Is the Re-Staking Newcomer Karak Vampire Attack On Eigenlayer?

With swift action and a remarkable debut, Karak has gone from announcing a $1 billion valuation financing to launching an early access staking plan, and now, supporting various assets, all in just around two months.

Karak, considered a rising star in the Restaking arena, is making waves. What exactly is Karak, and how significant of an impact can it make in the restaking field? How can one participate early in the project to increase the chances of receiving airdrops? In this research report, Biteye will delve deeper into Karak Network.

01 The Karak, valued at $1 billion, emerged out of nowhere.

Karak Network is a restaking network, similar to projects like Eigenlayer, that uses a point system to incentivize users to restake and earn multiple rewards. In December 2023, Karak announced a $48 million Series A funding round, led by Lightspeed Venture Partners, with participation from Mubadala Capital, Coinbase, and other institutions. Mubadala Capital, the second-largest fund in Abu Dhabi, participated in this round, valuing Karak at over $1 billion.

(Picture: Details of Karak’s Series A financing)

In February 2024, Karak announced the launch of its early access program, allowing users to restake on Karak to earn XP points. In addition to rewards from partner projects, users can also earn Karak XP. XP is distributed through the protocol and may eventually be airdropped by converting points into tokens.

On April 8, 2024, private access began, and as of April 12, the total value locked (TVL) across different chains supported by Karak reached $140 million. Karak Network accounted for the highest proportion at 48.5%, followed by Ethereum at 45.7%, and Arbitrum at 5.8%.

(Picture: TVL on different Karak chains, https://defillama.com/protocol/karak#tvl-charts)

The emergence of Karak has attracted considerable market attention. Although its total value locked (TVL) is still far below that of EigenLayer, it has distinct technical highlights that could potentially challenge EigenLayer’s dominant position in the restaking field.

02 Karak’s Technical Path

2.1 Karak Network: A Restaking Layer with Multi-Chain Support Advantage

Unlike EigenLayer, which focuses solely on Ethereum, Karak serves as a restaking platform that offers a diverse range of assets, including ETH, Solana, and various Layer 2 tokens. This multi-chain support enables Karak to provide secure solutions across multiple blockchain ecosystems, resulting in greater diversity and inclusivity. Currently, Karak supports networks such as Ethereum mainnet, Karak, and Arbitrum.

Here’s a simplified breakdown of how Karak operates:

For validators, staked assets are allocated to Distributed Security Service Validators (DSS) on the Karak network, granting them additional execution rights over their staked assets.

For developers, Karak provides a platform to attract validators through simple, non-dilutive incentives. This significantly reduces costs compared to building a new trust network from scratch.

Karak acts as a bridge between developers and validators, allowing developers to incentivize validators by offering non-dilutive tokens.

Karak eliminates the need for new protocols to use highly diluted rewards to attract and incentivize validators, thereby avoiding the large token issuance required in the early stages to ensure network security. This setup reduces costs and complexity while preventing token value dilution and protecting the interests of long-term holders.

(Image source: https://docs.karak.network/karak)

Karak’s technical path has three highlights:

1. Multiasset Restaking: Karak introduces the functionality of multiasset restaking, which serves as a novel security mechanism. Under this mechanism, users can restake various assets such as Ethereum, liquidity pool tokens, stablecoins, and more to earn rewards. This multiasset restaking not only increases users’ potential earnings but also significantly enhances the security of various dApps, protocols, and DSS.

2. Restake Anywhere: Karak internalizes the concept of restaking anywhere, making secure restaking infrastructure accessible to anyone on any chain. This convenience allows developers to focus more on innovation and product development without having to spend significant time and resources on initial security measures.

3. Turnkey Development Environment: Karak enables new systems to plug into a robust and secure trust network from the outset, significantly lowering the barriers faced by new protocols in ensuring their security. This allows these protocols to operate without complex security setups.

(Image source: https://docs.karak.network/karak)

In summary, Karak’s innovation not only provides users with opportunities for restaking various assets but also greatly simplifies the security assurance process for new protocols. These features collectively enhance Karak’s competitiveness and attractiveness in the same field.

