Can the Nesting Model Revive Ethereum as Competition on the Re-staking Track Escalates?

2024-04-10, 07:32

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![](https://gimg2.gateimg.com/image/article/1692587449analysis.jpeg)
## [TL；DR]: 
Innovative technologies in the Restaking and DeFi fields, such as Babylon Chain and Eigenlayer, are leading the way for future development.

The re-staking projects of PoS chains such as Picasso and LiNEAR have emerged, unlocking the liquidity value of more chains and bringing new growth opportunities to investors.

Re-staking is an important narrative in the <a href="/ru/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> ecosystem, and Eigenlayer has demonstrated broad development prospects by improving asset operation efficiency and security consensus.

## Introduction
In this year's booming bull market, and the highly anticipated AI, RWA, DePIN, and <a href="/ru/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> ecosystem, the Restaking track holds a highly imaginative focal point.

This track is expected to continue playing a role throughout the bull market with its unique narrative of nesting gains and the distribution of tokens through staked points, becoming one of the tracks investors cannot ignore.

We will share the latest developments in this track, analyze its significant impact on Ethereum's recovery, and look forward to future market participation opportunities.

## The TVL of the Restaking Track Continues to Climb, with Numerous Projects Emerging
With the emergence of Restaking, Ethereum's counterattack has essentially quietly begun, marking the gradual formation of a new round of competitive landscape.

Eigenlayer's founder pioneered the concept of Restaking, which is a product of the continuous evolution of the staking track.

In September 2022, Ethereum successfully transitioned from Proof of Work (POW) to Proof of Stake (POS), which means that Ethereum holders can become network validators by staking ETH, thereby maintaining the security and stable operation of the network. However, the high threshold (requiring 32 ETH) and lock-up period of Ethereum staking have become a major pain point.

To address these issues, liquidity staking derivatives (LSD) have emerged, which aggregate the staked ETH of retail investors. Stakers can obtain corresponding ERC-20 derivative tokens in a 1:1 ratio (such as the stETH issued by Lido), which have strong liquidity and are easy to trade and redeem.

Subsequently, the re-staking products were also launched in line with the trend. As the name suggests, re-staking is secondary staking of staked assets, which is attractive in obtaining staking rewards and potential project airdrops.

The reason why Eigenlayer proposes re-staking is that in many real-world applications such as Oracle, Decentralized Finance (DeFi), and DA Layer, high security is required. When insufficient project funds make it difficult to establish self-owned verification nodes. Therefore, Eigenlayer satisfies this security requirement by introducing the re-staking concept.

From the general market experience, when a project adopts the security provided by re-staking, the market generally expects it to offer airdrop rewards as incentives, which to some extent expands the enthusiasm of investors to participate in Restaking, and many LSTfi and related supporting facilities products also come in droves.

As of the writing date, according to DefiLlama's statistics, the TVL of the Restaking sector has climbed to $13.86B.
![](https://gimg2.gateimg.com/image/article/17127339591.jpg)
Source: DeFiLlama
 
## The Rise of Multi-Chain Liquidity Restaking Projects
Based on our observation, the development of the Restaking circuit is no longer limited to the pure Ethereum re-staking meta protocol. This concept of shared security has also begun to expand to other chains and even the entire chain, giving rise to many re-staking-based foundations and financial facilities. This will further improve the efficiency of asset liquidity value utilization in each chain and expand more empowerment scenarios.
 
## Bitcoin Re-staking: Babylon Chain
Babylon Chain is a Bitcoin staking protocol aimed at enhancing the security of other PoS chains by leveraging the security of Bitcoin's over $1 trillion cryptocurrency economy.
 ![](https://gimg2.gateimg.com/image/article/17127339992.jpg)
Source: Babylon Chain
 
 It creates a bilateral market that allows Bitcoin holders to securely stake their BTC and choose the PoS chains and DApps they want to support and profit from. The key to the operation of Babylon lies in enforcing the penalty mechanism and overcoming the shortcomings of Bitcoin's smart contract functionality by combining advanced encryption technology and optimizing the Bitcoin _script_ programming language.
 
Babylon utilizes one of the key features of Bitcoin - timestamp - to regularly record checkpoints of other PoS networks on the Bitcoin blockchain, providing a layer of security for transactions. Any attacker attempting to disrupt the PoS network utilizing Babylon Chain will have to attack the Bitcoin blockchain itself, thereby creating security equivalent to Bitcoin for these chains.

The architecture of Babylon consists of three parts: Bitcoin as a timestamp service, Babylon Chain as the Cosmos Zone of the middle layer and aggregator, and other Cosmos Zones as security consumers.

This architecture enables Babylon to aggregate checkpoints from different zones and perform timestamp verification through the Bitcoin chain, ensuring the security of all transactions.

In addition, Babylon also accelerates the unbinding period by sending checkpoints to the Bitcoin chain, reducing the withdrawal time that may have taken days or even weeks to hours.
 
##Solana Re-staking: Picasso
Picasso is an infrastructure layer focused on DeFi interoperability, utilizing Cosmos SDK technology to connect multiple ecosystems by extending the IBC protocol.
 ![](https://gimg2.gateimg.com/image/article/17127340353.jpg)
Source: Picasso
 
Picasso launched a testnet for Ethereum and IBC in October 2023, and plans to achieve IBC connectivity between Ethereum and <a href="/ru/price/solana-sol" target="_blank" class="blog_inner_link">Solana</a> in the second quarter of 2024. It uses PICA tokens to protect network security.

