and infrastructure. In addition to the Restaking business, EigenLayer also has a product called EigenDA, which is built on EigenLayer. EigenDA is the first AVS on EigenLayer. It can be understood as a self-operated AVS that provides cost-effective and ultra-large-scale throughput data availability for Rollup through the shared encryption economic security provided by EigenLayer restaking. EigenLayer is currently the leading project in the restaking track. In February 2024, a16z, the leading investment institution in the encryption industry, invested another US$100 million, with a valuation that may reach tens of billions of US dollars.

2.2 Service model

If you want to understand EigenLayer’s services, you need to first understand a special concept: Actively Validated Service (AVS). AVS is a blockchain application that leverages the security and decentralized environment of Ethereum to build various services and applications, such as second-layer networks, data layers, DApps, and cross-chain bridges.Before the emergence of EigenLayer, AVS had to establish its own consensus mechanism and faced huge security and financial challenges; with EigenLayer, AVS can now take advantage of Ethereum’s verification mechanism to simplify its startup process and reduce costs.Therefore, EigenLayer not only simplifies the setup of AVS, but also enhances its security, providing great assistance for blockchain application development.

We can use a specific amount as an example: on the left side of the figure below, if each DApps (decentralized application) builds its own security service, assuming that the pledge amount of each AVS is 1 billion (one billion U.S. dollars),the cost of DApps for a malicious attaacker to destroy will be the total amount pledged in AVS1, which is 1B. On the right side of the figure below, due to the addition of EigenLayer, each AVS does not need to build its own security service and directly shares the security of Ethereum. The amount of money a malicious attacker wants to destroy a single DApps will become 13 billion US dollars, which means that EigenLayer greatly increases the cost of damage and improves safety.

2.3 Restaking mode

There are 4 restaking modes supported by EigenLayer:

(1) Native restaking: In native restaking, the verifier can pledge the ETH that has been pledged in Ethereum to EigenLayer again. At this time, an ETH serves as collateral for both Ethereum and EigenLayer; this process is L1 → EigenLayer.

(2) LST restaking: LST restaking, users deposit the LST (pledge certificate, such as stETH) obtained after depositing themselves into the LSD (liquidity staking) protocol into EigenLayer and then pledge; this process is DeFi → EigenLayer.

(3) ETH LP restaking: Re-pledge of ETH financial derivatives. This type is derived from the first type. Since the ETH pledged in Ethereum can be re-pledged, then as long as the financial assets containing ETH can also be re-pledged, For example, users provide liquidity in decentralized exchanges and obtain deposit certificates (LP tokens) containing ETH; this process is DeFi →EigenLayer.

(4) LST LP restaking: LST LP restaking, this type is derived from the second type. Since LST (pledge certificate, such as stETH) can be restakeed, then as long as the financial assets containing LST can also be restakeed, such as Deposit certificates (LP tokens) containing LST assets obtained by users providing liquidity in decentralized exchanges; this process is L1 → DeFi → EigenLayer.

It can be seen from these four staking modes that EigenLayer supports and is compatible with ETH assets and a series of assets derived from ETH. These are regarded as valuable assets and can be used for restaking.

It is precisely because of the openness of EigenLayer that it leaves room for the matryoshka dolls of various financial protocols to be used, and more new assets are derived.

2.4 System architecture

EigenLayer can be divided into 4 layers as a whole, from bottom to top: (1) Ethereum main network: EigenLayer is built on the Ethereum main network, so the lowest foundation is the Ethereum main network. (2) Middle layer The middle layer is AVS operators (Operators), that is, node operators. They play the role of middlemen in the entire protocol. They are the bridge between Staker and AVS. They help Staker manage funds and at the same time help AVS perform specific tasks. . (3) Role layer pledgers: people who provide funds for AVS to earn income and re-mortgage native ETH or LST ETH to the EigenLayer protocol; AVS consumers: various projects that need to use pledge services to ensure security; AVS Developers: Build their own security services on EigenLayer; (4) Governance layer: EigenLayer’s governance layer; in general, Staker invests in capital costs, Operators invest in resource costs (resources required to run nodes), and AVS uses The first two services require financial costs.

2.5 Business model

EigenLayer is a two-sided platform, one side attracts funds from C-end users, and the other side sells security to B-end customers. EigenLayer’s business model is similar to the SaaS model. It does not provide services directly to end users, but to the pledge security trading market based on Ethereum. B-side projects can come to EigenLayer to purchase security services.The entire business chain can be summarized as: B2C2B2B2C.The first layer is B2C: EigenLayer first manages assets for users, allowing users to earn income beyond ETH PoS incentives while taking on more risks; the second layer is 2B: EigenLayer obtains the liquidity provided by users , first facing the small B of the node operator, letting the node operator act as an intermediary to maintain network security and provide external services; the third layer is 2B: the node operator provides verification services to the AVS application, and integrates the security mechanism of EigenLayer’s liquidity guarantee Provided to AVS; the fourth layer is 2C: after AVS has secured security, it then provides services to its own C-side. During this service process, EigenLayer mainly collects security service fee commissions from AVS service users, of which 90% is given to LSD depositors and 5% is given to node operators. EigenLayer commission rate is 5%.

