Restaking with Eigenlayer & GenesisLRT at Staking Summit Istanbul

Transcript

welcome back to the rollup High Roller Community as always nothing on the rollup is to be ConEd as Financial advice we are just an Educators in the defi space toss us a quick like give us a share a repost send it to a friend who may want to watch this and finally give us a sub or a follow it means the world to help support credibly neutral educational content in def5 we're here to educate Empower and enrich you and let's jump in what's up guys CH good to be here buddy let's get it all good we are live from Dev connect at Istanbul and uh man there there's so much knowledge being spread around here like I thought I was up to date in the ecosystem and I been getting staking pilled like with of course everything

that staking ped that's the big Alpha right big alpha Big Alpha liquid staking reaking so so tell us everything that that's going on in in the liquid staking world so liquid staking like you see like all the big players you know like Lio you know like rocket pool like those are what I consider like the big players coin Bas with the CB and stuff um but I will I will change this conversation immediately to reaking because this so this is the main application of of liquid staking is that then you can take you can take the the Stak and use it for other things yeah let's take it a step back so with staking you you open up a new world of possibilities right so that's why people still are very excited

with Li and that's normal it's it's it's huge you bring the security to the ecosystem more it State means more security and yields to the people which is amazing right but then come at this new technology IG layer we still still being developed right now and that in my view and view that people are developing on IG it's really like bringing the next step forward in Def fight why because if you stake more you get more security and more yields and let me also explain this a little bit uh because and I I'm going to start with the vitalic uh story so we have big Alpha we love vitalic stories yeah yeah yeah yeah so it's a big alpha Big Alpha so vitalic

always been a bit a little bit against iGun layer why because he thinks that can really disrupt the space too much leverage which is normal like if you go to the subprime crisis in trap five you see too much leverage so uh but the thing is and let me so I have a financial background traditional Finance working for traditional Finance uh before uh doing this and the thing is if you go uh to have a loan today you go to the bank and you ask for a loan and then you use that liquid funds to do whatever you want right so and you then repay the loan with time so that's the same human behavior that people have with staking so people will not stake and then unstake immediately no the the the stake

will stay in e in ethereum ecosystem meaning that people bring more security to the system more it St and and and the better e EOS system for everyone because the human will not human behavior natural human behavior they will not endake immediately so that problem is actually not a problem in my view so and the big Alpha is that we actually spoke with uh so not me personally but a friend of mine today just told us that he spoke with vitalic in uh uh in zalu so early uh early today and uh apparently vitalic says that he's now going to start supporting restating so this was what he said so I'm going to start supporting restake um and like I'm very

curious you know I'm very curious to know more I'm very curious to know his views because uh up until now and I completely understand his point of view like the over leverage uh problem problems with like right with slashing and we are going to talk all about that in a bit but slashing could be a big problem especially if you stake on multiple validators and the thing is it could be a problem absolutely but now with with alic supporting now it maybe there is some news coming up I don't know uh people already developing more and more solutions one thing that I said in my panel here today is that we need to have even more uh attention to Insurance on slashing uh to make sure that people are

not getting slashed to make sure that we have the best validators in the space the best due diligence on validators and that's how the space will grow more ethereum more yields everyone's happy yeah that makes sense so to to to trace the steps here vitalic was was against uh reaking because what reaking does is leverage up the ethereum consensus Network correct there's there's some eth that is staked in validators and then by reaking you take the Ethan validators and you apply it to other other applications that might being um like I stake in I stake eth in a validator it secures the ethereum network and then we have like like all of these liquid staking tokens and

technically I could use the liquid staking tokens to create another proof of stake Network so I take my my Lio e corre i stake that in a validator corre and then it it now validates transactions through etherium cash some crazy L2 we can just keep recycling these tokens and they can keep uh staking uh in New in new new networks yeah and and velik's concern about that was that it stretches ethereum's consensus until until it is being used in pull so many different directions that now it no longer um it's no longer for ethereum and then does it does it break at a certain point I think that

was the that is a very good point and we can explore this further because igen L is still at his infancy right now so he's still being developed still test net you know the main net supposedly can go on February March so we still don't know and they don't know why because they are still doing their research which is good you know a lot of people like from MIT UC Berkeley R behind L and that's good you know you need good academics with the best talent working on this because if something goes wrong like I don't know probably crypto goes Kaboom you know so we need to make sure that nothing goes wrong with the ecosystem right and and that's exactly why IAD being also delayed a little bit so but what is IG really doing you know

like what is the multiple Staten so right now the way that we are using it especially at Genesis is you st native if with us by the way I should maybe introduce Genesis a little bit you know like what we do in the company so we are doing the first Native token on I layers and on top of that we are doing the first Insurance on slashing on chain and also uh creating uh uh um a feature called Flash and stake which is so this was actually proposed me vi from One D gen that I met in New York actually was he he five minutes ago that guy that he just spoke yeah that guy was the one that told me like we should do something even more crazy I was like let me talk to my team to know if this is possible

