0. Preface
The growth of the restaking ecosystem has resulted in myriad questions and conversations regarding the various actors of this nascent stack. Who is adding value in the restaking ecosystem, and what players might have the most upside over the coming years? In this piece, we will examine what we consider to be the current stack of layers for the restaking economy. We will then describe the situation of inevitable commoditization that multiple of these layers currently find or will soon find themselves in. Finally, we explore the emergence of verticalized restaking platforms. This new model for the organization of the current layers of the restaking ecosystem will hopefully provide clarity around where our team at Anthias Labs sees restaking developing over the next several years.
I. The Layered Restaking Economy
To begin, we present the current layers (and future layers) within the restaking economy. To be clear, some of these layers are currently non-existent or not as clearly defined in the restaking economy’s current form (e.g the intent layer and risk manager layer), but we think they will be significant layers in the iterations of restaking to come.
Liquidity Layer (e.g. Restakers)
The liquidity layer consists of whales, institutions, degens, and regular users who seek to earn yield on their capital. Liquidity is largely a commodity. However, product differentiation can be created via granular liquidity solutions, such as locking up liquidity for specific periods and providing larger amounts liquidity than competitors. An additional differentiator at the Liquidity Layer is quality of liquidity (e.g. price volatility of the liquidity). While projects like Lucidly and Royco are offering liquidity solutions for restaking projects, restaking platforms can also build in-house solutions to tackle these challenges.
Intent Layer (TBD)
The intent layer's value proposition lies in coordinating users' preferences, allowing them to whitelist trusted operators, set a yield target, and select a risk appetite, ranging from aggressive to more conservative AVSs. In general, a well-defined intent coordination layer has not yet emerged in DeFi. Similar to the liquidity layer, restaking platforms can build in-house intent layer solutions customized for restaking.
Risk Manager Layer (e.g. Gauntlet, Chaos Labs, and Block Analitica)
The risk manager layer is responsible for underwriting AVS risks, properly assessing the risk-return profile, and constructing portfolios for restakers to particpate in. The risk manager layer remains nascent due to the limited universe of AVSs and lack of real yield (until AVS payments are live).
Liquid Restaking Token (LRT) teams appear to be interested in handling the risk management layer, but most LRT teams seem to be set up as product engineering teams rather than risk management teams — will they bring in external risk partners or build in-house risk teams? The former seems be the primed direction currently, with Gauntlet’s partnership with Ether and Swell serving as a possible heuristic, but this layer is still significantly less defined.
Vault Infrastructure Layer (e.g. Etherfi, Renzo, Mellow, etc.)
The vault infrastructure layer consists of protocol-level smart contracts, which manage the functionality of managing liquidity from restakers, delegating to operators, opting into AVSs, and managing rewards. There is significant complexity in managing native restaking rewards (e.g resweeping), so this is non-trivial. However, this technology is commoditized since smart contracts are forkable. This layer is primarily developed by the LRTs as of today.
Operator Layer (e.g Chorus One, Figment, etc.)
The operator layer is a collection of entities (institutions and individuals) who run AVS software to execute tasks and ensure the operation of the AVS network. As of today, trust and branding have played a major role in the perceived quality of operators.
A significant question remains around how to ensure proper operator participation if an operator does not have its own capital at risk but rather solely delegated capital (principal-agent problem). Right now, operators seem to be abiding by Proof of Reputation, as in if they act maliciously or improperly, they will likely take a “reputational slashing” at the social layer. Questions remain about how this will play out in the restaking economy once it matures further.
Restaking Protocol Layer (e.g EigenLayer, Symbiotic, etc.)
This layer provides the necessary smart contracts required for AVSs to opt-in and liquidity to be provided. This layer also facilitates the required on-chain actions, thereby unifying all the actors in the ecosystem. While this layer is highly forkable and can be easily commoditized, this paper explores how many restaking protocol projects will accumulate power by becoming verticalized platforms.
II. No One Wants to be a Commodity
While the graphic provided above reveals a very cleanly defined set of layers within the restaking economy, the reality will not play out in as picturesque a way. This is because every layer within the restaking market is incentivized to maximize its power and position of leverage. No layer wants to become a commodity.
This drive to avoid commoditization creates a hazier market structure as it will involve the following activities among other things:
Verticalization: Players in the restaking market will attempt to expand their influence and control across multiple layers, leading to a more interconnected market structure.
Private Liquidity Deals: Large institutions and wealthy individuals with the right relationships will seek to secure exclusive liquidity deals, potentially leaving smaller participants (regular restakers) stonewalled and at a significant disadvantage. These private deals may create an uneven playing field and limit access to certain opportunities for the average user.
Fight for Exclusivity: To increase their branding power (among other things), restaking platforms will compete for exclusive partnerships with key players such as AVSs, risk managers, and operators. Securing these exclusive deals will create stronger monopolistic and network effect dynamics.
How can the different actors within the restaking economy avoid a race to the bottom and achieve market dominance? This is what we will explore in the next section of this paper. Enter the verticalized restaking platform.
III. The Power of the Verticalized Restaking Platform
In a well-constructed marketplace, restaking platforms should facilitate a low-friction process that efficiently matches depositors to operators and operators to AVSs. Underwriting details will be determined by aligning capital and operators with AVSs that meet their risk and payment requirements. The primary purpose of the restaking platform is to coordinate all the layers effectively, and the platform that achieves this best will have the most product power.
To strengthen their market positioning, both LRT protocols (e.g. Etherfi, Renzo) and restaking protocols (e.g. EigenLayer, Symbiotic), in particular, are incentivized to become verticalized restaking platforms, where they offer well-coordinated, custom economic security systems, involving the coordination of liquidity, intents, and operators, combined with specialized knowledge around network design and risk management.
A restaking platform’s ability to sell a bundled offering creates an incredible position of leverage for the company, as the platform fulfills custom and specific needs. The key is to take all these commodities and properly coordinate them for a refined, granular, and specialized product offering for the AVS. In this world, it is the restaking platforms that can get away with price bargaining power.
This is analogous to the way by which dominant Web 2.0 business like Salesforce evolved: create stickiness by expanding the platform, offering a level of customizability, securing relationships, and acquiring or bringing in-house value-additive commodities. We see the restaking economy following a similar path.
IV. Closing Thoughts
The road to well-defined restaking platforms will involve increasing entropy before there is a fully organized structure. There are still many aspect of the restaking economy that must be fully fleshed out:
Slashing Conditions
Assessing Corruption Risk
The Principal Agent Problem
Dual Staking Mechanism Design and Implementation
Sophistication / Granularization of Economic Security
Light Node Operators — e.g. Can regular users create successful operators without requiring the infrastructure of major operator/validator entities like Chorus One or Figment?
In this paper, we explored the current and future layers of the restaking economy and what we see to be the future verticalization of these layers. There is significant work to be done around underwriting operator slashing risk, AVS payment rates, LRT payout rates to stakers, and LRT insurance funds, but we are advancing. Onward.
Anthias Labs, June 2024
