Restaking ‘Gold Rush’ Spreads to Solana From Ethereum, With Jito and Others Joining In

The same game is poised to emerge in the Solana ecosystem in the coming weeks and months.

Four sources with knowledge of the situation informed CoinDesk that Jito, a Solana infrastructure project, is developing a restaking service. This as-yet-unannounced initiative aims to challenge a rising number of competitors in the market, all striving to recreate EigenLayer’s success outside the Ethereum network.

As a crypto investor, I can tell you that the current state of the market is reminiscent of the gold rush days. The buzz and excitement surrounding cryptocurrencies are at an all-time high. However, I cannot disclose any information regarding my company’s plans in this regard.

The developing landscape of staking on the Solana network is still in its infancy, with major protocol builders and even key figures within the Solana Foundation admitting they have yet to explore the specific companies aiming to establish a presence in this area.

Despite findings from a CoinDesk investigation, more than half a dozen teams have been stealthily developing Solana staking solutions. Some of these projects are closely adhering to EigenLayer’s blueprint: a system enabling various crypto protocols to collectively benefit from the economic security provided by the blockchain’s native token.

As a crypto investor, I’ve had the opportunity to engage with teams developing Solana’s infrastructure, assessments from investors considering it, and startups potentially utilizing it. The parallels between Ethereum’s foundational technology and Solana are evident. However, there are concerns that Solana’s approach to restaking may not yield significant advantages and could even create a precarious financial structure.

In simpler terms, Solana’s restaking market hasn’t seen a dominant player emerge as of now. Jito faces competition from two unnamed companies in the process of securing funding from venture capitalists (Solayer Labs and Cambrian). Additionally, there is a team focused on Cosmos with an operational system (Picasso), and at least two teams that have emerged from hackathons (DePHY and Repl). All these entities are actively trying to tap into the potential Solana restaking market, although its arrival remains uncertain.

Restaking emerges

how to employ economic games to safeguard decentralized computing networks” could be:

Validators are remunerated with interest for their role in maintaining the blockchain’s integrity, while their staked amount serves as a pledge. In case a validator attempts to deceive the blockchain, a penalty equal to a portion of their stake is deducted by the network.

As an analyst, I would explain it this way: Instead of promising to apply the economic concept of staking to just about anything on a standalone basis, utilizing the substantial staking amounts on established protocols can serve to bolster the security of emerging blockchain services. This approach is more efficient as it allows for the collective $100 billion in staking to safeguard all one hundred projects, rather than each project being individually secured by $1 billion.

EigenLayer’s restaking systems primarily enhance Ethereum’s scaling solutions, which are the layer-2 blockchains constructed on Ethereum to boost its capabilities. In contrast, the restaking initiatives being developed for Solana mainly target applications due to Solana’s perceived unity compared to Ethereum. Solana doesn’t rely on or submit to a multitude of layer-2 blockchains as Ethereum does.

Nicholas Deng, a builder from the hackathon team DePHY that secured $2 million in funding in January, expressed that restaking could offer enhanced application security.

As a analyst, I’ve come across Multicoin Capital, a prominent venture capital firm in the Solana ecosystem with investments in various protocols including the network itself. In a recent interview, Managing Partner Tushar Jain expressed some reservations. Specifically, he mentioned that he has yet to identify a commercial use case for restaking in Solana.

“No developer has approached us with the concern that the lack of robust economic security for their protocol’s consensus is the reason users are avoiding their product.”

Head of the pack

Jito’s intentions regarding restaking are still uncertain. The firm responsible for the widely used client software has yet to make any official announcements about joining the restaking industry. When asked for clarification, Bruder only shared that Jito is deeply contemplating this possibility.

A knowledgeable source from a DeFi team has shared that Jito’s upcoming strategy for revitalizing projects involves utilizing SPL tokens, which can be thought of as Solana’s counterpart to Ethereum’s ERC-20 tokens.

“According to Bruder, he has faith in the economic stability of Solana. At the same time, he acknowledges that governance tokens from protocols can contribute to economic security as well.”

As a researcher studying the investment landscape in the blockchain industry, I’ve come across numerous investors who hold Jito in high regard. Two unnamed venture capitalists shared their perspective with me, stating that Jito stands out due to its team’s deep understanding of Solana’s architecture and the Solana community. They expressed their belief that “there’s a significant amount of doubt among the Solana community towards teams outside it achieving this feat.”

Cambrian

As a crypto investor following the developments at Cambrian, I’m excited to share that their founding team, consisting of seven members, is in the process of securing a $2.5 million investment. Insiders have reported a projected valuation for the company reaching approximately $25 million.

As an analyst, I would describe Cambrian’s mission as follows: I believe Cambrian aims to serve a similar role for Solana that EigenLayer does for Ethereum. In simpler terms, Cambrian is designed to provide a security layer for Solana by leveraging restaking, which enables various “middleware” functionalities off the main chain. The pitch deck from February showcases potential applications ranging from off-chain computations to zero-knowledge proof processing.

While we draw significant inspiration from the EigenLayer model, we’re not just a carbon copy. Our offering includes a computation layer as well, he explained. He likened Cambrian to a “decentralized Amazon Web Services,” capable of generating numerous services on demand. These services function as both a computational and security foundation for distinct segments within the ecosystem.

In the coming weeks, Cambrian is set to launch its test network, according to the statement. The executive is monitoring Solayer Labs closely, believing that his company has a technological edge over them.

Solayer Labs

It’s unclear if that’s true for Solayer Labs as well. Similar to many other teams discussed in this article, Solayer Labs hasn’t debuted or made public their source code yet.

