How Does Restaking Work? The Key Players in the Space
Restaking has emerged as one of the most exciting innovations in DeFi in 2024. By allowing stakers to earn additional rewards through the delegation of staked positions, restaking is elevating the utility of staked assets and offering new growth opportunities.
The restaking ecosystem involves four main participants: Restakers, Actively Validated Services (AVSs), Node Operators, and AVS-Curators. In this blog post, we will provide an overview of these four participants, analyzing the different roles they play within liquid restaking.
1. Restakers
Restakers are the backbone of the restaking ecosystem. These individuals or entities hold staked assets and delegate them through a Restaking Protocol or Liquid Restaking Protocol to earn extra rewards.
For instance, through EigenLayer, users can restake Ethereum or any of the 12 available Liquid Staking Tokens (LSTs). Restakers take steps to delegate their staked assets by selecting a restaking protocol, which will in turn choose their preferred Operators, and monitoring the performance of their stakes.
Rewards & Risks: The primary reward for restakers is the potential for higher returns. However, they also face risks, including slashing penalties and the security vulnerabilities of AVSs.
Steps a Restaker Takes to Delegate Their Staked Assets
1. Select a Restaking Protocol: Choose a reliable protocol that supports liquid restaking, such as EigenLayer or InceptionLRT.
2. Choose which token to restake: Identify the token you want to restake, such as Ethereum or another supported LST.
3. Delegate to Operators: The protocol on which the user restakes will delegate the users’ funds to the Operators validating AVSs transactions.
4. Monitor and Manage: Regularly check the performance and adjust your delegation to optimize rewards and minimize risks.
5. Claim Rewards: Periodically claim the additional rewards earned from restaking. Want to become a Restaker? Learn more here.
2. Actively Validated Services (AVSs)
AVSs require additional security layers beyond their native infrastructure to ensure optimal performance and protection. By integrating with Restaking Protocols, AVSs can leverage Security as a Service (SaaS) to safeguard their operations. Consequently, this leads to increased confidence and adoption.
Through protocols such as EigenLayer, AVSs can tap into the pooled security provided by Ethereum's validators, who restake their ETH to secure multiple services. This integration typically involves deploying smart contracts that handle the terms of validation, slashing conditions, and payment distributions. Additionally, AVSs often use off-chain components to manage specific tasks, which are validated and secured on-chain by the restaked assets.
The importance of security for AVSs cannot be overstated; inadequate protection can lead to considerable losses due to critical failures or exploits.
Examples of AVSs Benefiting from Restaking:
- EigenDA: This AVS focuses on data availability, improving Ethereum's scalability by providing a decentralized layer that supports rollups. It enhances transaction throughput while maintaining low costs, benefiting from the security of restaked ETH.
- Brevis coChain: A ZK coprocessor that allows dApps to perform secure, off-chain computations. By integrating with EigenLayer, Brevis utilizes Ethereum’s validator network to ensure the accuracy and security of its operations.
- Eoracle: An oracle service that brings real-world data onto the blockchain, secured by Ethereum’s decentralized network through EigenLayer. This ensures that data fed into smart contracts remains trustworthy and tamper-proof.
- Omni: This AVS unifies DeFi across Layer 2 solutions by enabling secure cross-rollup communication. Using restaked ETH, Omni achieves Ethereum-grade security for its operations, allowing seamless interactions between different rollups.
For a clear overview of the AVS Landscape, read in-depth blog post.
3. Node Operators
Node operators serve as crucial intermediaries in the restaking ecosystem, acting as the bridge between restakers and Actively Validated Services (AVSs). Their primary responsibility is to ensure that the restaked assets are effectively utilized to secure various AVSs.
When restakers delegate their staked tokens, node operators are tasked with running validator nodes, managing the infrastructure, and ensuring that the AVSs remain secure and operational. This process involves validating transactions, executing smart contracts, and enforcing slashing conditions when necessary to maintain the integrity of the network.
By doing so, node operators facilitate a seamless restaking process that benefits both restakers, who earn additional rewards, and AVSs, which gain enhanced security without needing to build their own validator networks.
Prominent Node Operators in the Restaking Space:
1. Figment: Figment is a leading staking infrastructure provider that plays a significant role in the restaking ecosystem, particularly through its collaboration with Renzo, a liquid restaking protocol. Figment operates validator nodes and provides comprehensive infrastructure support for AVSs on EigenLayer, making it easier for these services to leverage Ethereum's security.
2. 01node: Known for its extensive involvement in decentralized networks, 01node operates within the EigenLayer ecosystem, managing nodes that support AVSs like AltLayer and Witness Chain. These AVSs rely on 01node's expertise to ensure fast finality and secure validation processes across multiple blockchain environments.
3. P2P Validator: P2P Validator is another key player, providing node operation services for several AVSs. Their role includes ensuring that the AVSs they support maintain high levels of security and performance, which is critical for the trust and reliability of the entire restaking ecosystem.
4. AVS-Curators
AVS-Curators are specialized entities responsible for optimizing strategies around Actively Validated Services (AVSs) within restaking protocols. Their primary role is to manage and curate which AVSs are supported by restaked assets, ensuring that these strategies maximize returns while maintaining robust security.
Unlike node operators who focus on the technical side of validating transactions and running nodes, AVS-Curators take a more strategic approach, analyzing market conditions, performance metrics, and risk factors to select the most profitable and secure AVSs for staking. They may use sophisticated tools and models to predict which AVSs will deliver the best returns while also maintaining a safety net against potential losses.
By strategically allocating restaked assets to different AVSs, curators help restakers maximize their earnings while managing the inherent risks of participating in the DeFi space.
Approaches in Different Restaking Protocols:
- EigenLayer: In EigenLayer, the roles of Node Operators and AVS-Curators are often combined. Node operators here also act as AVS-Curators, directly selecting and delegating to specific AVSs based on the protocol’s objectives. This integration allows for a streamlined operation where the technical execution and strategic selection are closely aligned, although it can also increase operational complexity and maintenance costs.
- Symbiotic: Symbiotic takes a different approach by treating AVS-Curators as distinct entities separate from node operators. In this setup, AVS-Curators might include specialized funds, research companies, or other services that focus exclusively on developing and executing AVS strategies. This separation allows for more tailored and flexible strategies, as the curators can focus entirely on optimizing returns and security without the additional burden of running technical infrastructure.
Examples:
- MEV Capital / Re7 Labs: These are examples of asset management and research companies that function as AVS-Curators, focusing on optimizing staking strategies based on extensive market research and analysis. They bring a data-driven approach to AVS selection, aiming to maximize returns for their clients.
- P2P Validator: As a node operator that also acts as an AVS-Curator, P2P Validator balances the dual responsibilities of maintaining infrastructure and selecting the most secure and profitable AVSs. This dual role is particularly effective in environments like EigenLayer, where technical and strategic functions are closely integrated.
Getting into Restaking
As we’ve seen, the collaboration of key players—Restakers, AVSs, Node Operators, and AVS-Curators—creates a robust and interconnected system that drives the efficiency and sustainability of decentralized networks.
As the DeFi industry continues to grow, the role of restaking will become increasingly important in providing the security and flexibility needed to support a wide range of decentralized applications and services. The success of protocols like EigenLayer and InceptionLRT demonstrates the potential of restaking to transform the blockchain world.
For investors and developers looking to capitalize on the best restaking tools and opportunities, InceptionLRT offers a one-stop shop for everything restaking-related. Explore how our protocol can help you maximize your returns and enhance your DeFi strategies.
