The re-staking game has entered the second half. How to use LRT and AVS to seize the market?
By Larry Sukernik & Myles O'Neil
Compiled by: Xiaobai Navigation coderworld
“If only you could see yourself in my eyes” — Lost by Dermot Kennedy
"If only you could see yourself in my eyes" - Dermot Kennedy, Lost
At Reverie, we spend a lot of time researching restaking protocols. It’s an exciting investment category for us because the market is still unclear (opportunities often exist in murky markets) and activity is high (dozens of projects are set to launch in the restaking space in the next 12 months).
We have found some observations about how the restaking market will develop over the next few years. A lot of things are new and what is true today may not be true tomorrow. Nonetheless, we would like to share with you some of our initial observations about the business dynamics that are reshaping the market.
Liquidity Re-PledgeTokenLiquid Restaking Token (LRT) as a leverage point
Today, LRTs like Etherfi/Renzo occupy an important position in the restaking supply chain: since they are close to both the supply side (stakers) and the demand side (AVs), they are on both sides of the transaction. If development continues, this will enable LRTs to
(i) determine their commission rate,
(ii) Impacting the rake rate of the underlying market (e.g. EigenLayer, Symbiotic).
Given their strong position, we expect the re-staking market to see the launch of first-party LRTs to gain control over the power of third-party LRTs.
AVS/Re-stakeholders as Leverage Points
The best markets in the world have two characteristics:Decentralized supply side and decentralized demand side.To form an intuition for this, it is necessary to look at situations where one or both sides of the market are concentrated. Imagine a simple market for apples, where the largest seller of apples controls more than 50% of apples.supplyIn this case, if the market operator decides to increase the market commission from 5% to 10%, Big Apple sellers may threaten to take their business elsewhere.On the demand side,If the largest apple buyer controls more than 50% of apple demand, she can threaten to use another market (or buy directly from the apple supplier) if the market operator increases the market cut.
Back to the re-pledge market, if the final market structure of the re-pledge market is concentrated on the AVS side (AVS of the first 10% account for more than 50% of income) or the re-pledger side (re-pledgers of the first 10% account for more than 50% of deposits), then the natural result is that the market has reduced its ability to extract commissions for itself (and therefore should have a lower valuation).
While there is not enough data to conduct a rigorous analysis, our intuition is that the power law will apply here as well: large AVs will capture the majority of total payment volume and thus have bargaining power over the commission the market ultimately wants to charge.
Compete for exclusive AVS
From eachpledgeFrom a market perspective, any opportunity to do something that the competing re-pledge markets cannot is worth seizing.The simplest way to differentiate as a re-staking marketplace is to provide re-stakers with access to exclusive AVS - either first-party like EigenDA, or third-party through an exclusive partnership. This is similar in concept to Sony developing exclusive games for the PS5 to drive hardware sales.
As a result of these dynamics, we expect the re-staking market to see more first-party AVS launches and/or exclusivity agreements with third-party AVS. In short, the coming months will see a battle for AVS.
AVS Subsidy
AVS needs to support the services providedXiaobai NavigationPay the operator/re-stakeholder fees, which effectively meansAVS needs to be ready with its nativeToken, ETH/USDC or possible points/future airdrop payments.然而，由于到目前为止大多数AVS都是没有代币、大额资产负债表或设计良好的积分计划/空投的早期初创公司，签约运营者/再质押者已被证明是一个繁琐的过程（大多数EigenLayer的合作伙伴关系都是在私下谈判的定制合同）。简单地说，This is a situation where a customer wants to purchase a service and may have the ability to pay, but does not yet have the funds.
In order to promote business, it is highly likely that the re-pledge market will "pre-pay" the launch operator/re-pledgee, whether in its native token, balance sheet assets, or possibly by issuing "cloud credits" for AVS to use with operators/re-pledgees. In return for the pre-paid funds, you would expect AVS to commit to airdrop/allocate tokens to the re-pledge market. Alternatively, the re-pledge market could pre-pay this money to AVS to convince it to choose you over a competing re-pledge market.
in short,We expectpledgeThe market will be highly competitive over the next 12-24 months by subsidizing AVS payouts. Similar to the Uber/Lyft market dynamics, the restaking market with the most funds/tokens will likely be the winner in the end.
White glove door-to-door service
Going from “I want to launch an AVS” to “actually putting it into production” is much harder than it seems, especially for a small team without much R&D bandwidth. For example, questions that the team needs to answer include: How many AVS should I buy?SafetyHow long should it be purchased for, how much should be paid to operators/re-stakeholders, what should be cut and by how much?