or not so I layer because of the consensus and to maintain security only allows 7 Days withdraw period okay so your if stays locked for seven days after you say that you want to unlock right so one one stake you have like a seven day cool down type of period and then you receive your etherum correct we are making that we are leveraging up that a little bit why but not in a so Degen way we are actually doing something really really Alpha willite so it's actually very simple imagine that you want your eth and Stakes back faster right you say I don't want to wait seven days I want in one at one day one hour 100% possible how we are partnering up

with liquidity funds and liquidity providers that we can then do a flash loan with them repay you and when IG pays us we we repay uh the load and we do that via a fee and everyone says happy yeah and this is like what we're seeing in bridges through optimistic rollups arbitrum and optimism have this 7-Day dispute period and during that dispute period is is the time when someone can come in and they can dispute a transaction but what we're seeing is like these liquidity Bridges if you want to go from arbitrum back to ethereum mainnet right right and within a matter of minutes you don't want to wait to period so you don't use the canonical bridge that takes seven days you go through this liquidity bridge that will

provide you your liquidity they will give you those tokens on the destination chain and then when your 7-Day period ends and your funds are unlocked they will take those funds and and they can they can go and you can go your separate ways and everything is is okay this is this is one of the things that's coming out of out of Genesis and the reaking um so so maybe you could talk more about like how igen layer like when I first heard about igen ler I was of the it was during the data availability narrative and I was thinking like okay aan layer is getting all of this stake and they are going to have data for all all right right all of this ethereum for all these

networks now how is Igan layer like utilizing this state that they're that they're acquiring for some of the other applications like like genesis and the reaking that guys are doing how are you guys using uh the reaking in a safe way so that you know vitalic is now supporting things that like you're working on what do you what do you think about that so like I think that um so the main really the main purpose for igen as I see it is bring more security to the ecosystem at the same time bring more yields so the way that you do it is you put your stake on a igen pot inside the igen pot you have several validators and inside every validator you have a AVS

or multiple avss okay what what is an AVS so AVS is an activated validated system service sorry active validator service okay uh so it's acts like a second layer validation so to speak mhm okay and uh and so in the beginning because we are doing a customizable operation uh which allows us to we ask the client how much risk they want to take and how much yield they want to take and we choose via a list of valid that we have the best risk profile per client and then we make it happen via staking and how much yields they want to get I'm saying for example so Li is doing 4% in igen layer and right now this again IG L is still under

development right now they are supposedly allowing three four Stakes so imagine 4% 8 12 maybe 16% so it's the range that we are aiming you know like 12% maybe 16 maximum that's the range we are aiming right now so three to four validations M and and um in the beginning we thought okay to have the maximum efficiency for us let's make sure that we are choosing the validators and the avss but right now we switch a little bit The Narrative because if we do that we will spend the majority of our time just doing DD so what we are doing is right now the our business

model is we choose the validator and each validator has the job already to un board the best AVS on side okay and the way that we are also doing it we are not chasing like solo validators anything like that we are partnering up with funds and indexes that already did do diligence on the validators and and uh they already did all this du diligence they already know which are the best guys uh and uh we are just partnering up with them and they already have a pool so instead of we losing like hundreds or hundreds of hours uh partnering up with the best we just partner up with one or two of the best systems and they already have their list of valid very cool very

cool th this is uh this is very educational like I'm I'm learning a lot while I'm here because like this this entire liquid staking ecosystem is only is only online since the merge right merge was 2019 I think it was December maybe it was quite a bit later than that I'm not sure exactly but it's only been around for a little bit of time I think it's very cool to to see that like um okay igen layer is now used for these other applications um like you said Lio is giving 4% yield on eth that is staked in Lio um so when we recycle that's what I'm calling it re restake um we're going to apply this eth to multiple different other ecosystems

that'll that'll Supply more yield now I think we we spoke about vitalik's concern when you restake you're not you're you're adding more yield because you're applying it you're using it for security and these other networks but you're also bringing in those risks right because when you restake um you're now you're now stretching ethereum's consensus so it's about building the right risk Prof yeah but like coming back to my first example imagine the the the loan scenario again or let's let's say a mortgage when you have a mortgage you have your house you st your house and then you get liquidated right that's a mortgage you give your bank the bank your house as a collateral as an asset that's a great example he's a great example I've been telling that to all the VCS that I'm doing fundraising with