As a researcher investigating this topic, I’ve learned from three venture investors with relevant knowledge that the recently established Delaware corporation, just two months old, is aiming to secure $8 million in funding during a seed round. This valuation is set at an impressive $80 million, with Hack VC taking the lead on the investment. They have previously backed EigenLayer as well.

Rachel Chu of Solayer Labs revealed to CoinDesk that the company is on the verge of securing a $10 million investment. One investor, Anatoly Yakovenko, co-founder and prominent figure of Solana, has already committed. However, Yakovenko did not respond to a request for comment. His involvement signifies acceptance for a team that doesn’t have extensive ties to Solana. Chu previously worked as a core developer at SushiSwap, an Ethereum-based decentralized exchange, while her business partner Jason Lee created MPCvault, an Ethereum wallet service.

“Ultimately the problem we’re trying to solve is scaling Solana,” Chu said.

In a blog post published on April 8, Solayer Labs revealed their intentions to create a network of app-chains, which will be fortified by Solana’s economic security and execution. This network is designed to offer users an enhanced experience with the following features:

In her Telegram message on April 29, she mentioned that Solana boasts top-tier vertical stack characteristics. Meanwhile, various approaches will be adopted for ingenious scaling methods to effectively manage workloads.

As a crypto investor in Solana, I’m looking forward to the launch of Solayer’s Shared Validator Network, which is expected to introduce Actively Validated Services (AVS) to strengthen our infrastructure. Among the initial AVS offerings that have piqued my interest are Multi-Transaction Execution (MEV) strategies, distributed computing solutions, and oracle networks.

As a researcher studying a company’s blueprint for their new project, I can describe it as follows: Our plan involves designing and deploying at least four advanced Automated Market Making (AMM) systems focused on Maximal Extractable Value (MEV). One of these systems will function as an auction platform, enabling bids for the right to capture MEV in specific trades. Another system will serve as a MEV regulator, ensuring fairness and preventing potential abuses in this area. Furthermore, we propose the development of a decentralized Graphics Processing Unit (GPU) cluster to enhance computational power, and an Additional Value System (AVS) tasked with managing transaction sequencing among node operators.

Picasso

Approximately six months ago, Picasso initiated the development of a restaking mechanism. More recently, they unveiled Solana’s initial functioning product. According to Henry Love, the Executive Director, Picasso is likely around 12 to 18 months ahead in their progress compared to Cambrian and Solayer Labs.

Love announced that Picasso’s crypto staking platform on Solana will be made accessible to other teams and developers for securing their projects.

Points, points, points

Setting aside the concept of staking, the primary economic endeavor in the crypto realm is the relentless pursuit of profits by its participants. Traders are undeterred in their quest for profitable investment avenues where they can inject their digital tokens. In the ecosystem of EigenLayer, airdrop hunters hold onto the hope that the points they amass through restaking will eventually translate into tokens – an additional revenue stream. This dynamic is poised to repeat itself on Solana as well.

In his prediction of the upcoming clash between Solana’s restaking protocols, Love expressed that the outcome would be determined solely based on yield performance. His team at Picasso has introduced a gamified incentive scheme accessible via its Mantis platform, which amplifies rewards for top performers in terms of yields.

As a researcher studying Cambrian’s upcoming initiatives, I can share that they intend to institute a reward system and subsequently issue a token upon the completion of their staking network’s launch. This event is predicted to occur around the end of the second quarter or the beginning of the third quarter.

Solayer Labs is developing its unique multistage reward system. According to the program’s documentation, those who join early will enjoy significant advantages over late entrants. Depositors in the initial phase, exclusively open to our earliest backers (whitelisted), will have a two-week window to deposit any amount they desire and receive points that are triple the value of those earned during subsequent phases. In contrast, later stages will have established limits on the total value locked and smaller multipliers for earned points.

After the party ends, when inflated currency and rewards are distributed as points or equivalent, it’s crucial to focus on platforms with genuine income and value creation. The proportion of these returns that goes back to the creators will significantly influence which platform garners the most loyalty from them.

Restaking skepticism

Despite widespread doubts within the Solana community, Ethereum’s dependency on layer-2 networks and the substantial staked assets make the process of restaking particularly advantageous for it, according to Ryan Connor from Blockworks Research. He views Ethereum as a “modular” blockchain, which focuses on one function while delegating other tasks to layer 2s – making it an ideal candidate for restaking due to the potential need for a collective pool of assets to secure such a vast network of interconnected infrastructure initiatives.

Solana functions as a “self-contained” blockchain, handling various tasks within its platform. The requirement for features like staking is less significant on Solana compared to Ethereum and other decentralized systems. As stated in a Telegram message.

Cautious critics warn that restarting the process in crypto could be a hidden danger – a repetition of trust-based arrangements that may eventually crumble.

The possibility of contagion exists: if an Automated Validator System (AVS) is compromised and incurs a loss, it could cause a domino effect throughout the entire staking community. The value of all other staking pools could be diminished, and the security of each AVS might be weakened as a result.

As a crypto investor, I’ve come across the concept of “liquid staking” services, which act as intermediaries by accepting deposits from users and re-staking them into platforms like EigenLayer and their equivalents. In return, they issue “liquid restaking tokens” (LRTs), which can be traded in decentralized finance markets to generate additional yields. However, it’s essential to remember that these services introduce an added layer of risk – the risk that the intermediary might face operational issues or even go bankrupt. This could potentially result in a loss for the depositor, so it’s crucial to thoroughly research and assess the reputation and financial stability of any liquid staking service before making a deposit.

An active investor in Solana initiatives shared with CoinDesk that he hadn’t yet put money into any staking teams. When questioned about his reasons, he playfully quipped: “Pondering when staking will cause a cryptocurrency explosion.”