Solana Restaking Overview

Introduction to Solana Restaking

Solana’s Restaking utilizes already staked assets to support additional security and operations across multiple platforms. This concept, initially popularized on the Ethereum blockchain through innovative platforms like EigenLayer, has since expanded to Solana, bringing new possibilities for asset utilization. On Ethereum, restaking transformed how assets are used, allowing staked ETH to secure multiple protocols, thereby enhancing capital efficiency and network security. This model was subsequently adopted by Solana, introducing restaking to contribute to enhanced asset liquidity and improved network security.

Restaking allows staked SOL to be used in multiple decentralized applications (dApps) without forfeiting the benefits of the original staking. On Solana, restaking involves complex mechanisms that enhance both the utility of assets and their earning potential. Validators can utilize a portion of their staked SOL to secure other protocols or earn additional rewards. Smart contracts manage these assets under the protection of the restaking protocol.

How It Works

The implementation of Solana’s restaking technology is a complex process involving multiple components, designed to improve capital efficiency and network security while generating higher potential returns for users. The process begins with users depositing their SOL tokens into a restaking pool manager, which oversees the flow of assets into the protocol. Users can deposit liquid staking tokens (LSTs) or directly deposit SOL, first converted into sSOL-raw, an intermediate form of liquid staking token issued by the staking pool manager.

The user’s SOL tokens are delegated to the manager during this process. After the manager converts SOL to sSOL-raw, it interacts with the restaking pool manager again, ultimately converting it to sSOL, a liquid restaking token (LRT).

Concurrently, the manager handles stake distribution across validators and AVSs, and can delegate SOL to validators that earn maximized extractable value (MEV) returns. The staking pool manages validator selection and MEV-boosted returns, ensuring that user assets are used effectively to secure the network and generate yields.

To enhance cross-chain interoperability, Solana’s restaking also involves a Shared Validator Network (SVN), which allows Solana-based chains to share security. Furthermore, throughout the restaking process, rewards are calculated off-chain. For example, Solayer implements a state observer to track deposits and withdrawals, along with referral data, and additional rewards are applied to user accounts in real time. This design ensures the transparency and timeliness of rewards, while also improving user engagement and satisfaction.

Finally, Solana’s restaking also involves Stake-Weighted Quality of Service (swQoS), a network resource allocation mechanism that allocates block space and transaction processing capacity based on stake weight. This mechanism ensures that users with larger stakes are more likely to submit transactions, thereby improving overall network efficiency and security.

Benefits of Restaking

Restaking on Solana offers various opportunities for users and developers, not only enhancing investment returns but also strengthening the security and vitality of the blockchain network. Through restaking, users are not simply parking their assets but actively maximizing their potential. Staked SOL can simultaneously support multiple projects or validator nodes, thereby earning multiple streams of rewards. This capital efficiency makes investments more valuable.

Firstly, participating in restaking enhances the overall security of the Solana network. Every restaked SOL contributes to the network’s robustness, making it more resistant to attacks and failures. This risk diversification strategy, allowing users to choose multiple validator nodes and distribute staked assets across different validators or protocols, reduces the risk of losses due to the failure of a single node. Simultaneously, the participation of each node enhances network security, making the blockchain more resilient against attacks.

Secondly, liquid staking is another significant advantage of restaking. Solana’s restaking solutions often provide liquid staking options, allowing users to maintain liquidity while continuing to earn staking rewards. This means users can flexibly use their tokens for various financial activities without sacrificing returns.

Finally, users can allocate their restaked SOL to emerging projects, supporting their growth and success, thereby promoting the health and diversity of the blockchain ecosystem. For example, Marinade offers traditional and liquid staking options, allowing users to enjoy staking rewards and liquidity. Jito, on the other hand, improves validation efficiency and node profitability by minimizing the negative impact of Maximum Extractable Value (MEV). These projects play an important role in the restaking ecosystem, optimizing the validation process, improving network efficiency, and enhancing the profitability of validator nodes.

Exploring Restaking Projects

Solana’s restaking ecosystem is a vibrant and innovative field, with a current total value locked (TVL) in liquid staking of approximately $4.51 billion. The top three liquid staking tokens account for 72.6% of the market share. Due to lower entry barriers and continuously optimizing yield mechanisms within the ecosystem, Solana’s restaking has an annual growth rate of 159.2%, demonstrating rapid growth potential. Restaking protocols such as Solayer and Jito, by providing additional security layers, optimizing network resource allocation, and facilitating asset circulation, shapes a more interconnected and robust ecosystem. This enables the Solana network to support high-traffic decentralized applications and crypto projects while maintaining fast and secure transaction processing and low fees, paving the way for new applications and wider adoption.

Solayer

Solayer is a restaking protocol on Solana dedicated to helping SOL holders maximize their asset returns. Through Solayer, users can earn traditional Proof-of-Stake (PoS) staking rewards and receive additional MEV and AVS yields. Solayer supports staking assets such as SOL, mSOL, and JitoSOL, allowing holders to securely provide funds to various protocols and dApps within the Solana ecosystem.