Genesis like it's the best example you know like you use your house as collateral then you get liquidity it's the same thing as staking okay you use your asset you stake it you get a collateral with liquid funds and so the more you Stak the more houses you put in the ecosystem they will be locked in you know and as a normal human normal human behavior it's not your normal behavior to oh I'm going to do a mortgage and then I repay it immediately no yeah you do a mortgage you use their liquidity to do other stuff you do it and then you repay with time so that's how I see the reaking scenarios you repay for example you stake three times and then you want stake like the first part on the second and then the third and then you get your

e but for you to get your native e is a process and I don't believe but again this is just speculation I don't believe that people will just stake and unstake immediately but again this also needs to be considered and that's why everything is still under research and under heavy heavy research and and and that's good yeah and let me also say that like we we realize just as an ecosystem that like with risk you get reward and with reward they go they go hand in hand so in this example of uh staking your house you get you get uh like you get liquidity on your house what if we were to restake then it would be like a second mortgage your second mortgage okay so then so we are essentially like

leveraging the ethereum yes the assets the asset and because and this is this is again to your your vitalic story and I think what vitalic is saying in that story is that it's okay to leverage up ethereum now that ethereum is decentralized enough it's okay to leverage up because it's like we already have we have a very healthy Health Factor correct we can take some more steps with ethereum the risks are low enough that we can squeeze a little bit more reward out of the E the thing is the thing is that so theoretically let's talk about the theory behind because there is like two points which are I think are really fascinating first thing is theoretically you can stay on iglay

like infinite times almost you know like it's like build to stake infinite times um but that's why they are not allowing that they're allowing like the triple or quadruple State because and I don't even know if more Stakes will be available and maybe it shouldn't be available because like Stak three times already enough you know so uh this is a research question I'm not researching on igen you know I'm just letting it out there but like staking three times is very good staking four is insane maybe we should stop because the leverage can go too much inside can go Bonkers yeah because like if you tell to a d gen like oh you can stick a 100 times they'll say sure they'll do it they will do it you know and but then you have a subprime crisis

then we have people losing their home almost losing everything the financial priz is like insane everything collapsing right so I think there should be boundaries and I'm glad that there are boundaries right now and and that's good second good thing and this is actually I brought this on the panel and even the guys from Igan L look at me like yeah this needs to be addressed which is theoretically on the paper from aan ler you can get slashed Beyond 100% how's that how do they take money from you that I'm going to explain I'm going to explain so because you have multiple validators if you get slash on validator one two and not on the third you get slash 100% 100 plus 100 you get slash 100% but the thing is and we

already asked this for the I team and they say like well that's kind of not possible and I agree because if you already have 100% liquidity you lose 100 matches it's done right but if you lose 200 where are they finding the other 100 it's in the void it's in the nothing someone will lose that we are you bringing that from the market taking it from someone else are you printing money to lose money on a on a void slashing no so that needs to be addressed and I don't know how they are going to solve it uh I don't know if there is some kind of like mechanism like for example instead of putting the slashing on the validator one or two or three which is 300% slashing you can put a uh slashing on the igon Pod and then if you get

slashes on the IG is just a 100% because the igon Pod is to three validators for example inside so if you get slash three times 300 if you get slash on the igen Pod it's just 100 so maybe could be a way to solve this I don't know maybe like the igon Pod splits the slashing like for example 33% 33 33 and then you get slash only 33% in each validator to be the 100% maybe this is a solution I don't know this is just Theory but it is a problem it is it is cuz when you think about like like reh recycling this eth maybe it's it's if it's three times maybe the eth is being used to

secure three different networks if the if the main eth is slashed what happens to the third network does it maybe become vulnerable to 51% attacks right there's there's lots of of these uh like there's a lot of question and that's why this is after his infant you know like this is being like developed right now and like we are like really like close with the igen team to also try to solve this problem to to bring the solutions to Genesis too and um but yeah I think that the future is really bright in thei you know and I see this as the future of defi like 100% And to looking at the market in general like uh you see that especially in crypto the

projects that are really going forward VCS are excited about what defi what are the best projects in the space def fight you know so I do think that we are in the right place in the right time and like you remember the ear the early days of BTC you know like early days old BTC was like a thing then it was ethereum now I think it's Igan it's going to be the same this it will change everything very cool it will change everything yeah I uh I tend to agree I think I think uh ethereum and cryptocurrency has found its product Market fit in eii and now we're starting to explore these applications that that go beyond a single Network um we're going towards a world with thousands of of app chains

rollups and this this means thousands of applications and uh we will continue to see more and more scalability without losing security and I think that is kind of the the the Gap that we are looking for igen to fill is uh make sure that we have security at the core because we will scale we will restake and we want to make sure that we are stretching a very secure Foundation y 100% man that's it that's about it that's about it absolutely thank you so much man thank you so much thank you thank you guys yeah 100% let's do it