Restaking: Innovation or Centralization? | Vanessa Pestritto, Rok Kopp, Chunda McCain, David Rodman

everybody going doing good we doing doing well doing well huge uh turnout for the reaking staking stuff gigantic uh well welcome everybody uh title of this panel is reaking innovation or centralization um just show of hands everybody know what reaking is in this room excellent excellent that's actually really impressive uh that's I think that's 100% that's 100% that's um my name is Dave Rodman I am the managing partner at the Rodman Law Group we are a web three focused uh Law Firm here in Denver Colorado uh represent all sorts of cool projects in the space we've got I see at least one client in the audience one client on the stage um so I'm excited to be here and moderate um I'll turn it over to you Vanessa to introduce yourself thanks uh hi I'm Vanessa pisto founder of electric gems I have experienced as a venture capitalist and layer one and I work with web 3 projects and also make investments hey uh my name is Rock I'm one of the co-founders of ethery um most people know ether fi for our liquid reaking token um and that's kind of how we got up and going but uh that's one of our three products what we're really trying to do is build uh essentially a a Neo bank that's fully on crypto rails so allowing people to save invest and spend their crypto uh without having to offboard and to Fiat so that's really the mission and what we're trying to do now um and so uh one of the core products is our liquid reaking token rap e thanks for having us and I'll close it off uh my name is chunda I'm one of the co-founders of nucleus uh we build uh yield infrastructure and liquidity management infrastructure as well as tokenization infrastructure for l1s l2s D5 protocols and D5 Primitives so we enable them to kind of optimize any pre-existing uh kind of financial Primitives they have as well as uh tokenize both on and offchain um asset flows awesome thanks guys uh so given the title reaking Innovation or centralization I want to ask each one of you uh what that means to you and where you fall on that Spectrum um you know it's it's been framed as a a g potential game Cher but also as a risk factor um who would like to take that I can I can kind of kick it off there um I think so the I think the first question that most people in the audience would probably have when it comes to uh kind of answering that is what do you mean by centralization like what exactly is that risk um that that could exist and the the way that I kind of uh look at that question is that um reaking effectively takes what was traditionally thought of as more like an individual uh part uh kind of action of validating a network you know the vision of you know eventually everyone could run an ethereum node or you know some networks like Celestia allow you to run light clients on your phone um and it really kind of takes that and flips that on its head and says well actually what we're going to do is we're going to take these like large entities who run these like professional note operating systems and then enable them to secure pretty much all of the decentralized networks that will ever exist uh in crypto in general um and I do think that you know is is taking a kind of centralizing factor for validators and validating Services yes um but was the writing on the wall before reaking even kind of came on board a lot there was a lot of contention about you know uh the valir size being too large and ethereum being slower as a byproduct uh worries about like uh State retrieval in the long run and so a lot of the kind of limitations of e scaling were limited by validator set size and a lot of discussions around validator set centralization was already occurring at uh the ethereum level even before reaking so is it centralizing yes um but I think the kind of writing was a little bit on the wall before it came into play what do do you like to add to that uh while on the Innovation side I think there were like two things um one reaking was brought in because people were got all their tokens in the beginning when years ago when we were getting into crypto we all decided to hold our tokens so then we could stake them and and that was a nice little internal thing to do for the existing crypto audience a lot of education for newcomers and then yet again let's do reaking as the next thing so I think there's been this internal aspect to still try to find more to do with our crypto when we really need adoption but one can argue on a 30-year life cycle but I still think we need to work harder to get more people in so on the Innovation side I think reaking as a concept is entertaining and there is some value things like with ethery or Veta which also helps power ether ethery but um the other side for Innovation is that we want to see people build like launch avss and we're not seeing enough of that yet so I think there needs to be much more effort in that space But I think it's just challenging for anyone new coming into crypto who thinks I have to launch a token but do it on an AVS because it's easier it's just still it's still a lot to take in um rock uh it's been about 2 years since Ian layer launched and uh well I don't think it's a con opinion to say that we don't really have a killer use case yet are we are we missing are we missing something what do we what do we need to do uh