Regarding Solana, Picasso has built a re-staking layer, known as the "visitor blockchain," as the validation layer to make Solana compatible with IBC. This layer needs to be validated and use staked assets to protect its own security, while SOL and its derivatives can serve as collateral.

To guide liquidity, Picasso has launched the Mantis Games event, which is divided into three stages, including NFT auctions, team staking matches, and exchange matches with a scoring system.

In addition, Picasso has designed an Actively Validated Service (AVS) to facilitate the interoperability between Solana and other chains. In the bridging fee, 20% is given to the PICA staker and 40% to the re-stakers.

Another highlight of this protocol is that the Rome Protocol will serve as the second AVS to use Picasso Solana as a re-staking layer, and more details are expected to be announced shortly.
 
## Near Re-staking: LiNEAR
LiNEAR is a project that enhances the chain abstraction network security of NEAR through re-staking. As the leading DeFi protocol of NEAR, it improves network security and decentralization through innovative liquidity staking and automatic validator optimization algorithms.
![](https://gimg2.gateimg.com/image/article/17127340864.jpg)
Source: LiNEAR
 
LiNEAR is committed to simplifying user participation in decentralized networks, especially as the NEAR ecosystem advances chain abstraction.

Chain abstraction enables users to easily cross multiple blockchain transactions without understanding underlying technologies. Therefore, LiNEAR focuses on re-staking and lowering the entry threshold for multi-chain ecosystems.

Its core strategy is the liquidity re-staking of the entire chain, ensuring the security of the chain abstraction infrastructure and avoiding the pitfalls of centralized and permissive solutions. By utilizing existing blockchain security mechanisms, improving capital efficiency, and promoting the close integration of the underlying layer and blockchain, re-staking effectively protects the infrastructure of the chain abstraction.

The chain abstraction functions of NEAR include social authentication, account aggregation, and chain signing, providing users with a unified account and interface. To achieve this vision, LiNEAR is developing new decentralized infrastructure such as chain signature MPC networks and multi-chain Gas relays.
 
## Full Chain Re-staking: StackStone
StackStone is a full chain re-staking liquidity protocol demonstrating high scalability by supporting various staking pools and being compatible with upcoming Restaking. StackStone has also established a multi-chain liquidity market based on its native LST and STONE, providing users with more use cases and revenue opportunities.
 ![](https://gimg2.gateimg.com/image/article/17127341765.jpg)
Source: StakeStone
 
The main highlights of StackStone include:
1. Decentralized integrated staking protocol: aimed at establishing an LST liquidity cross-chain market, connecting Ethereum and other blockchains, and solving the problem of liquidity and asset fragmentation between the main network and other networks.

2. OPAP (Optimization of Investment Portfolio and Allocation Suggestions) mechanism: Provides a decentralized solution for liquidity staking, allowing users to deposit ETH into protocols in exchange for STONE tokens. As protocol revenue increases, STONE value (exchange rate against ETH) will continue to rise.

3. Cross-chain compatibility: Based on LayerZero design, it supports seamless transfer and alignment of assets and prices between multiple blockchains. Currently, it supports public chains such as Ethereum, Manta, Base, <a href="/ru/price/bnb-bnb" target="_blank" class="blog_inner_link">BNB</a> Chain, Mantle, Linea, etc.

4. Automatic income optimization: Using the OPAP mechanism, the underlying asset allocation is automatically adjusted to ensure that STONE holders can obtain the optimal staking income.

5. Security: StackStone is committed to providing users with the safest revenue management services.
 
##To Sum Up
This is a rapidly growing emerging market, with not only initiators like Eigenlayer but also aggregators like StackStone dedicated to expanding the full chain liquidity staking. They focus on developing solutions and continuously expanding new financial return scenarios in liquidity re-staking protocols.

Presently, the track is still at the junction of the blue and red oceans, and more changes in the market pattern are expected in the next few weeks and months.

Of course, this nesting method of creating new assets by repeatedly staking ETH and other native assets also carries many risks.

For example, users may have reservations about using EigenLayer's native tokens as they can directly stake ETH to receive rewards.

If a large amount of ETH is re-staked in other protocols, once a security vulnerability occurs, it may affect the security of the Ethereum network. There is also the issue of token reward allocation; if the re-staking participants receive too many rewards, it may disrupt the token economy of the protocol.

Re-staking also involves the risk of canceling the staking period and ETH management issues.

Despite the risks, in the bull market, the issuance of these new assets can be seen as the process of creating a foam, which is crucial to broaden the value of assets and obtain excess returns.

Meanwhile, with the development of technologies such as modularity and chain abstraction, Eigenlayer's pattern provides the possibility for projects to deploy applications quickly, conveniently, and at a low cost.

The current market demand for EigenLayer and Liquid re-staking protocols indicates that we are on an interesting journey of exploration. Although the emergence of new technologies and companies comes with risks, these risks are worth evaluating and controlling rather than giving up and cracking down on.

As for which new protocols and product paradigms will emerge in the future, and how they can integrate and even boost the Ethereum ecosystem, this will be a long-term issue, and we will continue to monitor the development of this field closely.

<div class="blog-details-info">
<div>Author:**Carl Y.**, Gate.io Researcher
<div>Translator:Joy Z.
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
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