Regarding funding, Solayer has completed two rounds of financing:

• Pre-Seed Round: Solayer conducted an undisclosed-size Pre-Seed round with angel investors, including Solana co-founder Anatoly Yakovenko and Polygon co-founder Sandeep Nailwal.
• Seed Round: Solayer completed a $12 million seed round led by Polychain Capital, with participation from other investor,s including Big Brain Holdings, Hack VC, Nomad Capital, Race Capital, ABCDE, and Arthur Hayes’ family office, Maelstrom. This round of funding brought Solayer’s valuation to $80 million.

Leveraging Solana’s staking mechanism, Solayer provides security through a decentralized validator network, reducing the trust risk associated with centralized services or proprietary tokens. It also provides decentralized applications (dApps) with a convenient way to create AVS LSTs, allowing them to enjoy basic staking rewards and earn additional revenue shares. DApps can also benefit from staking commissions, and in the future, even further optimize yields through underlying operator configurations.

In terms of technical architecture, Solayer’s architecture includes two main approaches: the restaking architecture and technical integration support. The restaking components include a restaking pool manager, delegation manager, staking pools, and a shared validator network (SVN). These components collectively facilitate cross-chain interoperability, allowing Solana-based chains to share security while optimizing staking-based resource allocation. For developers and integration partners, Solayer provides a command-line interface (CLI), comprehensive API documentation, and well-defined smart contract interfaces for interacting with Solayer (endoAVS and restaking) and building compatible dApps.

Furthermore, Solayer has launched a points program designed to prioritize rewards for early participants. In the initial phase, Epoch 0, Solayer offered early depositors a higher points multiplier, allowing them to deposit any amount of assets within 24 hours to earn a higher APY. Upon entering Epoch 1, the total value locked (TVL) cap was set at $50 million. During this period, users who deposited more than 10 SOL could unlock a permanent invitation code and have the opportunity to earn more points by completing at least three tasks, including inviting friends, depositing LSTs, and having deposits for more than two epochs. Currently, Solayer has entered Epoch 3, with no TVL cap, allowing users to stake at any time, and native SOL deposits earn more points compared to other tokens.

Currently, the SOL deposited in Solayer has reached as high as $397.64 million, with 160,000 deposit addresses and an APY of 8.15%.

Operating as a decentralized cloud infrastructure, Solayer enables application developers to achieve a higher degree of consensus and block space customization, facilitating more scalable and complex applications.

Source: Solayer

Cambrian

Cambrian is a modular restaking layer designed for the Solana ecosystem, providing shared security and additional yields for modular networks and middleware by repurposing staked $SOL capital. Its technology and architecture are inspired by Ethereum’s EigenLayer, aiming to enhance Solana’s scalability, security, and economic efficiency.

Cambrian is characterized by its modular architecture and restaking mechanism, providing a shared security solution for the Solana ecosystem. Compared to traditional monolithic architectures, the modular design decomposes the system into independent functional modules, each of which can be developed, deployed, and scaled independently, enhancing flexibility and composability.

In summary, Cambrian’s technical principle is based on the restaking mechanism and shared security, extending the consensus security of the Solana mainnet to other modular networks and middleware. This allows validators to earn additional yields while supporting new applications, and developers can quickly launch trusted networks without relying on new tokens. Its modular architecture further enhances the system’s flexibility and composability, providing secure and efficient foundational support for decentralized applications.

Source: Cambrian

Picasso

Picasso is a general-purpose restaking blockchain built on the Cosmos SDK, connecting different base chains through the IBC protocol, processing deposited assets and allocating them to Actively Validated Services (AVS). Its restaking solution is similar to EigenLayer, allowing a portion of the nodes in the network to provide security for AVS. Governance mechanisms select Picasso’s node operators and currently support restaking with SOL LSTs and native SOL.

Picasso’s architecture achieves compatibility between Solana and other IBC (Inter-Blockchain Communication Protocol) enabled chains by deploying a “Guest Blockchain” on Solana, driving breakthroughs in cross-chain interoperability. This architecture allows Solana to use native SOL and other LSTs (such as $jitoSOL, mSOL, bSOL, etc.) as staking assets, enhancing network security through the restaking layer and enabling seamless connection of Solana liquidity with chains like Cosmos, Polkadot, and Kusama.

Picasso has designed Actively Validated Services (AVS) to support this cross-chain bridging and uses activities like Mantis Games to guide liquidity into the restaking layer. Regarding the distribution of bridging fees, 20% are allocated to PICA stakers, and 40% are allocated to restakers. Through incentive mechanisms such as the distribution of staking rewards, this system promotes the participation of PICA token holders and restakers, while paving the way for further integration of Solana with the IBC network. Additionally, Picasso collaborates with several Solana DApps, such as Kamino Finance and Raydium, to promote the expansion of the PICA token within the Solana ecosystem.