to get that killer use case I it's a really good question so I think um a couple things reaking is still really new in the grand scheme of things we are really impatient in crypto um the if we're being honest like the centralization stuff um I think what people care about and what's going to bring people into crypto is higher yields so yes reaking is giving higher yields right now but it's not sustainable long term because it's just being um supplemented by the ion token right so you need new use cases and killer apps to actually build here I think one of the big issues with reaking just for normal people to build on it is how like complex like the words are like in and kind of adapting it and so I think making it simple and more marketable for Builders who are outside of crypto to coming and build like um one analogy I've kind of used is like if you use a website you don't think of like oh what servers are they like are they AWS or the Google cloud like you don't think about that and so if we can get to that point where people understand it's like it should be more cost effective I guess to uh build on top of uh Igan layer or symbiotic or whatever shared security platform um I think that is like a big win but ultimately what users care about what's going to drive more users is higher yields and so the the supply side of like actual eth to be shared or BTC or whatever it is like the shared security is fine we just need a lot more builders on top um so Redstone is launching an ABS and they're launching a token and they're going to pay um with a token which is that's a huge win um but like you need that at like 100 or 200x scale uh and so I think that's a big challenge for the igen layer and the symbiotic BD teams to like get a lot of building and make it it really compelling for people to build there well yeah I mean I think one of the original selling points of reaking was that it would generate extra yield but I mean correct me if I'm wrong but aren't uh aren't many lrts earning less than just basic staking at this point maybe um but maybe they're just not like allocated then uh so ether base taking Y is about 3% uh ethery apy like 30 days is 4.3% um so like 50% more but it's still lower like go back 3 years ago staking yields were 8 9 10% staking yields right like so um the risk of that for 3 to 4% like honestly if you look at our usage people aren't there just to stake they're there to stake and then go do some crazy in defi so fair uh what if you take the token emissions out what are we looking at then it's just staking yield yeah for sure so but the dream is that igen emission like IG doesn't have to continue to like supplement that maybe they'll continue to pay for da or whatever but other avss will use their tokens to to pay out so that's like I said Redstone doing that is is amazing it's huge um and you need to get like more of that built but Ian layer needs to figure out the the market dynamics I guess on that to encourage avss to to pay out um and see enough value uh to pay out um with their tokens so so I'll throw this to the whole panel whoever wants to take it can take it but um I think we're starting to see slashing going live across a couple of platforms uh how do you think that users should be thinking about this in general that's a very good question um in fact I say it's the it has been the the question that's been kind of lingering over reaking ever since the idea was created right um I think it's also going to be the true stress test on whether or not people are willing to keep their capital and reaking Platforms in terms of how users should think about slashing I think there's kind of a uh two things um that I think everyone should kind of keep in mind um one is first about kind of awareness and knowledge so when you're interacting with the reaking platform um whether it's in LRT like ethery or directly with like IG symbiotic um this is a completely different Dynamic uh than traditional staking like the game is completely changed um those similar way that we think about kind of uh assessing like solvency risk at a financial level with let's say like a financial derivative not that the risk is the same but that level of scrutiny and discipline when it comes to understanding what's going on underneath the hood I think also needs to be extended to uh reaking products and restake a assets the second thing I think which also is interesting is that with Innovation comes additional risk and not additional risk in the sense that oh you're going to build new things and new things may break but new things may intentionally have a purpose on why they may be slashed and those slashing constraints are like definitely going to be much more frequent um than ethereum uh has I think in the history of ethereum there's less than 500 slashing events to ever occur in the history of proof of stake being live that might not be the case with reaking I think there is going to have to be some sense of kind of acclimating to this reality that people are going to get slashed um and there are going to be different applications that slash for different reasons but people should be aware that that will be a reality and to understand why and maybe in certain cases it's not always a bad thing um and that it might be a part of like kind of the the product or feature that they're opting into so to to build on that for either one of