A Brief Overview 👀
Remember the amusement park analogy? Rides 🚋 are like different networks/protocols and the Safety Instructors 🦺 are analogous to AVS (Actively Validated Services).
Protocols which cannot be validated or proven on EVM (Ethereum Virtual Machine) cannot use Ethereum’s security pool. AVS helps in solving for this by bootstrapping trust through LSTs & LRTs.
Restaking & the Tokens
Restaking involves staking ETH on multiple networks simultaneously, for higher rewards and ensuring security to these networks. This is done through the use of LSTs (Liquid Staking Tokens) and LRTs (Liquid Restaking Tokens). 🪙
LSTs are the token that you receive after staking native ETH with Liquidity Staking Protocols. While, LRTs are the token that you receive after restaking the ETH or the LSTs.
Restaking Providers
Enough of the context, Restaking Providers, also known as operators are responsible for staking ETH on behalf of the users, providing economic security and capabilities.
The Need?
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Validating Transactions
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In order to validate the transactions, without building own security/validator network.
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The Restaking Provider enables with the infrastructure and software for the AVS to validate the transactions.
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Decentralization
- Involving multiple Restaking Providers leading to further decentralization and even less risk of failure.
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Economic Security
- As the Restaking Provider is staking ETH on behalf of the AVS, it leads to enhanced economic security as the TVL increases, liquidity on the network increases. A Happy Ecosystem overall. 😁
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Additional Rewards
- By running an additional node software for the AVS, the validators are also earning extra. Hence, for extra additional rewards or earning opportunities, Restaking Partner was needed.
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Slashing
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AVSs also needed some governance to control the validation of invalid transactions. And EigenLayer being based on PoS consensus mechanism had that advantage, so came the concept of Slashing in AVSs as well.
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Hence, the need for Restaking Provider.
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The Risks
The world is not all pink, but yellow (sorry Barbie)! 😉
What I mean is while Restaking Providers are providing with numerous benefits, there are some risks as well.
Risks involve slashing conditions, discontinuity of the restaking provider or their project, failure of the Ethereum or the base layer protocol. 😓