The Mega Restaking Space AMA gathered key figures from various liquid restaking protocols to explore the future of the Restaking industry. Hosted by Staking Circle, this insightful session featured major industry players from Etherfi to KelpDAO, EigenPie, Swell, InceptionLRT, and YieldNest. The conversation included business models, slashing conditions, AVS selection, future plans, and BTC restaking, providing a comprehensive deep dive into the liquid restaking landscape today and in the future.

Explore the highlights of the AMA to obtain useful insights into the strategies and ideas driving the fastest growing sub-sector of Defi in 2024.

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Speakers:

• Rok Kopp: Co-Founder & CRO (X Profile) @ Etherfi (X Profile)
• Amit Gajjala: Co-Founder (X Profile) @ KelpDAO (X Profile)
• Lew: AMA Lead (X Profile) @ MagPie (X Profile)
• Kilian BoshOff: Head of Partnerships (X Profile) @ Swell Labs (X Profile)
• João Simões: Co-Founder and CEO (X Profile) @ InceptionLRT (X Profile)
• Amadeo Brands: Co-Founder (XProfile) @ YieldNest (X Profile

Index of Questions:

1. How is each Liquid Restaking Protocol Developing Business Models to ensure Long-term Profitability?
2. Are there any concerns regarding the new Slashing Conditions from EigenLayer? If yes, how is each protocol preparing to address these changes?
3. What is each protocol's approach for AVS Selection?
4. Once the Point System Trend dies down, what are the future plans for each protocol?
5. How is each Protocol Planning to Integrate EigenLayer Competitors?
6. Who is Exploring BTC Restaking?

Question 1:

How is each Protocol Developing Business Models to Ensure Long-term Profitability?

Etherfi - Rok:

• Etherfi focuses on vertical integration.

• They aim to replace banks by providing comprehensive on-chain solutions, including a Visa credit card project.

“So we come from the Web2 world, so like profitability is something that we've thought about since day one. And so we're building something that's vertically integrated. And so ultimately, like we want to replace banks. (...) EtherFi Cash is an actual Visa credit card that you're going to be able to use in stores. And yeah, so that one's super exciting.”

(Source)

• Currently developing Etherfi Liquid for easier DeFi strategy deployment:

“And so we've got to think about how we like onboard more people into the space. And so we just think we need to make DeFi easy. And that's kind of what we did with Etherfi Liquid. So basically with a couple of buttons you get deployed into DeFi strategies that you don't have to manage. So think of it as like an ETF on the stock market.”

(Source)

InceptionLRT - João:

• João emphasized real restaking yields over points systems.
• InceptionLRT is currently exploring other infrastructure providers like Symbiotic or Karak:
• They aim to onboard new assets for restaking, such as Bitcoin

“Like point season is starting to be over and we are going to be looking at EigenLayer now for the next releases and actually the real risk taking happening and the increasing of the yields. And not only that, but we are also looking at other infrastructure providers such as Symbiotic or Karak, for example, that also promised to have a new view on restaking. (...) we are also looking at this problem and looking at the vision for the future is to start onboarding also new forms and new cryptos to restate such as Bitcoin. So this is something that we are looking very seriously now.”

YieldNest - Amadeo:

• YieldNest focuses on DeFi strategies and vertical integration with other restaking platforms.

“We need to bring in the real yield. And I think that will come in from like a vertical integrating different like restating protocols. It's really cool to see Nectar, Symbiotic, and Eigenlayer. These ones are the one I see building real things. And also the other ones are interesting, keeping an eye on them.”

KelpDAO - Amit:

• KelpDAO is choosing a more conservative growth strategy.
• Revenue from staking and restaking rewards is being considered for revenue, plus innovative earn section offerings.
• The expansion to infrastructure space is also being done by building restaking protocols on other L1s.

“We've been quite conscious about the way we grow as well as the way we build a decentralized org. (...) we've been quite conservative as well as building the right teams. (...) we charge a percentage of staking rewards and obviously that extends to a percentage of restaking rewards when actually the rewards from protocols, rewards from the AVSs go live. (...) Beyond that, we are also expanding to the infrastructure space, where we are actually building the restating protocol ourselves on other L1s. So those are the three main revenue sources that will make us sustainable.”

