Restaking is a relatively early-stage field, with one of the more notable projects being Eigen Layer. It gained considerable attention for a time because Eigen Layer hired researchers from the Ethereum Foundation with high salaries. Public opinion speculated that these incentives led Ethereum Foundation members to promote a shift toward centralization in Ethereum’s development.
Eigen Layer has made significant waves. Undeniably, Restaking’s business model is feasible, as Eigen Layer has already set the path. Its operational model does not invite much skepticism.
However, returning to the definition of Restaking, certain questions remain worth pondering. For example, why Restaking instead of Staking?
The core issue of Restaking projects is not technological but economic. In other words, Restaking projects lack technological barriers but are constrained by business model barriers. The key lies in whether they can operate effectively within business collaborations.
The reason is simple: limited returns. As a staking user, I can stake ETH to obtain stETH and earn a stable 3% staking yield. On top of that, I can stake stETH on Eigen Layer, earning additional rewards if available. Even if there are no extra rewards, I still have a guaranteed 3% yield.
But what about Staking? This poses a dilemma. Holding ETH, should I pursue the stable 3% yield from stETH or opt for the unreliable returns from Eigen Layer projects?
This brings us to a critical question: where does Eigen Layer’s revenue come from?
Staking rewards on PoS chains are native and highly stable. What about Eigen Layer? Its rewards must come from users utilizing AVS (Active Verification Services). So, what services does AVS provide?
Here’s a theoretical framework:
For PoS chains, users stake tokens to give validators staking weight, enabling validators to validate block data.
In Restaking projects, users stake tokens to give operators staking weight, enabling operators to validate arbitrary computational tasks.
Doesn’t this sound appealing? PoS chains are merely a subset of Restaking projects, which implies significant potential for Restaking.
This theory holds some merit. However, on closer scrutiny, the comparison should be with DPoS (Delegated Proof of Stake) consensus rather than PoS. In terms of decentralization, DPoS is less decentralized than PoS.
Would Restaking projects have a significant advantage over DPoS? Let’s consider another question: why has DPoS primarily been used for block data validation rather than for verifying other types of data?
The answer is straightforward: there’s no data more important than user assets. For example, is the accuracy of tomorrow’s weather forecast more critical than the balance of a bank account? Historically, DPoS has served only one scenario: validating block transaction data. Finding a use case more critical than asset data is exceedingly difficult.
With this in mind, let’s return to the issue of Restaking yields. If DPoS offers a 3% staking yield, how much could Restaking provide? Theoretically, less than 3%, because the data validated by Restaking is unlikely to surpass the importance of asset data.
This is why Restaking projects must adopt Restaking rather than direct Staking—they cannot compete with Staking yields. By building on Staking, Restaking transforms into something different.
In essence, the staking yields of both DPoS and Restaking originate from users of the service.
In DPoS, one group of users stakes tokens to become validators, while another group relies on these validators for asset security. Users thus allow the DPoS chain to mint 3% additional tokens as block rewards. While this increases the total supply, effectively taxing all participants, it sustains the system.
In Restaking, one group of users stakes tokens to become operators, while another group relies on these operators for data validation. The basic logic resembles that of DPoS. Here, the “other group” refers to users of AVS services, who ultimately fund the returns in Restaking.
Restaking’s yields cannot materialize out of thin air—they come directly from users. The payment mechanism can be straightforward: users pay directly for services. For instance, invoking an AVS service might cost $0.10 per transaction. Such direct billing eliminates the need for adjustments in token supply.
How much user payment is sufficient? Suppose there is a staking pool of 1 million stETH. To provide a 1% annual return to stakers, assume 10,000 users call AVS services once daily.
At this point, another question arises: which user would willingly pay for such a service? On Ethereum L1, even a $1 transaction fee is considered exorbitant. Many people hesitate to pay $9 for an iQiyi subscription, and countless developers refuse to buy legitimate licenses for tools like IDEA despite using them daily.
Of course, as long as the bubble doesn’t burst, everyone’s wealth seems to grow. In a bull market, no one appears to be losing money. As long as one can exit before the bubble bursts, everything will appear rosy.