Uncharted Territory Ahead: Why Restaking Needs Modularity - TOKEN2049 Dubai 2024

okay welcome everyone bit cold um awesome hope everyone is doing well I am mohak Agarwal I'm the founder and CEO of clay stack uh prior to Clay stack I was running my own Fund in web3 then I was running a staking Air Service Company with 200 Mill doar in assets have been running valuator nodes for quite some time uh I started clay Stacks somewhere around couple of years back um initially to solve liquid staking now reaking so the topic of today is why reaking needs modularity you must have seen lot of reaking protocols now coming up uh becoming the hottest topic right now so let's look at like what is the anatomy of liquid reaking like what does it what are the elements of liquid reaking as I said like it's one of the hottest space in less than one year the tvl has been highest more than 4 million of eth has been staked directly by igon layer itself so what does it mean like what are the elements of reaking so the very first layer is the staking layer uh when someone deposits eth in any reaking protocol when you deposit on your reaking protocol the E needs to be sted on Beacon chain uh I'll jump on each individual topics or uh components of that so first the eat needs to be restak on Beacon chain then the E needs to be restak on any reaking layer so let's say iGun layer then after that which me relay to use uh to capture all the me boost and lastly when you want to expand um your restated LRT on different l2s uh then there are like specific challenges that everyone faces there so let's talk about the reaking layer first uh we'll go through this one quickly because I want to focus more on uh reaking one but in the staking layer first is which valuators to stake to uh you must have seen like every every staking protocol face that challenge like Lio used to have a very small validator set and the reason is when you start growing your validator set the challenge that you face is you need to have a bond you need to have a collateral deposited by uh a valuator imagine having on boarding a home scker who's skiing in Salt Lake City when the node is down what do you do you cannot do anything uh even though let's say the validator is very technical so there are solutions to that um so the solution is DVT which is distributed valuator technology instead of letting a single person single machine run any node you split the keys and let four people or multiple people valuate the same node without DVT you cannot do that if you run any backup node you run a risk of double signing uh but with DVT um as long as let's say more than 66% of The Operators are online you're never going to miss any single attestation you're never going to get slashed if everyone even deliberately wants to get you slashed they have to collude to do the same malicious activity which is very hard to coordinate uh then vfp uh which is valuator funding provider this is a concept that has been developed by Clay stack when you ask any valuator uh or a homaker to come and bond with you you you need a collateral so let's say 4 e for most of the crypto Bros here maybe for e is nothing but for any homaker that's almost $122,000 it's a lot of money so they will not do it that's why we created this pool called vfps where imagine you are someone who wants to uh underwrite bond for mohak who's a very technical valuator but does not have the capital to write his own Bond so I'm going to borrow that bond from you and then run these nodes and you're going to you're going to lend me this Bond because uh you're going to make much more yield uh by just like lending it in a minimal risk then last is client diversity which becomes extremely difficult um at execution level and um at valuator level as well so um most of the valuators just want to support get so it becomes uh I mean just like more and more centralized now the reaking layer which is what where you want to spend the most time so so uh the first is uh abss which is actively valuated Services uh every reaking protocol have to decide uh which abss they want to delegate to um right now it's easier because most of the abss does not have any slashing so most lrts are going to just support everything um it's gas intensive but still uh second is um the risk management um which comes once the slashing is live uh how much you want to give to any AVS and how um how do you want to distribute to that AVS what is the selection criteria um then the next is um reward distribution which is every AVS is going to give reward in their own currencies uh how do you distribute that to stakers so the reason I'm explaining this is the reason um I'm explaining this is because this architecture is very very complex uh and most of the people it's all invisible tech for most people they deposit eth you get LRT you don't know what is happening behind and the challenge is reaking is super early days like igon layer just launched their minut it with $3 million in tvl there will be numerous updates that going to be coming on uh IG layer and if you are a very security focused protocol the challenge that you're going to face is you'll have to re audit the whole protocol so that's why I'm explaining all the moving parts of the system then we'll see like where it needs or why modularity is absolutely essential here the next is cross chain layer uh when you expand your uh LRT to multiple layer twos or layer ones the challenge that you face is maintaining the exchange rate let's say your uh let's say the Cs is trading on uh on ethereum at 1.5 uh and now you're live