2.6 Security mechanism

After risks arise, how does EigenLayer ensure safety? There are currently three main mechanisms: (1) The penalty mechanism. EigenLayer mainly uses the penalty mechanism to increase the cost of participants doing evil and reduce risks. If a staker in EigenLayer is proven to have committed evil acts while participating in the AVS service, the staker’s funds will be confiscated. The focus of risk management and control is that AVS needs to define objective, on-chain, and attributable penalty rules to avoid disagreements. (2) Economic Game. The so-called economic game means that if the benefits are less than the cost of doing evil, it can be controlled. For example, if an AVS has 8 million U.S. dollars as a pledge guarantee and 2 million U.S. dollars are locked, then it will take more than 50% of the cost, or 4 million U.S. dollars, to get 2 million U.S. dollars in revenue. (3) Emergency braking is carried out by restricting the flow of funds and other methods. This approach is difficult to implement: if an objective factual loss does occur, Ethereum cannot be expected to compensate the affected parties through a hard fork.

2.7 Ecological projects

The most important sub-track derived around the meta-protocol of EigenLayer is Liquid Restaking DeFi (LRD). Users entrust LSD (pledge certificate) assets such as stETH to the liquidity re-pledge agreement. The agreement deposits LSD into EigenLayer for the user and then pledges it, and obtains the restaking certificate token, that is, LRT (Liquid Restaking Token) asset. In order to control risks, EigenLayer has a short restaking window period for users. That is to say, most of the time, users cannot directly deposit into EigenLayer. Therefore, the Liquid Native Restaking Agreement has emerged, and users can deposit at any time, any amount, and obtain restaking certificates to obtain liquidity, so it attracts a large number of users and funds. There are currently 4 main products: (1) Ether.Fi. Ether.Fi ranks first in terms of lock-up amount and has several significant advantages: First, convert ETH into eETH and deposit it into EigenLayer immediately without waiting. The deposit window period of EigenLayer; second, it provides an exit mechanism for Unstake, that is, eETH can be un-pledged into ETH; third, by cooperating with the Pendle protocol, eETH can be re-deposited into Pendle for liquidity mining, which can significantly provide income; fourth, the first liquidity restaking project for currency issuance, which has benchmark value; (2) Renzo: quickly deploys multiple chains, supporting the cross-over of ezETH to emerging public chains such as Blast and Mode, and can not only obtain re-pledge At the same time, you can interact with multiple new public chains to obtain airdrops, so you can benefit more; (3) Puffer Finance: It has received investment from Binance and has a luxurious financing background. Its restaking function lowers the threshold for node operators to less than 1 ETH. , trying to attract small nodes to join; (4) KelpDAO: KelpDAO is a Restaking ecological project under Stader Lab. Stader Lab has been operating for many years and has a good reputation, so security is guaranteed.

In addition to the liquidity re-pledge track derived from re-pledge, there are currently various AVS and Operator projects built on the EigenLayer protocol, such as the self-operated EigenDA and the modular track AltLayer. These projects verify the feasibility and sustainability of EigenLayer and are therefore also worthy of attention.

03 Summary

In addition to the liquidity restaking track derived from restaking, there are currently various AVS and Operator projects built on the EigenLayer protocol, such as the self-operated EigenDA and the modular track AltLayer. These projects verify the feasibility and sustainability of EigenLayer and are therefore also worthy of attention.

03 Summary

The above article provides an in-depth analysis of the restaking track through two parts: the first part is the development history of restaking, starting from staking, describing in detail the background of restaking, the problems solved and the value of it; the second part is an analysis of the EigenLayer project, which has been studied from various dimensions such as project positioning, service model, system organization, business model, security mechanism, and ecological projects. After understanding this new track of restaking, how can we ordinary individuals participate? First of all, focus on participating in the EigenLayer project. On the one hand, you can win the airdrops issued by EigenLayer to obtain new users and new funds. On the other hand, the deposited funds can also get a higher rate of return. Secondly, you must also participate in various EigenLayer derivative projects, especially the LRD (Liquidity Re-pledge Protocol) sub-track. Leading projects will also issue tokens, and airdrops are expected. If the EigenLayer airdrop is the main dish, various derivative projects are snacks, and you can also enjoy it. Restaking is like a matryoshka doll. ETH, the native underlying asset, is repeatedly pledged, and many new assets are created in the process.

Disclaimer：

1. This article is reprinted from [ 岳小鱼]. Forward the Original Title‘再质押（Restaking）赛道深度剖析：从再质押发展史到龙头项目EigenLayer’.All copyrights belong to the original author [岳小鱼]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
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