In this insightful discussion, Swell Founder Daniel was joined by Seraphim from Lido, Brianna from EigenLayer, Dheeraj from Stader Labs, Chunda from Ion Protocol and Jedi from Blocmates to discuss the Liquid Restaking Revolution!
In case you missed it, here are some of the highlights from the event.
What excites you most about staking and what are some of the opportunities you can see between liquid staking and restaking?
“What excites us about liquid staking is that we see it as a fundamental driver for the growth and adoption of Ethereum staking overall. Restaking is an entirely new primitive and is exciting for the ecosystem, builders and users alike, and we’ve seen this come through already with tremendous product market fit. We've seen the LST restaking market caps sell out quickly, and we are now seeing a lot more first and second order effects come off the back of that. Overall, there is a highly synergistic relationship between LSTs, restaking and restaked LSTs respectively, and I would expect to see more complexity come out of this in the future” — Daniel, Swell Labs
“I largely see restaking as a new primitive that helps bring new services into the crypto ecosystem, effectively making it easier for them to integrate into web3. With respect to the synergies between liquid staking and restaking, I think we are really talking about the same demographic, as liquid stakers are already comfortable with the smart contract risk, which is taken in the form of staked ETH with the issuance of a liquid staking token on top. The most important point for me is that users who take part in liquid staking get somewhat additional sustainable yields, which is why I believe a lot of ETH stakers are going to be interested in restaking” — Dheeraj, Stader Labs
“I believe the core idea of restaking is that you are able to create another commodity in the form of economical slashing security that inherently has value. In effect, if you want to run an adoption of LSTs as an asset, you are less dependent on financial markets to be the dependency that users are required to build in order for LSTs to be adopted in the greater ecosystem. With restaking, you are able to build a new market for people that generates some sense of fundamental value” — Chunda, Ion Protocol
How do you see liquid staking and restaking playing out as DeFi evolves over time?
“Generally, ETH is the best place to focus on, primarily because it has a strong ecosystem and the most traction overall. Before restaking came into play, users were only focused on consensus and execution rewards, with consensus rewards being proportional to the capital being staked, so the more users that stake their ETH the lower the yield is going to be. Overall, it seems that we are now going to see a decrease in staking yields and an increase in restaking yields” — Seraphim, Lido
“EigenLayer has been written to allow any type of asset to be staked, and is very open to be able to change as the market changes. The EigenLayer governance process will be introduced at a later date, which will open the protocol to adding additional tokens other than LSTs or native ETH for restaking” — Brianna, EigenLayer
“We are still at a fairly precarious point within the development of DeFi, and the risk and return of yield hunting remains at the top of users' minds. Having these types of infrastructural layers that are built on the economic principles of security, return and rehypothecation will be the thing that injects more capital into the system and serves as a primitive or base layer for users to build different applications on. The more innovation we have, the more sustainable things will ultimately become because we are still very early in blockchain technology.” — Daniel, Swell Labs
In the next couple of years, how do you see these trends playing out?
“I believe that in two years time, most providers will simply act as conduits or position managers for restaking platforms. Any effective pre-existing liquid staking provider will act as a UX layer to plug into protocols natively, or will act as a way for users to plug into restaking platforms holistically. From a users standpoint we are going to see a lot of onchain natives make up the large majority of staking, with an emphasis on users trying to optimize their risk-reward profiles on restaking platforms” — Chunda, Ion Protocol
“I believe that in the next two years we are going to see more non-crypto businesses onboard into web3. Restaking is going to be a great platform for them to create subchains and L2s, with most LSTs becoming active collateral for these chains. Some of the problems I see arising in the future, especially in this world where you have numerous services coming onboard is, as a restaker, how is it going to be easy for the user to select the right kind of service, node operator, or risk profile. Overall, I believe restaking is going to be a thriving ecosystem with a large range of risk profiles and I would not be surprised if liquid restaked tokens come up and consolidate some of these positions with whitelisted entities." — Dheeraj, Stader Labs
“From a risk perspective, there is going to be a lot of work that needs to be done about educating users on the apparent risks of partnering with different service providers, and making the information available for them to make informed decisions on what they are opting into. In terms of liquid restaking tokens, I think we are going to see a lot of native integrations with protocols such as EigenLayer that will build off future receipt tokens from their positions for DeFi and liquid restaking. This is what LSTs did for beacon chain staking so I believe that we will see this soon with liquid restaking.” — Brianna, EigenLayer
“Together, restaking and liquid staking create an interesting dynamic, in which the more traditional side of financial innovation in the form of leveraging and riskon behavior is coupled with greater optionality. This could play into an endgame where we see more ETH staked, and also see POS become the dominant consensus mechanism as more users hunt for yield.” — Daniel, Swell Labs
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