on 10 other l2s so how do you maintain the exchange rate across all 10 l2s if there's a buffer or if there is a mismatch the protocol can have a hole if you give outdated rate um then the bridge which bridge to choose uh most optimistic Bridges have 7 Days delay uh when you're transferring from Layer Two to layer one so that becomes another challenge uh so which bridge to select so that uh there is minimal delay which cross chain message passing um protocol you want to use uh or um the multiple ones there as well because again if there's a delay they can be whole in the protocol so this is the architecture but uh like you can see how complex it is already uh what we have tried our best is to modular modularize this architecture um this this slide could have been uh more better for sure uh it's probably it's not helping the case uh but the idea is what we want to do is we want to have this architecture as modular as possible so that the core protocol remains immutable and all the isolated modules to remain upgradeable if you see the trajectory of Lio right if you are someone who wants who does not want to take any risk who just want a stable yield you'll not go to any newer protocol you you're going to go to Lio why because you feel that the smart contract has been deployed for years the same smart contract it has been audited seven or eight times so people feel much more trust but what happens is we are living in a space where rapid development is happening especially reaking it's the fastest space right now so the moment you upgrade your contracts it needs to be re audited the previous audit doesn't mean anything uh even if you had like five audits now it's all meaningless uh I mean not completely meaningless but most of the times so that's why you see Lio like people are more trusted that oh okay it has 10 audits never been hacked have more trust that's what we want we envision that in liquid reaking with all these moving parts reaking super early going to have at least three upgrades this year DVT super early so many challenges that has yet to be solved at least four to five upgrades this year then every layer DVT reaking there will be multiple players out there uh on reaking they already you you must have seen like IG layer competitors coming up obviously they are far more like igen layer is far more ahead and most likely have won the race on ethereum but still DVT SSV OBO multiple ones are going to come come up uh so if you don't have a modular architecture if you're relying your whole protocol is baked in in one of the partners one change happens the whole architecture has to be upgraded whole all all the smart contracts needs to be re audited which creates just like very strong challenges then the most interesting thing that's going to happen once avss are going to have slashing how do you give AVS programmability to the end users uh user a wants to delegate to AVS X User B wants to delegate to ABS Y how do you do that because uh the LRT every LRT is fungible so so many challenges and every protocol who who will try to solve all of them in one baked in architecture uh they will have very very hard time it gives there's one advantage of doing that which is fast execution you go to the market very very fast you gain a lot of tvl but at the same time you bring a lot of risk to the system one hack and yeah then like you create history because this is the only space mind you this is the only space that has never been hacked dexes have been hacked PS have been hacked um lending borrowing protocols have been hacked left and right liquid staking has never been hacked liquid reaking it's early never been hacked there's only one instance which was one protocol but that was not a hack they just forgot to back up the private key with $150 million uh uh so I would not call that a hack but this is the only space which has not been hacked but I feel like if we don't give a strong emphasis on modularity now someone will create history and uh I hope that doesn't happen yeah so that's the end of it any questions raise your hand okay so either I did a very good job or very bad job but thank you no wait wait wait wait that case I'll I can if you I'll ask you one question because when we're talking about reaking uh it seems like in the past it used to be let's say something uh unimaginable when you're building actually your protocol um what was the let's say did you take some other protocol as an example this is how we build this on top um this is how we'll build this on top of other protocols or this is how this was just initial idea and the only one unique yeah so uh we started the liquid sticking what we have put us very strong emphasis on is we spent last two years in making a very modular architecture so last year actually from token 2049 Singapore stage we launched our liquid sticking protocol congrats thank you so that was exactly 6 months back we launched liquid saking where we enabled our uh staking module and M and DVT module and now we just enabled two months back our reaking module so for us uh we have been we are very security Focus protocol so we've been seeing this journey once we felt comfortable that now re we are comfortable with reaking we feel that the it has matured a little bit more and then it was a I think 3 weeks development for us to enable reaking so that that's the advantage this modularity gives us so much faster execution speed oh fantastic so if you would like to know more details feel free also to reach out the mwk after his presentation please please give him a big hand louder thank you