DeFi Is Back: EigenLayer & LST Revolution Continues

Hey anon!

Today, let’s take you down the Eigenlayer restaking rabbit hole.

As regular readers may know, this is a topic we have covered before. 

However, today, we will introduce you to Kelp DAO, one of the fastest-growing restaking protocols. We will also check the inner mechanics of LRTFi (liquid restaking finance).

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How does Restaking Work?

Restaking allows digital assets that are locked in as a “stake” on one blockchain to be simultaneously utilized on other blockchains or layers without necessitating their physical transfer or duplication. 

This is achieved through innovative protocols and smart contracts that recognize and verify the original staking in a secure manner. The concept hinges on the idea that while the token is physically located and locked in one chain, its security value can be spread across multiple chains, thereby leveraging its utility.

So, What is LRT and LRTFi?

Liquid Restaking Tokens (LRTs) represent tokens that are staked on one blockchain but are also utilized to participate in the economic activities of other chains. This boosts token utility and boosts capital efficiency. LRT holders can benefit from multiple yield-generating opportunities, including direct staking rewards and additional yields.

LRTfi, or Liquid Restaking Finance, expands on this concept by integrating these tokens into broader DeFi ecosystems. 

This integration allows LRTs to be used in various financial strategies, such as liquidity provision, collateral for loans, and more complex leveraged plays in the DeFi space. 

By deploying LRTs across multiple DeFi protocols, investors can potentially achieve higher yields and greater liquidity.

So, not only can you yield more tokens by locking up liquidity on a chain. But you can potentially use the newly generated tokens as collateral to get even more tokens!

But, is it really that straightforward? Are there any risks? 

Risks of Restaking

As with any big brain DeFi plays and strategies, there are always going to be risks.

• Slashing: In scenarios where validators perform maliciously or fail to meet the network's protocol, the staked tokens (and by extension LRTs) can be slashed, leading to a loss of capital.

• Smart Contract Risk: As LRTs involve multiple protocols and smart contracts, and they’re susceptible to bugs or vulnerabilities in those contracts, which can lead to financial losses.

• Depeg Risk: Since LRTs are often pegged to the value of underlying assets, any significant deviation (depegging) can trigger widespread market disruptions and liquidations, exacerbating losses.

• Restaking Risk: The complexity of managing stakes across various services increases the risk of unintended consequences, including cascading slashes if a bug or error occurs in one part of the system.

Now that you know about the risks involved, let’s learn about EigenLayer - the biggest restaking protocol in the world.

EigenLayer: A Pioneer in Restaking

EigenLayer is to restaking what CryptoPunks are to NFTs. 

It leverages the existing staked Ethereum to secure various middleware or Layer 2 protocols without requiring additional staking of ETH. This is particularly revolutionary because it taps into the already staked ETH on Ethereum’s Beacon Chain, harnessing it for additional purposes.

Key Features of EigenLayer

• Restaking Staked Ether: Validators on Ethereum’s Beacon Chain can restake their already committed ETH into various actively validated services (AVSs) without needing to unstake. This allows them to earn additional rewards on top of their Ethereum staking rewards.

• Dynamic Participation: Validators can choose different Actively Validated Services (AVSs) based on their risk appetite and reward preferences. This promotes a dynamic and flexible ecosystem where validators aren't locked into single, monolithic contracts.

• Risk Management: EigenLayer enhances its risk management strategy by reallocating ETH stakes across multiple Actively Validated Services (AVSs), thereby fortifying its economic defences. This approach means that to compromise any single AVS, an attacker would need to overcome a substantial barrier. This system parallels the security mechanisms found in proof of stake models, where the pooled capital acts as a protective shield against potential attacks, thereby increasing the overall resilience of the network against threats.

Economic Impact of EigenLayer (and Restaking)

The economic implications of EigenLayer's approach to restaking are significant. By enabling ETH stakes on the Ethereum mainnet to be used for additional purposes, the platform effectively multiplies Ethereum's economic bandwidth. 

This enhances the yield opportunities for ETH holders and deepens the security and functionality of the Ethereum ecosystem and its connected layers or services.

Also, let’s not forget the staggering impact EigenLayer, in particular, has had on the DeFi ecosystem.

With a little over $16 billion locked in, not only is EigenLayer the second-largest DeFi app in the world, but it won’t be a stretch to say that it single-handedly rekindled interest in DeFi.

As such, expect more promising restaking protocols and narratives to enter the market.

One of these upcoming restaking apps is Kelp DAO.

Enter Kelp DAO

Kelp DAO is at the forefront of the new DeFi revolution, allowing Ethereum stakers to unlock additional value and utility from their already staked Ethereum by leveraging it as economic security across multiple DeFi services. Through using Kelp, users are also incentivized with numerous rewards. Users should also note that Momentum 6 is an investor in Kelp DAO.

Additionally, users can increase their likelihood of receiving the Kelp airdrop by actively engaging with the protocol. Not only does participation potentially qualify them for the airdrop, but it also provides an opportunity to comprehend the complexities of Liquid Restaking using a reliable and respected platform.

