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Concerns Arise as Restaking Makes Its Way to Solana Post-Ethereum

2024-05-10 03:00:01

Restaking is entering Solana. The popular service on the Ethereum blockchain is expanding to the Solana ecosystem, which presents both profit-making opportunities and risks. According to some experts familiar with the matter, Jito, a Solana-based project, is developing a restaking service.

Ethereum and Solana are both proof-of-stake blockchains, which means that their networks are secured by a decentralized community of validators who stake ETH or SOL for a passive income.

Restaking is the process of securing any system that requires distributed validation with the staked ETH and then earning a synthetic representation of tokens, which is called a liquid restaking token (LRT).

There have already been some successful cases of restaking on Ethereum. EigenLayer, a billion-dollar startup, collected $15 billion of ETH capital in less than a year with this attractive concept. Renzo (REZ), a protocol that is built as an interface for EigenLayer, facilitates the development of restaking.

Restaking on Ethereum

The concept of liquid restaking is becoming increasingly popular in the cryptocurrency industry. Ethereum pioneers are leading the way on, and the entry of other players such as EigenLayer and Renzo indicates strong market sentiment. This trend reflects the dynamic nature of the crypto ecosystem, which frequently introduces new use cases. 

Restaking is a promising investment opportunity that applies an economic game to virtually anything by leveraging the large staking numbers on incumbent protocols to help secure upstart blockchain apps. It is pitched as a way to get a bit of extra interest out of conventional staking. EigenLayer is a service that allows Ethereum users to take their staked ETH and restake it with "Actively Validated Services" (AVSs). These AVSs are blockchain protocols that support Ethereum scaling solutions. With EigenLayer, users can retake their Ether and benefit from the added security and scalability provided by these AVSs.

Those in favor of the technology argue that restaking helps improve the security of smaller blockchain apps since they may struggle to prop up their own proof-of-stake security systems, which require substantial capital and an active community. In an interview last month, EigenLayer founder Sreeram Kannan explained how this works using the example of 100 blockchain protocols, each secured by $1 billion worth of stake. He stated that "instead of each of the protocols having $1 billion separately staked, there was $100 billion commonly staked across 100 protocols. To attack any one protocol, you now need $100 billion rather than $1 billion.” 

The specifics may differ on other blockchains, but the idea is the same. Not just Solana, but projects like Shiba Inu are exploring restaking as a strategy to provide value to their users, reflecting a broader trend in which cryptocurrencies are diversifying their service offerings. These innovations could redefine user engagement and investment patterns in the sector. 

As restaking continues to evolve, its potential impact on the cryptocurrency market could be significant. It provides a pathway for sustainable growth and enhanced support for blockchain technologies, potentially attracting more institutional investments into the crypto space.

Restaking on Solana 

The trend of crypto restaking is gaining popularity among investors, and it has now expanded from Ethereum (ETH) to Solana (SOL). Restaking allows crypto investors to stake their idle tokens to secure anything and earn an additional yield. Ethereum and Solana are both proof-of-stake blockchains that use validators to stake ETH or SOL to secure their networks. 

EigenLayer, a billion-dollar crypto startup, has leveraged the trust concept of restaking and attracted $15 billion of ETH capital in less than a year. Now, Solana infrastructure project Jito is building a restaking service that will compete with other companies trying to replicate EigenLayer's success outside of the Ethereum ecosystem. Lucas Bruder, the CEO of Jito, said that there's a lot of hype around Solana restaking, and it's like a gold rush. 

There are currently more than six teams working on the development of Solana restaking, with some of them replicating EigenLayer's core design. This design allows various crypto protocols to share the economic security of the blockchain's native token. However, some critics are concerned that restaking may create a financial house of cards and not provide significant benefits to Solana.

While major protocol developers and insiders at the influential Solana Foundation have yet to delve into the companies trying to bring restaking to their platform, Jito, along with two other companies raising capital from venture capital firms (Solayer Labs and Cambrian), one Cosmos-centric team whose system is already live (Picasso), and at least two hackathon teams (DePHY and Repl), are all eagerly waiting to catch the Solana restaking wave, if it comes at all.

Skepticism about Solana Restaking

The Solana ecosystem is still skeptical about restaking, despite its popularity in other blockchain networks like Ethereum. Ryan Connor of Blockworks Research argues that Ethereum's reliance on layer-2 networks and its large number of staked assets make restaking particularly useful. Ethereum is described as a "modular" blockchain that performs one task while outsourcing other things to layer 2, which makes it more compatible with restaking.

On the other hand, Solana is an "integrated" blockchain that aims to do everything in one place. While there is still a need for restaking on Solana, there is far less of a need than on Ethereum and other modular systems. Despite this, fear and skepticism remain, with some viewing restaking as a ticking time bomb for the crypto industry.

Critics point to the risk of contagion, where the failure of one operator could impact the entire staking ecosystem, reducing the value of the restaking pool and compromising the security of other Actively Validated Services (AVS). There is also added risk with "liquid restaking" services that take deposits from users and restake them into platforms like EigenLayer, offering receipts called "liquid restaking tokens" (LRTs) that can be traded in decentralized finance for even higher yields.

The rise of LRTs has increased the risk of a rehypothecation crisis, where protocols leverage people's trust by allowing them to stake SOL and also liquid restaking tokens. This could lead to a catastrophic situation where one slashed AVS or depegged asset could topple many.

One angel investor in Solana projects has even joked that he has not yet invested in any restaking teams, saying he is "just debating when restaking blows up crypto." Despite the skepticism, restaking continues to gain popularity in the crypto industry, particularly in Ethereum and other modular blockchain networks. However, as with any new technology, it is important to proceed with caution and fully understand the risks before investing.


Restaking is becoming a more popular trend in Solana, with a number of teams working on Solana restaking services. While there is potential for profit, some investors and insiders remain skeptical about the benefits that restaking brings to Solana and fear it could lead to a financial crisis.

Despite this, Jito, a Solana-based project, is already developing a restaking service and is in a strong position to lead the Solana restaking scene. The competition is on to establish a dominant restaking protocol for Solana, and only time will tell which company will emerge as the leader in this emerging industry.

Disclaimer: Please note that the information provided on this website is intended for informational purposes only. CoinEx assumes no liability for any financial losses resulting from cryptocurrency trading. It is advised that you conduct your own research.

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