Ahead of swETH going live on EigenLayer, we were joined by some of the inaugural members of our Liquid Restaking Council to discuss the risks and rewards of restaking, along with the role that it is likely to play in DeFi over the next few years.
In case you missed it, here are the top questions from the event.
What is restaking and what does it enable?
"Restaking is something that we haven’t seen before, and it is really exciting to see it being part of the evolution of Ethereum. In a nutshell, restaking is when you take your staked ETH and restake it on another platform to generate more yield.
EigenLayer is opening its doors to more liquid staking protocols on the 18th of December, and is pioneering opportunities for users and stakers to earn more, as well as invest in the security and decentralization of Ethereum."
— Irina, Everstake
"New networks need to be bootstrapped, so they will issue a token and that token must have a high enough market cap for security. The idea is that you can tap into another network and use that network's security in some way. Ethereum is one of the most secure networks out there with the highest economic collateral, and protocols will want to use that collateral to bootstrap and bring security to their network. That is what restaking allows you to do."
— Amrit, AltLayer
"If we can take the security provided by Ethereum stake and repurpose it, we don't necessarily need a lot of new L1s to support new blockchain use cases."
— Nils, Blockscape
What are your thoughts on EigenLayer's role in the emerging restaking ecosystem?
"EigenLayer is essentially a marketplace whose central role is to connect restakers, builders, and operators. It is a little bit convoluted, but EigenLayer has also developed an actively validated service (AVS) called EigenDA which a lot of projects are currently testing.
EigenLayer is really attractive for builders because you can bootstrap the stake rather than going out and sourcing it on your own. There is a lot of excitement and attention being paid towards EigenLayer and it is going to be the thing to watch next year in the Ethereum ecosystem."
— Benny, Figment
What should swETH restakers be concerned about in terms of risk and reward when restaking on EigenLayer and beyond?
"Restaking is still very new and we are still discovering a lot around it. We don’t have a sense of what the rewards will look like, and the topic of slashing and penalties is still being figured out. The framework that should be used is just like any other network. Users need to have a sense of:
- What is the AVS doing?
- What do the rewards and risks look like?
- What are the potential penalties?
- Which operator should I delegate to?
LSTs are useful for a number of reasons, one being that you can utilize the token in DeFi. What’s interesting with EigenLayer restaking is that the activity users potentially engage in is the same activity giving rise to the opportunity."
— Benny, Figment
"It is likely that the first iteration of mainnet AVS’s will not have any slashing conditions or risks, meaning the economic impact will be very different. We will have to continue to see how that will flow but we think of it as a training wheel that is put in place at first to see how the ecosystem reacts, and then once we have a sense of how it works we will be putting slashing conditions in place."
— Amrit, AltLayer
What can we expect to see from your project in the coming months?
"Kiln is already live on the EigenLayer AVS testnet and we are also part of the EigenLayer operator working group. We will be spinning up our mainnet node operator soon for people who want to restake their LSTs once the cap is raised. We are working on simplifying the restaking process and integrating EigenLayer through our onchain pooling product."
— Edgar, Kiln
"AltLayer is a service provider and we have been talking to clients who like the idea that some other vendor or third party can manage the nodes for them. Eventually, many of these clients will want the ability to run these infrastructures in a more decentralized way.
There are three things we are building as an AVS under the brand umbrella of restaked rollups:
- Decentralized sequencing — This is different from what you see in the market in protocols such as Espresso. In this model you will have AVS operators run your decentralized sequencer network and they will order transactions for your specific rollup.
- Decentralized verification — This is really important for the long tail of dApp rollups that we are going to see, where anyone will be free to go and spin up an instance. We are building an AVS that keeps track of staked commitments made by these rollups.
- Fast finality layer — Ethereum's finality takes quite a bit of time which is not ideal if you're building a rollup or building anything that has cross rollup messaging. The idea is to build another AVS that will offer fast finality to rollups."
— Amrit, AltLayer
"We are similarly testing EigenDA and part of the operator working group that are continuing to test AVS’, as well as looking at various partnerships right now and integrations across our operations. We are very excited for Q1 next year because that's when things will start to happen, and to echo what has been said, Figment recognises how important EigenLayer is going to be, so we are very excited to continue the testing and to roll out products and services along those lines."
— Benny, Figment
"Everstake is planning active strategies in restaking and figuring out the directions with different protocols and options for stakers. We are also working on several research analyses to support the Ethereum and restaking ecosystem."
— Irina, Everstake
What role do you think restaking will play in the next bull run?
"I am especially bullish to see if EigenLayer can fulfill its promise and bring the power and value accrual to ETH staked, as this can definitely change the game for value accrual to the space. I think that EigenLayer will bring a lot of experimentation as it brings down the barrier to entry for applications that require consensus so there is a lot of potential there."
— Edgar, Kiln
" believe that in 2024, we will be hearing a lot more about restaking, and I think it can potentially take a leading position in the process."
— Irina, Everstake
Thanks to everyone who attended the event!
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