Best practices will eventually emerge, but until then, the re-staking market needs to guide the AVS team through these issues (it is worth noting that EigenLayer does not yet have a payment or slashing mechanism). To this end, we expect successful re-staking markets to look a bit like enterprise sales businesses that provide white glove integration/service assistance to customers to use their products.
Graduated from the market
An interesting dynamic that may emerge ispledgeThe most successful additional verification service on the market (AVS), as the project develops and grows, it will eventually leave the re-staking market and manage its ownSafetyand validator network.
Today, restaking proposals are best suited for smaller projects that:
(i) No time/money/Brand/relationships to recruit validator sets,
(ii) There is no highly valued token to secure the networkSafety.
但随着项目变大，他们的下一步可能是离开再质押市场，转而招募自己的验证者集，并用自己的（现在更高估值的）代币来保障安全。
In concept, this is similar to the dynamics of dating markets (e.g. Hinge, Tinder),The most successful customers will eventually disappear from the market.However, churn is bad news for marketplace operators because you will lose a customer (which is one reason why dating marketplaces trade at lower valuations/multiples than marketplaces with low reoccupancy/churn).
One-stop encryption SaaS
To illustrate this point, let’s take a look at the history of software: Cloud providers such as AWS make it easy for developers to get everything they need to develop an application or web service (such as hosting, storage, and computing). By significantly reducing the cost and time required to develop software, a new class of web services has emerged, with more specialized services provided. The combination of first-party cloud services and the large number of “microservices” provided within the platform allows cloud providers to meet all needs except core business logic in a one-stop shop.
Restaking markets like EigenLayer aim to create a similar set of microservices for Web3. Before EigenLayer, crypto microservices had the choice of fully centralizing their off-chain components (and passing that risk on to their clients), or incurring the cost of launching a set of operators and economic stake to purchase security.
Restaking markets have the potential to break this trade-off for microservices —If everything works as expected, you will be able to prioritize security without compromising on cost and speed to market.
Let's say you are developing a cheap, high-performance zk-rollup. If you go to a restaking market like EigenLayer, you will have multiple core service options like DA and bridges for easy onboarding. Along the way, you will also see many other AVS microservices that you can integrate with.
The more microservices that the re-pledge marketplace offers, the better the customer experience will be. Instead of evaluating the capabilities and security of services from dozens of independent vendors, applications will be able to purchase all the services they need from one re-pledge marketplace. Come for service X, stay for services Y and Z.
Some AVS will have network effects (e.g., preconfs)
To date, restaking use cases have primarily focused on exporting Ethereum’s validators and economic stake. But there is also a class of “inward” restaking use cases that can add functionality to Ethereum’s consensus without changing the protocol.
The idea is simple -You allow validators to choose to make additional commitments to the blocks they propose in exchange for payments, and hold them accountable through slashing if they don’t meet those commitments.We suspect that only a few commitment types will have sufficient demand to attract high levels of participation, but the value flowing through these commitments is likely to be substantial.
Unlike the “external” restaking use case, the effectiveness of this type of use case is directly tied to validator participation. That is, even if you are willing to pay to be included in a block, if only 1 out of 10 validators choose to join in on that commitment, it’s not very useful.
If every validator opts in to a given commitment, the guarantees behind it will be equivalent to those provided by the Ethereum protocol itself (i.e. valid blocks)Following this logic, we can expect this category to have strong network effects as users of AVS will benefit from every marginal validator that chooses to join the pledge market.
While this class of AVS is still evolving, logical distribution channels to facilitate these use cases are emerging through Ethereum client sidecars and plugins such as Reth. And, similar to the proposer-builder split, proposers may outsource this work to professional actors in exchange for a revenue share.
What is less clear is what form these AVS will take. While one entity could create a general marketplace that works for any commitment type, we suspect it is more likely we will see a number of AVSs that are tailored to the source of demand (e.g.L2Interoperability and L1 DeFi drive demand) Professional participants emerge.
in conclusion
For students of business strategy, the business dynamics of the re-pledge market are a treasure trove of content that deserves further study.
The article comes from the Internet:The re-staking game has entered the second half. How to use LRT and AVS to seize the market?
OKX Ventures' investment methodology: Fundamentals are an important basis.Community/ Operation / Technological innovation is the focus. Written by: Xiaobai Navigation Coderworld Recently, OKX Ventures has completed a number of separate strategic investments and lead investments, covering multiple tracks such as games, social networking, and Layer2. Coinciding with the Hong Kong Web3 Carnival,…
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