📆 Last week, we ventured into the fascinating realm of LSDs (Liquid Staking Derivatives) and the LRT-Fi (Liquid Restaking Token Finance) frontier. Today, let's delve deeper into one of the most intriguing protocols in this space.
🙇🏻♂️ What am I doing?
Frankly speaking, I'm navigating this as I go. A little disclaimer: anyone who claims to have all the answers in crypto is probably stretching the truth! 😅 It's all a grand and beautiful experiment, filled with potential for great success or challenges.
Moving on, in the past few weeks, I've been exploring Liquid Staking Derivatives and stumbled upon KelpDAO and Stader Labs. These protocols can be synergistically used to boost staking rewards through restaking in EigenLayer.
Let's explore these concepts a bit more! 👇🏻
🤔 What’s KelpDAO?
Kelp DAO is a restaking protocol built on EigenLayer, enabling users to acquire an LRT (Liquid Restaking Token). This token gathers restaking rewards and is readily usable in DeFi. You provide a Liquid Staking Token (LST) to the protocol and receive an LRT in return.
🪙 Supported Liquid Staking Tokens:
🔨 How does it work?
It's quite straightforward:
Take your ETH to platforms like Stader, Lido.Finance, or Frax.Finance and stake it.
You'll receive an LST in return.
Restake this LST on KelpDAO.
Receive rsETH, an LRT, in exchange.
Now you accumulate staking + staking rewards, plus other benefits will explain below!
Benefits of rsETH
💧 Liquidity
While you could stake your LSTs directly on EigenLayer, you wouldn't get a token representation of your restaking. A liquid token like rsETH allows for easy entry and exit from positions and broad usability.
🫰🏻 Zero Fees (for now):
Take advantage of the current lack of fees!
💰 Staking Rewards
Accumulating staking rewards, especially in a bull market, can be quite profitable.
💸 Restaking Rewards
Increasing your benefits through restaking is great, though it's important to acknowledge the added risk. I'll discuss how KelpDAO mitigates this risk later.
🪂 EigenLayer Points (Potential Airdrop)
There's a widely discussed theory that EigenLayer might decentralise with a token airdrop. While I can't confirm this, and it remains speculative, those holding these points might be well-positioned for any potential airdrop.
🤯 Kelp Miles
Exclusive to KelpDAO, these points can enhance staking rewards. Keep an eye out for potential airdrops here too (though this is just speculation).
🧩 DeFi
As LRTs gain popularity, they're becoming integral in DeFi. I anticipate more integrations using rsETH and other LRTs in 2024. The ability to use rsETH as collateral or provide liquidity to augment rewards is a game-changer.
🚨 Security & Risks of Restaking
1️⃣ Slashing Risks: If restaked ETH is slashed by services like EigenLayer, it might reduce Ethereum's consensus layer ETH, potentially threatening network security.
2️⃣ Ransom Attacks: There's a risk of services blackmailing stakers, threatening to slash their restaked ETH unless they receive payment.
3️⃣ Centralisation Concerns: Restaking may favor sophisticated operators over solo ones, possibly leading to centralisation due to their better understanding of risks and rewards.
4️⃣ Increased Vulnerability: Introducing more services and contracts to the ecosystem amplifies the risk of attacks, affecting stakers, delegators, and Ethereum itself.
5️⃣ Straining Social Consensus: Restaking’s high-risk scenarios could burden Ethereum's social consensus, especially if they necessitate community intervention for resolution, like network forks or reorganizations.
✅ Mitigating Risks with rsETH
rsETH, operated by KelpDAO and guided by a Risk Committee, is taking steps to tackle these risks:
Slashing Risks: rsETH initially uses LSTs instead of native ETH for restaking. This approach ensures that any slashing due to service misconduct does not directly impact the underlying staked ETH on Ethereum. Future modules for native Ethereum restaking will be designed to minimise impact.
Centralization Risks: The selection of services by Kelp DAO removes the burden from operators to understand the underlying risks, serving as a benchmark for solo restakers. Upcoming versions of rsETH aim to onboard permissionless operators, aiding decentralisation.
Impacting Social Consensus: Kelp DAO and the Risk Committee are set to scrutinise and whitelist services, carefully evaluating and excluding those posing significant risks to users' funds and the Ethereum network.
👉🏻 While restaking introduces various risks to Ethereum, protocols like rsETH are actively working to mitigate these challenges, focusing on preserving Ethereum's integrity and decentralisation.
The answer is Stader Labs
Stader Labs is a Multichain liquid staking platform that enables earning staking rewards in various tokens from different blockchains like Ethereum, Polygon, BNB, and more!
You can stake tokens on any of the supported networks to receive a liquid staking token. Additionally, you can run a staking validator with Stader, requiring only 4 ETH, which is very similar to the process with RocketPool but lower barrier entrance!
They also have their SD Token, which is an ERC-20 governance token with limited supply of 150 millions that can be used in DeFi!
🧠 Conclusion
KelpDAO, with its Liquid Restaked Token rsETH, strives to address the complexities of restaking for the benefit of various stakeholders. The operation's structure, which includes a Risk Committee and the Kelp DAO itself, is designed to enhance the ecosystem and promote decentralized decision-making.
Overall, this protocol is emerging from a new and nascent narrative in the crypto world. This means it could offer significant profitability, yet it also carries the inherent risks typical of cryptocurrency ventures. It's crucial to conduct your own research and explore new opportunities while carefully managing risks whenever possible