EigenPie - Lew:

• EigenPie is following a community-oriented approach.
• Focused on establishing a self-sustainable protocol focused on platform revenue rather than token emissions.
• Currently preparing for IDO and airdrop distribution.

“So rather than solely posing metrics that may harm other components of EigenPie, such as the token holders and other partners, basically we will be community-oriented as the core of our philosophy, and we aim to establish a self-sustainable protocol that operates. on a platform revenue rather than relying heavily on token emissions to push the stats of our protocol.”

Swell - Kilian:

• Swell plans to explore the L2 revenue model with sequencer fees.
• Currently focusing on operator selection and support for AVS development.
• Keen on ensuring decentralized sequencers over time.

(Source)

“One of the core pieces of the restaking economy is AVS is actually generating real yield and finding a clear use case for what they're building. It's our belief that we can bring that and create that ecosystem for them to thrive on Swell too (...) there's the L2 revenue model that most L2s have, which is sequencer fees. So that is one avenue. I think as we all know, that will be decentralized over time. And that's exactly what EigenLayer enables, decentralized sequences”

Question 2:

Are There any Concerns Regarding the New Slashing Conditions from EigenLayer? If Yes, How is Each Protocol Preparing to Address These Changes?

InceptionLRT - João:

• Inception is developing an on-chain slashing insurance covering up to 50% of user positions.
• The need for protocols to have solutions to protect users against slashing was emphasized.

(Source)

“And one thing that we are doing in Inception, and I know that Puffer is also doing a similar solution, which is by avoiding slashing, we are preparing ourselves a more on-chain solution which will be a slashing insurance and the user will have the possibility to choose the percentage of how much ETH they want to insure and we want to make sure that by having separated pools and these pools being fed by the fees that user pay for this insurance”

YieldNest - Amadeo:

• Amadeo made clear that advocating for transparency and democratizing slashing risk are benefits.
• YieldNest is collaborating with the Llama Risk team for AVS and operator selection criteria.
• They plan to publish extensive risk reports for operators and AVSs.

“I actually have quite a controversial take on it. I do think that in a flourishing restaking ecosystem you should make the risks transparent. You should make it very clear for a user before he enters a product for what he's actually restaking on. (...) what we are doing we're collaborating with the llama risk team and we are going to publish an extensive kind of AVS and operator selection criteria. (...) So we are highlighting all the risks, making everything very transparent and pretty deep and extensive risk reports (...) where people can transparently see risks or yields and decide themselves how they want to handle them”

KelpDAO - Amit:

• KelpDAO emphasized the objective risk assessment and historical context of slashing events.
• Currently working with risk managers like Gauntlet to define delegation strategies.

“I'm not by no means I'm advocating for not being careful regarding slashing. I think it's also important for us to put numbers behind some of these subjective assessments of slashing. (...) using Ethereum as an example or a reference point, those events have been insignificant. But obviously, at the same time as liquid restaking protocols, slashing will definitely be an important aspect in the design of the protocol (...) apart from working with some of the risk managers that others have mentioned, the likes of Gauntlet or Chaos, that will help define and design the right set of delegation strategy for the protocol”

EigenPie - Lew:

• EigenPie is focusing on selecting honest and competent operators.
• Evaluate cumulative risk profiles of AVSs to limit exposure.
• Also prioritizing operators with strong track records.

“When it comes to avoiding the slashing risk and taking precautions, we place our trust in operators who demonstrate honesty and competence. Similar to individuals selecting staking services on Ethereum, we prioritize operators who have a track record avoiding slashing offenses and maintaining service. Active participation in preventing inactivity, like penalties is important. To note that operators may differ in AVSs they validate and each AVS carries its own level of risks.”

Swell - Kilian:

• Partner with Gauntlet for expert guidance.
• Emphasize working with professional operators who have their own slashing insurance.
• Ensure users have a worry-free experience.

“We are working really closely with Gauntlet. I'm sure everyone's familiar with the content and what they actually do. But yeah, we are leaning heavily on their expertise. We have a lot of back and forth and, and, you know, meeting with them weekly, discussing this planning and strategizing. (...) We were very specific about the operators we wanted to bring on board, really respected and well-known players in the industry. And a lot of them do have their own slashing insurance in place”

Question 3:

What is Each Protocol's Approach for AVS Selection?

