From Ethereum (ETH) to Solana (SOL), the cryptocurrency restaking frenzy is expanding, attracting major players like Jito (JTO) and a few up-and-coming teams, as well as lucrative chances for investors.
Both Solana and Ethereum are proof-of-stake blockchains, which means that a decentralized group of operators known as validators guards the networks by pledging—or “staking”—ETH or SOL, respectively, in exchange for monetary compensation.
The popular billion-dollar cryptocurrency EigenLayer literally used restaking to utilize this trust idea. Investors in cryptocurrencies may now safeguard almost anything with their idle ETH tokens and earn additional income in the process. EigenLayer devoured $15 billion in ETH capital in less than a year, and they did it with abandon.
Project for infrastructure in Solana Four individuals who are knowledgeable about the situation told CoinDesk that Jito is developing a restaking service. With more businesses attempting to duplicate EigenLayer’s magic outside of the Ethereum ecosystem, the as-yet-unannounced program will face competition.
A re-staking occurs
With regard to using economic games to safeguard decentralized computing systems, restaking is the most recent response to the fundamental security concern in cryptocurrency.
As compensation, validators receive interest, and their ownership serves as collateral. Part of the stake is revoked (or “slashed”) by the network in the event that a validator attempts to deceive the blockchain.
In summary, the approximate cost of attacking the system is equal to the sum of money invested in its protection. Because there are more than $100 billion worth of ETH invested, Ethereum is seen as being extremely safe. Solana’s enormous $42 billion shareholding contributes to its respectability as well.
Restaking aims to adapt this economic game to a wide range of applications by utilizing the large staking amounts on established protocols to support the security of newer blockchain services. Using restaking, all 100 projects may be covered by their combined $100 billion, as opposed to each one being secured by, say, $1 billion.
While EigenLayer’s restaking systems primarily support Ethereum scaling solutions, or layer-2 blockchains that are constructed on top of Ethereum and intended to enhance its capabilities, the restaking methods being developed for Solana are often application-focused. In part, this is because Solana isn’t thought to be as fragmented as Ethereum; it doesn’t rely on and is subject to a wide range of layer-2 blockchains.
Plans for restaking by leader of the pack Jito are still unclear. The company that created the wildly successful client has not made a formal announcement about joining the restaking market. Jito is “thinking a lot about it,” according to Bruder, who declined to elaborate on its plans.
Still, the disclosure positions Jito to take the lead early on in the Solana restaurant industry. With over 73% of stake-weight—the percentage of SOL tokens promised to safeguard the Solana blockchain—running on validators powered by Jito technology, Jito enjoys a solid reputation among protocols and validators. The continuous flurry of Solana ecosystem airdrops began with its December delivery of JTO tokens. For airdrop farmers, a core group of stakers and restakers, this made it a household name.
Cambrian
By using restaking to enable various forms of “middleware” that isn’t taking place on the main chain, Cambrian aims to be for Solana what EigenLayer is for Ethereum. Use examples ranging from off-chain computation to zero-knowledge proof processing are presented in its February pitch deck.
Benefits
Without mentioning staking, the perpetual pursuit of profits by cryptocurrency players is its most notable economic game. In their quest for high-yield capital avenues to leverage their tokens, traders are uncompromising. In the EigenLayer ecosystem, those who pursue airdrops think that the points they’re earning from restaking will eventually be converted into tokens, which would allow them to earn further revenue. Solana will witness this scenario repeat itself. A multistage points program developed by Solayer Labs is in development.
Regaining doubt
The risk comes from “liquid restaking” services, which are middlemen that receive user deposits, restake them into EigenLayer and similar platforms, and then issue receipts known as “liquid restaking tokens” (LRTs), which may be exchanged in the decentralized financial market for even higher returns.
The increased use of LRTs has increased public concern about a potential mass disaster. The potential for a rehypothecation problem increases if protocols begin to take advantage of people’s confidence by enabling them to stake SOL, which are liquid staking tokens, as well as liquid restaking tokens. Many could fall with a single depegged asset or cut AVS.