Picasso plans to expand to the Cosmos chain and other assets after launching AVS on Solana. Currently, supported restaking products include SOL, Jito SOL, mSOL, and bSOL Picasso)

LST assets. Picasso’s Staking Interface (Source: Picasso)

JIto

After successfully building the largest liquid staking protocol on Solana, Jito Labs is again driving industry development with the launch of a new restaking protocol – Jito Restaking. The protocol is now live and will open deposit functionality with an initial restaking cap of approximately 147,000 SOL.

Jito’s Restaking Interface (Source: Jito)

The core of Jito Restaking consists of the Restaking Program and the Vault Program, which are the two key pillars working together within the framework.

• The Restaking Program is responsible for managing Node Consensus Operators (NCNs), including node creation, user selection mechanisms, and reward and penalty rules. This component is invisible to users and is the underlying core of the restaking framework’s operation, providing security and stability support for the network.
• The Vault Program is the primary interface users interact with, responsible for managing Liquid Restaking Tokens (VRTs) and implementing personalized restaking strategies through DAOs or automated protocols. The Vault Program provides users with flexibility, allowing them to choose the most suitable staking plan based on their preferences while enjoying the benefits of liquid tokens.

In the initial phase, Jito Restaking is partnering with three Liquid Restaking Token (VRT) providers: RenzoProtocol ($ezSOL), Fragmetric ($fragSOL), and KyrosFi ($kySOL), collectively allocating the initial cap of 147,000 SOL. Users can choose between these three based on their risk tolerance and return expectations to optimize their staking experience.

Risk Management: The liquidity and mechanisms of different VRTs vary. Renzo and Kyros’ tokens have initial liquidity and lower risk, while Fragmetric’s tokens are initially non-transferable, resulting in higher liquidity risk.

Yield and Airdrops: The expected annual percentage yields (APYs) of each VRT are similar, but there are significant differences in airdrop potential. Kyros and Fragmetric have not yet launched tokens, so there are more airdrop opportunities, while Renzo’s token airdrop potential is limited.

VRT Provider Comparison (Source: Jito)

Sanctum

Sanctum is an innovative restaking protocol that enhances capital efficiency and security on the Solana network. It allows users to restake liquid staking assets (such as mSOL or stSOL), thereby achieving compound returns on their assets. This mechanism allows users to continue earning rewards from their original staking and enables further yield distribution through participation in the Sanctum ecosystem.

A key highlight of Sanctum is Infinity, a multi-asset liquid staking token (LST) liquidity pool that supports trading between an unlimited number of whitelisted LSTs (such as SOL, bSOL, etc.). It determines the fair price of each LST by calculating the actual value of SOL in staking accounts, eliminating the reliance on constant product or stable swap formulas used by traditional liquidity pools.

To optimize yields, Infinity dynamically adjusts the target allocation ratios and swap fees for each LST, both increasing trading returns and maintaining minimum asset holdings. The native token INF enables shared liquidity and can be used in DeFi protocols, with its yield sources comprising a combination of LST staking rewards and transaction fees.

How it Works

Sanctum’s operation is based on the following key processes:

• Liquid Staking Asset Support: Users can deposit liquid staking tokens obtained from protocols like Marinade or Lido into Sanctum.
• Restaking Mechanism: Sanctum delegates these liquid staking tokens to audited validator nodes, achieving restaking.
• Compound Returns: Users not only earn basic staking rewards but also gain additional returns through Sanctum’s restaking mechanism, maximizing asset utilization.
• Decentralized Security: Sanctum directs more staked capital towards Solana’s validator nodes, enhancing network security and decentralization.

Sanctum addresses two pain points of traditional staking models: asset liquidity issues and the limitation of a single revenue stream. Through restaking, Sanctum provides an innovative solution that increases users’ earning opportunities and injects new momentum into Solana’s security and decentralized development.

Conclusion

Restaking on Solana is an innovative mechanism for enhancing capital efficiency and network security by repurposing already staked SOL assets to support multiple protocols or decentralized applications (dApps). This concept, initially emerging in the Ethereum ecosystem, has gradually been adopted by high-performance blockchain platforms like Solana, providing users and developers with more flexible asset management and yield opportunities.

The working principle of restaking involves depositing SOL into a manager, converting it into liquid staking tokens (LSTs or LRTs), and achieving efficient resource allocation through complex staking pools and validator networks. This process increases asset liquidity and strengthens network stability and resilience against risks through shared security mechanisms. Furthermore, restaking is combined with cross-chain technology, significantly enhancing the interoperability of the Solana network with other blockchains.

The introduction of restaking has enabled Solana to not only excel in high performance but also offer new possibilities in capital utilization and ecosystem collaboration. Through innovative staking mechanisms and decentralized infrastructure, restaking enhances the Solana network’s capital efficiency, security, and ecosystem diversity. With the gradual development of protocols such as Solayer, Cambrian, and Jito, Solana’s restaking is paving the way for users and developers towards a more open, efficient, and secure blockchain future.