Etherfi - Rok:

• Maintain current operators while bringing new ones.
• Select AVSs based on desired outcomes and find suitable operators to work with them.

“Once your validators get spun up, you know, the cost of changing validators is high. So the operators that we currently have are probably the ones that we'll be with. We are continuously bringing new ones on, but we will keep the operators that we have and try, you know, find out an AVS of which of the 15 operators, you know, we'll work with them to kind of work that way”

KelpDAO - Amit:

• In the short term, KelpDAO aims to delegate to as many AVSs as possible.
• Long-term focus would be on assessing risks before selecting AVSs.

“In the short term, because there is no slashing yet on the AVSs. So obviously there is an interest in delegating to as many AVSs as possible and also letting the operators that are working with us. (...) But in the long term, when EigenLayer introduces slashing, that is when some of the points that we discussed during the conversation about slashing become very critical and important, right? That is when we will be a lot more cautious and assess the risks in the right way before we pick the right AVSs.”

EigenPie - Lew:

• Balance between selecting reliable node operators and choosing the right AVSs.
• Optimize performance and returns by evaluating both operators and AVSs.

"So while selecting reliable node operators, it's vital for maintaining the network integrity. We also understand the importance of choosing the right AVSs. (...) moving forward, we will continue to monitor and assess the performance of our node operators and AVSs and we maintain an open and an interactive approach taking into account like the data and our goal is to create a robust and efficient liquid risk taking protocol that maximizes the performance of the returns.”

Swell - Kilian:

• Swell evaluates AVS sustainability and utility.
• Maintaining close communication with AVSs for development support.

“I think it comes down to like, what is that AVS actually doing, right? Are they sustainable? (...) I think those are all honest and hard questions we have to ask ourselves. (...) And what we're doing as well is working closely with all the AVSs, speaking to them regularly, seeing how they're developing, how's the service that they're building actually growing”

InceptionLRT - João:

• Inception prioritizes choosing the best node operators and delegates AVS selection to them.
• Focus on building relationships with operators instead of evaluating AVSs directly.

“So in Inception the way that we are doing things is instead of choosing the AVSs ourselves, we are betting on the node operators, meaning that we are choosing the best node operators in the space that have already a reputation (...) So instead of literally wasting our time by going on an infinite list of AVSs, we just bet on having the best relationship with the best node operators ourselves.”

YieldNest - Amadeo:

• YieldNest is building a strategy engine for AVS selection.
• Able to analyze full stack risks and integrate with all beneficial restaking protocols.

(Source)

"And how we do that in the Yield Nest created products is basically that we have our own kind of strategy engine that we built on top of EigenLayer and the strategy engine will also be used to build on top of the other restaking protocols (...) i do think that a liquid restaking protocol does need to actually select and analyze all the avs's they work with and then monitor the nodes that are running the avs's i don't think we can upload that responsibility to you to the nodes itself in my opinion.”

Question 4:

Once the Point System Trend Dies Down, What are the Future Plans for Each Protocol?

YieldNest - Amadeo:

• Make point systems fully deterministic and transparent.
• Use points for governance distribution and protocol decentralization.

“I think, is that point systems generally are not that transparent. Maybe some of them are more transparent than others. We are making our point systems fully deterministic, meaning that you can actually always see and validate all the different points (...) And that means that we're striving to be a fully decentralized protocol and giving most of the power away over time to decentralize our protocol”

EigenPie - Lew:

• EigenPie continues the point accumulation phase and is preparing for IDO and airdrop.
• Current focuses on onboarding institutional partners.
• Plans to distribute 45% of total supply as airdrop to point accumulators.

“The point accumulation continues and we haven't launched our token. And we haven't discussed the details of the tokens. But on the point accumulation, as Yieldnest mentioned, they are being community oriented. So on EigenPie, we will distribute 45% of total supply to users who accumulated points, which will be a huge part of the token, will be distributed as airdrop”

InceptionLRT - João:

• Ramp up TGE and use points to reward community support.
• Convert points into airdrops and governance tokens.
• Maintain close engagement with community through points system.