you two have want to take this one do you think that uh reaking is riskier than originally advertised no um I proper disclaimers written well um staking is is again this is a market Dynamic that needs to play out Igan layer is just turning on staking a lot of um protocols we're building are saying well hold on like no um and then symbiotics started with uh slashing but the um basically each what they call a network or protocol gets to set their own slashing terms so I completely agree with chunda that reaking will have slashing events but like the market dynamics are still so immature because um there's not enough incentive for protocols uh to turn to to like say yes to slashing and capital if slashing is turned on is certainly not um getting enough return uh to to say yes to that right so um I I think we'll see some of those market dynamics play out uh again it's it's an industry that's two years old and like there's $30 billion in it so I feel like the industry in general is like really good we're just impatient in crypto and we're like why isn't this here like now um but the next couple years and getting Builders and getting incentives to users is super super important I was say building confidence in uh putting your crypto into uh a new application or a smart contract that is new I mean yes you have this high level of ass asss that are being restak that's a good signal for people to have more confidence in participating but as a newcomer or people who've been around for a while who've lost funds in uh some smart contracts that were already had a lot of um AUM but I think that's where the risk still is because there are issues or challenges around uh solidity smart contracts still and I've I am an investor in the space I do believe in it but I think that's always one side that um will keep newcomers from continuing to want to participate well I think to build on that and also I know that you have some experience in other ecosystems um do you what are your thoughts of uh on reaking in other non-e ecosystems um so I was in the cosmos ecosystem I still have assets there uh they were turning on uh this different liquid reaking tokens and protocols uh I like that the one that I was talking to the most I think was just drop where they were putting together uh commitments for people to already start in order to have liquidity in the space but um I've not spent enough time to go further on that fair we're getting we're getting closer to the end of end of time but I want you guys to all get the answer this one if you want and uh we'll start with uh you rock um what uh is the most interesting ABS uh use case for reaking that you've seen personally or one of you don't have to pick your favorite so you don't have to pick favorites I I mean there's there's several things that are um being built right now that are that're interesting um I guess the pre-confirmation stuff is probably like the best uh use case I guess that I've seen and um uh actually oracles probably so like Redstone and E Oracle I think are the first two that are going live and both will pay out in tokens uh on I so so that probably is the best use case uh the pre-confirmation space again a lot of market dynamics to to figure out there um with the the validators uh in in the market but uh I'm very interested in see how that one plays out because I think there's a lot of potential in pre-ms I think on my end um I I'll Che because it's kind of not an ABS but it's a use case that's dependent on reaking um protocol cap Labs they're focusing on like kind of financializing also a client also a client shout [Laughter] out Denver Colorado um but really fascinating use case on saying like Okay how can we use restate collateral uh to actually support uh Financial activities um and not Financial activities on chain Financial activities offchain from large institutions which I think is a really out of the box an Innovative use case for restake collateral that um although may share some risks is I think an experiment worth uh kind of uh pouring some resources into uh so I guess also uh reaking adjacent uh is um I mentioned earlier Veta Labs I'm an investor just a disclosure um and they're helping increase the overall participation in several protocols uh including ethery and it's just I think making it easier for people to participate without having to have that intimidating initial risk uh and otherwise that might be out for for them all right last one um if we're having the same panel one year from now at eth Denver what do you think has changed in the reaking ecosystem what do I think has changed or what has to has to change either one either one it is super important that um there's abss or networks that are paying out tokens so I would say like fast forward from now I 25 or 30 like more than 25 or 30 um protocols on both igen layer and symbiotic that are paying out with uh paying rewards with a token igen layer has to prove that this is going to make it 100% so similar along align with that avss need to have their revenue models uh correlated with reaking if there's no monetary incentive or shared economics with reaking at the protocol level it's not going to work all right well I think we did almost perfectly on time uh thank you all for listening to us and let us letting us pontificate thank you to our panel um and uh I think that's it thank you fantastic thanks guys