2.2 Comparison between Karak and EigenLayer

Karak and EigenLayer are both restaking protocols, meaning they allow staked assets like ETH to be restaked by validators across multiple networks, while enabling validators to earn additional rewards. At first glance, Karak may seem like a “clone” of EigenLayer, but comparing the technical paths of the two reveals some differences.

So why is it said that Karak is not a “clone” of EigenLayer, and what are the differences?

Reason One: The dApp on EigenLayer is called Actively Validated Services (AVS), while the dApp on Karak is called Distributed Security Services (DSS). A detailed explanation will be provided in the next section.

Reason Two: The execution layer of EigenLayer is on the Ethereum mainnet, but Karak has its own Layer2 (called K2) for sandbox testing, allowing DSS to be developed and tested before deployment on Layer1.

Now let’s discuss the first question: What are AVS and DSS, and what are the differences?

AVS, short for Actively Validated Services, is a concept in the EigenLayer protocol. It can be likened to “middleware” that provides services similar to data and validation capabilities for end products. For example, an oracle is not an end product but can provide data services for DeFi, wallets, etc., making it a type of AVS.

Understanding EigenLayer’s AVS (Actively Validated Services) can be illustrated with a simple yet vivid analogy:

Imagine Ethereum as a vast shopping mall, and various Rollup L2 solutions are like stores in the mall. These stores need to operate within the shopping mall and pay rent, which in the Ethereum world is equivalent to paying GAS fees so that their transactions and state data can be packaged, verified, and stored in the ledger of Ethereum, the “shopping mall.”

In this analogy, Ethereum not only provides the physical space for stores (block space) but also takes on the role of security (validating the legitimacy and consistency of transactions), ensuring that all transactions in the mall are secure and valid.

EigenLayer’s AVS is like offering an affordable service to small vendors (projects) who want to set up stalls outside the shopping mall. These vendors may not be able or willing to operate inside the mall, such as mobile vendors (requiring liquidity) or roadside vendors (with good geographical locations). However, they still want to utilize some services of the large mall. AVS can provide services for them. Although it may not have the comprehensive security of the mall’s interior, meaning there is a reduction in consensus security and lower costs, it can provide an Ethereum-like data or trust mechanism solution for dApps that cannot be verified within the Ethereum EVM network. This way, even small-scale projects can find a foothold in the vast Ethereum ecosystem.

This approach is particularly suitable for applications with relatively low requirements for consensus security, such as some Dapp Rollups, cross-chain bridges, or oracles. These projects may not need the highest level of security provided by the Ethereum mainnet, so by choosing AVS, they can obtain the necessary security verification services at a lower cost while still operating in a relatively secure environment. The emergence of AVS actually expands the boundaries of the Ethereum ecosystem, allowing more diverse projects to join, especially those resource-limited but innovative small projects.

Similar to EigenLayer, Karak also has its own version of AVS, called Distributed Secure Services (DSS). Unlike EigenLayer, which is limited to the Ethereum ecosystem, Karak introduces a new concept—providing restaking services for multiple assets, allowing anyone to use any asset on any chain.

In an Ethereum-only environment, AVS needs to compete with every opportunity to earn Ethereum rewards, and without speculative expectations of airdrops, this competition is unsustainable. DDS, on the other hand, can attract assets from more chains, use restaked assets to enhance security, and reduce operating costs. Compared to ETH, the opportunity cost of many assets is lower, which means DDS has simpler and more feasible sustainable revenue pathways.

It’s worth noting that the first AVS was released and launched on the EigenLayer mainnet on April 10th, with 6 AVS subsequently released. Karak plans to launch its first DSS in the coming weeks.

Next, let’s discuss the second question: What is Karak’s Layer2 K2, and how is it different from Eigenlayer?

K2 is a Layer2 built on top of the Karak network.

Operating on Layer1 is relatively expensive for both developers and users. Therefore, K2 provides a new solution. Acting as a “sandbox” environment, it allows Distributed Secure Services (DSS) to be developed and tested on K2 before being deployed on L1 to ensure they are stable and secure before actual deployment. Additionally, by adding custom precompiles, which allow more validators to verify DSS, K2 not only improves efficiency and security but also decentralization.

Compared to EigenLayer, which uses the Ethereum mainnet as the execution layer, Karak shapes its own execution layer (K2), built on top of Layer2. This can provide faster transaction speeds and lower transaction costs without sacrificing security.