“We also are ramping up things to do our TGE very soon, so for us points is also a part of course, of community growth. The points will, of course, turn into the airdrop, so we can reward the community with the points. So people that farm more points will have more access to the airdrop and of course this will all result also in our governance token.”

Question 5:

How is each Protocol Planning to Integrate EigenLayer Competitors?

YieldNest - Amadeo:

• Investigate and integrate with Symbiotic, Nectar, and EigenLayer.
• Focus on wrapping restaking protocols for structured products.

“We are actively like further integrating with all of them and making products that are kind of like that where you can stake one token and get exposure to kind of all the whole sector and i'm just most excited about having this kind of structured product where you can have the security of an ethereum network and then can also secure all these other services via different networks (...) Nectar, Symbiotic and Eigenlayer. Well, Eigenlayer, Symbiotic and Nectar, I would say those are the three ones that we're mostly looking into right now.”

EigenPie - Lew:

• Recently proposed a new sub-DAO, SymPie, for Symbiotic integration.
• Continue building on the Magpie ecosystem.

(Source)

“Symbiotic and Karak are likely to attract attention and adaptation from users who value flexibility, diversification, and improved liquidity. So they may encourage competition and innovation in the staking industry. So that recently we passed governance voting, so we will be building a new protocol called Sympie, and currently it's just passed the voting. But yeah, it will be built by Magpie ecosystem”

InceptionLRT - João:

• Bullish on Symbiotic and Nectar; cautious about Karak's model.

“Our take is that the way that Symbiotic is building is actually very, very interesting. I do think that can be a very good extra offer, apart of Eigenlayer. So I agree with Yieldnest saying that first comes Eigen, then Symbiotic, then Nectar. (...) I will say that Karak, the way that Karak is building is a bit strange in my opinion because they allow to restake restaked assets and by doing that you are literally like adding leverage on top of leverage on top of infinite leverage and i don't know if that is is um good for the space”

Swell - Kilian:

• Well will Launch an LRT on Symbiotic.
• Maintain an open approach to integrating various restaking platforms.

“We will be launching a Swell LRT on Symbiotic. We started teasing that this week, so you guys should probably see that in the near future. And in terms of all the other restaking protocols, you know, it's an open market, right? So everyone is now part of the industry”

Question 6:

Who is Exploring BTC Restaking?

InceptionLRT - João:

• Actively exploring BTC restaking, starting with wrapped BTC and moving to native BTC.
• Aim to release BTC restaking solutions soon.

“This is something that we are really exploring hardcore at this moment. We believe that that is the next frontier for LRTs and we plan to release a way to do restaking of BTC. First with wrapped BTC, then native BTC. But we plan to do that very, very soon and we believe that that's the next stage for any LRT protocol”

EigenPie - Lew:

• Proposed a new sub-DAO called BabyPie for Bitcoin restaking.
• Focus on expanding the Magpie ecosystem to include BTC restaking.

“So we recently proposed a new sub-DAO call will be called BabyPie we'll be focusing on Bitcoin restaking, it's still under vote but most likely it will pass since it's like we said 99 percent yes, so yes we will be building a new sub-DAO as well on this side”

YieldNest - Amadeo:

• Investigating BTC restaking and examining its feasibility.
• Currently focused on ETH and ERC-20 tokens but open to future BTC restaking.

“So we're bringing out this kind of deep dive into restaking protocols right soon. And BTC restaking is part of that. We're definitely examining it right now. (...) So we're actively monitoring it right now, but we keep our focus on ETH and ERC-20 tokens, LP tokens and stablecoins.”

Swell - Kilian:

• Exploring BTC restaking, with focus on yield sustainability and Cosmos ecosystem.
• Emphasize first principle thinking and market analysis.

“I think a good way for maybe the listeners to think about it is, ask yourself, how real will the yield be that Babylon is promising? I guess their strategy in general is the Cosmos ecosystem. And some could argue that that's good and that's more sustainable (...) in terms of Babylon and that… I think they are doing a great job and it's in no way like a way to undermine them. But, you know, I think that's the first question we would ask is, ok, how sustainable is the yield that's coming from this restaking platform?”