To qualify for the Kelp DAO Airdrop, participants can take several steps to enhance their eligibility. These actions might involve depositing assets such as ETH, ETHx, stETH, or sfrxETH to earn EigenLayer points and Kelp DAO points, also known as 'miles,' alongside bonus points. For those targeting the airdrop, it's advisable to deposit amounts equivalent to at least 1 ETH, although the exact criteria for qualification have not been disclosed. Typically, larger deposits offer greater assurance of receiving the airdrop.

Now, let's delve into the mechanics of Kelp, explore key metrics, and discuss actions you can undertake to participate. Be sure to use this referral link to get going with Kelp DAO. 

TVL on Kelp has grown steadily and is poised to hit the $1B mark very soon. 

The protocol has been audited by some of the best in the game, bolstering user trust and confidence in the protocol. Read the in-depth security audits here and here.

Strategic Partnership with Laser Digital

Recently, Kelp DAO announced a significant partnership with Laser Digital, the digital asset-focused subsidiary of the esteemed Nomura Group. This collaboration aims to incorporate rsETH into the investment strategies of Laser Digital, highlighting the growing institutional interest in leveraging blockchain technologies for more dynamic and efficient financial solutions. 

This partnership not only validates the potential of Kelp DAO’s innovations but also sets the stage for broader adoption of liquid restaking solutions in traditional financial markets.

The Role of EigenLayer in Kelp DAO's Ecosystem

A fundamental aspect of Kelp DAO's strategy involves its integration with EigenLayer, a protocol designed to bolster the security of various blockchain services by leveraging staked Ethereum. As previously mentioned, EigenLayer plays a crucial role in expanding the capabilities of conventional staking, enabling the establishment of a layered security framework that reinforces Ethereum's decentralized structure. By engaging with Kelp DAO, users accumulate EigenLayer points, which will later translate into EigenLayer rewards during the protocol's airdrop event.

One can track all their rewards, both from EigenLayer and Kelp DAO on the dashboard tab.

Restaking on Kelp DAO

Kelp DAO’s mission is to enhance liquidity and reward potential for staked assets through its novel liquid restaked token, rsETH, which simplifies and amplifies the benefits of restaking.

• rsETH, the cornerstone of Kelp DAO's offerings, is a liquid restaked token that represents fractional ownership of staked Ethereum. 

• It is designed to be highly flexible and liquid, enabling holders to engage seamlessly with various DeFi protocols while benefiting from the compounded rewards of staking and restaking. 

• The introduction of rsETH marks a significant milestone in proving the viability and benefits of this innovative financial instrument.

In order to restake go to the restaking tab on the Kelp site or click here. Be sure to connect your wallet before interacting.

Enter either ETHx, ETH, stETH, or sfrxETH for restaking. The rewards you will receive are listed to the right. Additionally, more LSTs are currently being developed and will be introduced soon.

Once you've received your rsETH, you can bridge it to various L2s to unlock additional rewards by participating in liquidity provision.

Users can also wrap their rsETH into wrapped rsETH (wrsETH) offering more options when providing liquidity.

Now, let's delve into some exciting options available to users.

Head over to the DeFi tab. Below, you can see the yields for providing liquidity on the Ethereum mainnet. Notably, attractive yields are being offered through platforms such as Pendle, Vaultcraft, and Balancer.

Yields on L2 solutions like Optimism, Base, and Linea are notably impressive for users currently.

The Introduction of KEP Tokens

In response to the limitations of traditional staking rewards, Kelp DAO also launched the KEP token (Kelp Earned Points), which is designed to bring liquidity to the otherwise illiquid EigenLayer Points. 

This token allows users to trade and manage their earned points as they would with any other crypto, thereby enhancing the utility and flexibility of the rewards gained through staking and restaking activities.

More Rewards

KelpDAO has launched the Road to One Billion Reboot campaign, following the success of its initial phase where users restaked approximately 50,000 ETH with Kelp. The new campaign, running from April 26 to May 05, 2024, offers enticing rewards for ETHx, stETH, and ETH depositors.

Participants can expect perks such as 100 extra EigenLayer Points for every ETH restaked, a chance to win a share of $50,000 worth of rsETH for the top 100 restakers, and access to rewarding DeFi opportunities on both the mainnet and Layer 2 solutions. 

Withdrawals for rsETH are also set to commence by May 3, 2024, allowing users to unstake rsETH and withdraw LSTs, with native ETH withdrawals becoming available after LST withdrawals. 

Users can join the RTOB 2.0 campaign and earn unparalleled rewards by restaking their assets with Kelp DAO

Closing Off

And that’s all for now, anon. We trust you found this guide informative and that it aids you in navigating Kelp DAO. In summary, Kelp DAO is not merely innovating in staking and restaking; it is reshaping the utilization of blockchain technologies to establish more transparent, efficient, and rewarding financial systems. 

Through its strategic initiatives and ongoing advancements, Kelp DAO is positioned to maintain its pivotal role in the DeFi arena, providing solutions that promise not only increased returns but also enhanced liquidity and flexibility for the wider Ethereum community.

That wraps it up for today, Anon! We trust you found this issue insightful. We hope you will stack your restaking yield on KelpDAO soon!

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