Understanding these two questions, we can see that Karak and EigenLayer have adopted different technological paths, which also brings the most intuitive differences.

Karak supports more diverse assets outside of ETH, planning to cover Solana, Tia, Arbitrum, Optimism, and other Layer2 solutions, aiming to create a cross-chain and diversified restaking layer. EigenLayer focuses on the Ethereum ecosystem, using ETH as the primary asset for restaking, unlike Karak’s broader inclusivity.

To help understand, imagine Karak as an international airport connecting multiple countries, welcoming travelers (assets) from around the world, whether they are large passenger planes (public chain assets like Solana) or small private planes (Layer2 assets like Arbitrum). Karak aims to provide a convenient and secure transit hub for these travelers. In contrast, EigenLayer is more like a subway system designed specifically for a metropolis (the Ethereum ecosystem), focusing on serving residents and tourists within the Ethereum city, providing professional and efficient transportation services (transactions and operations).

In other words, Karak expands the range of restaking assets, including Ether, various liquidity-staked Ethers, and stablecoins, thus expanding the range of choices for users.

This approach has proven effective. According to DefiLlama data, for example, stablecoins account for about 19% of restaked crypto assets in Karak, while in EigenLayer, stablecoins may account for less than 0.27%. More differences can be seen from the following pie chart.

(Picture: Details of Karak’s re-pledged crypto assets https://defillama.com/protocol/karak#tvl-charts)

(Picture: EigenLayer re-pledge details of crypto assets https://defillama.com/protocol/eigenlayer#tvl-charts)

03 Is Karak a Vampire Attack on EigenLayer?

Looking back at SushiSwap’s vampire attack on Uniswap, if Karak were to launch its token before EigenLayer, what would happen?

First, let’s understand what a “vampire attack” is. In the crypto world, a vampire attack is a strategy where one project (in this case, SushiSwap) attempts to seize users and liquidity from another similar project (like Uniswap) by offering better incentives, such as higher liquidity provider (LP) rewards.

In simple terms, a vampire attack involves taking liquidity from the target project to increase one’s liquidity and value, effectively “sucking blood” from it.

In 2020, SushiSwap successfully attracted a large amount of liquidity by forking Uniswap’s code and introducing SUSHI as its native token. Karak and Eigenlayer, as protocols with similarities, could potentially face a vampire attack. If Karak were to launch its token first, here are a few scenarios that might occur:

1. Karak supports multiple assets, which may attract potential restakers seeking asset diversification. If a vampire attack were executed, this could pose a challenge to Eigenlayer.

2. Once Karak and Eigenlayer are both running on mainnets with multiple AVS/DSS, Karak could potentially execute a vampire attack by moving the deposited Eigenlayer LRT assets from Eigenlayer to Karak. (Note: Karak allows restaking LRT assets that are already restaked in ETH on Eigenlayer, essentially allowing the restaking of LRT, which is a bit like nesting dolls.)

If Karak were to launch its token first, it would indeed attract LRT from the entire market. More importantly, Karak’s own chain is already usable, with reasonable speed and fees. After all, one of Karak’s standout advantages is having an execution layer, which means it’s not just a follower of Eigenlayer but a competitor.

04 How To Become An Early Participant In Karak

Currently, the Karak project is still in its early stages, and you can participate by staking on the official website to earn XP rewards. In the future, Karak’s airdrop will likely distribute tokens by converting these accumulated XP points. The amount of XP earned may depend on the timing and duration of your staking, as well as the number of new users entering with an invitation code.

Access the staking interface

Karak official website

https://app.karak.network/

Currently, Karak supports staking on the Ethereum mainnet, Arbitrum (L2), and Karak (L2) networks.

The assets supported for staking on Karak include various mETH assets, multiple LRT assets like pufETH, as well as three stablecoins: USCT, USDC, and sDAI. Please note that the supported tokens may vary depending on the network, so please confirm carefully.

In simple terms, the points system works as follows: when staking on Karak, you can simultaneously earn “staking rewards + restaking rewards + Eigenlayer points + staked LRT points + Karak XP.”

Currently, Karak is not like Eigenlayer’s “eating all the fish,” but rather aims to achieve higher returns by staking on other protocols, especially when Eigenlayer is already “saturated.” However, it’s important to note that higher returns come with higher risks.

It is recommended to stake directly on Karak (the L2 network mentioned earlier) to receive double Karak points. Here are the specific steps:

First, add the Karak network.

Go to Chainlist and select Karak Mainnet on the left side.

https://chainlist.org/?search=karak

Next, transfer your assets to the Karak chain. If you choose to stake through the Karak chain, three tokens are currently supported: rswETH, USDC, and wETH.

Staking rswETH presents two scenarios:

1. If you already possess rswETH, you can transfer it from the Karak official bridge to the Karak chain.

2. If you don’t have rswETH, you can obtain it by staking ETH in Swell (Swell only supports staking ETH on the mainnet; you cannot stake ETH on the Karak chain directly). Afterward, you can use the Karak official bridge to transfer rswETH to the Karak chain.

Swell staking address:

https://app.swellnetwork.io/restake%EF%BC%89

Staking wETH also involves two scenarios:

1. If you already have wETH, you can use the Karak official bridge to transfer it to the Karak chain.

2. If you don’t have wETH, you can utilize either the Karak official bridge or MiniBridge to transfer ETH from the mainnet to Karak. When staking, simply enable Auto-Wrap ETH.

Karak official bridge and MiniBridge addresses:

https://karak.network/bridge

https://minibridge.chaineye.tools/?src=arbitrum&dst=karak

Finally, complete the staking on Karak Pools.

Since the three supported tokens are not ETH, this means that you’ll need ETH for gas fees when crossing the chain. Especially for WETH, if you transfer ETH over and select “max” for deposit, the first contract step involves a Deposit function, effectively wrapping your ETH.

This may result in your wallet running out of ETH, causing the second step of the deposit to fail.

Here are some recommendations for operations:

1. For staking rswETH and USDC, you can use the MiniBridge cross-chain tool to transfer a small amount of ETH for gas fees.

2. For staking wETH, keep a small amount of ETH and avoid clicking “max.” However, if you accidentally stake the maximum amount, it’s okay. You can still use MiniBridge to transfer a small amount of ETH over.

🔗 MiniBridge supports transferring ETH from the mainnet to the Karak chain and supports small-value transfers with low fees. It’s used to pay for gas fees on the Karak chain for staking. You’re welcome to click the link for more details.

https://minibridge.chaineye.tools/?src=arbitrum&dst=karak

05 Risk Warning

At present, controversies surrounding Karak mainly focus on two aspects.

• Firstly, the team hastily launched the product in February of this year after securing funding at the end of 2023. As a restaking project, there is currently less discussion around the technology and more emphasis on marketing strategies such as “point activities” to capture market share.
• Secondly, the Karak team’s past project’s “self-protective behavior” has been criticized by the community, with some KOLs directly labeling it as a RUG. In response to this questioning, the team addressed it during the DC on April 9th.

In conclusion, blockchain projects are always accompanied by contract risks and team risks, especially those involving billions of dollars in restaking protocols. However, in the current market environment, new users tend to favor projects with strong investment institutions and substantial funding backgrounds, while existing users pay more attention to the past history of project teams.

06 Summary

Balancing risk and reward has always been a concern for users. As a newcomer in the restaking arena, Karak’s $1 billion valuation and unique technical highlights introduce the possibility of challenging EigenLayer’s dominance in the restaking field. Moreover, Karak supports various LRT tokens for restaking, including but not limited to Swell, Puffer, Renzo, EtherFi, and KelpDAO, which also contributes to the prosperity of the Ethereum staking ecosystem.

Perhaps sensing the “crisis,” EigenLayer announced the removal of all deposit limits and the reopening of deposit windows on April 17th, 0:00 Beijing time.

The decision between sticking with EigenLayer or betting on Karak for potentially higher returns now lies in the hands of users.

Statement:

1. This article is reproduced from [Biteye], the copyright belongs to the original author [Biteye core contributor Viee], if you have any objection to the reprint, please contact Gate Learn Team, the team will handle it as soon as possible according to relevant procedures.

2. Disclaimer: The views and opinions expressed in this article represent only the author’s personal views and do not constitute any investment advice.

3. Other language versions of the article are translated by the Gate Learn team and are not mentioned in Gate.io, the translated article may not be reproduced, distributed or plagiarized.