What are the security risks of Restaking in the context of "involution"?

Author: Haotian (X: @tme l0 211)

Recently, dozens of Restaking solutions have emerged simultaneously, making the market quite lively, comparable to the exciting Staking battles of Lido, RockX, SSV, and others. The competition has shifted from a "technical strength" battle to lower the user 32 ETH threshold for node services to an "operational strategy" battle for Eigenlayer points. A typical example would be @KelpDAO, which managed to reach the TVL Top 3 through this points competition. How did they achieve this?

In the first phase, since @Eigenlayer suspended its restaking services, market users were unable to participate in staking directly for a long time. Meanwhile, Eigenlayer introduced a clear points airdrop mechanism, providing KelpDAO and other newcomers with an opportunity to seize market users during this "window." KelpDAO's treasury allocated the points earned on Eigenlayer to users.

Users staking ETHx, stETH, and sfrxETH on @KelpDAO can earn Kelp Miles points as well as EL Points provided by Eigenlayer. During this phase, a total of 49 K ETHx participated in acquiring points from Eigenlayer.

In the second phase, Eigenlayer fully opened its Restaking services and removed the staking fund cap. It was initially thought that this would render the points competition strategies of KelpDAO and others ineffective, as users could directly participate in Eigenlayer to earn points, inevitably reducing the demand for other competing platforms. Unexpectedly, @KelpDAO launched the EigenBoost 2.0 strategy to respond urgently:

1) Users staking ETHx can earn an additional 1 million EL points, with each ETHx deposited earning an extra 50 EL points;

2) Users can mint LST into rsETH to provide liquidity to the market, and for every successful mint of 1 rsETH on the Stader platform, users can earn 100 K Kelp Miles. This liquidity from rsETH will not go to waste, as users can deposit it in Pendle to enjoy a 30% APY return.

The interesting part is that although Eigenlayer opened the window, the standard of 720 points is not attainable by everyone. More small funds may choose to flow into KelpDAO, achieving a "one fish, multiple eats" scenario, as if the points from Eigenlayer are missed, there is still a safety net provided by KelpDAO.

Especially since @KelpDAO has grown to a psychological safety threshold of over $300 million in TVL. Such operational strategies will undoubtedly attract a significant amount of idle funds.

There are always stronger players; if Eigenlayer lifted the staking cap to regain users drawn away by other Restaking projects, then KelpDAO's enhanced points operation strategy is a powerful counterattack. Indeed, once the competition for Eigenlayer points became clear, the mentality of retail investors seeking to maximize their gains became crucial.

If asked how to view the security risks of excessive "involution" in the Restaking track, I offer three shallow insights:

1) The brand and reputation of Eigenlayer are the fundamentals of the Restaking track. Since its AVS and node slash mechanisms are not yet perfected, the only safety carrier is Eigenlayer's own smart contracts.

If a large number of retail investors FOMO into Eigenlayer, the risk exposure will be greater, as any small issue could lead to a bank run. Based on this, I believe allowing platforms like KelpDAO, which are more institutionalized, to take the lead will help distribute and reduce the potential security risks of Eigenlayer's dominance.

2) Although these third-party platforms may seem to have rug risks, the points users earn are not generated out of thin air; Eigenlayer holds the cards for these platforms. For a platform to gain a decent share in an involuted market, the opportunity cost of a rug pull is significant. In addition to the funds constrained by Eigenlayer, the costs of market operations are also considerable.

From a positive perspective, compared to the potential security risks of a single Eigenlayer contract, the dispersion of funds in third-party platforms may actually reduce overall systemic risk, provided that the platform has undergone a period of market brand reputation accumulation.

3) With Eigenlayer's current capital volume, the likelihood of idle funds participating to capture airdrop opportunities is decreasing; as more funds flow in, the threshold for low guarantee points will only increase. At this point, the points extracted by third-party platforms using large funds indeed present a "one fish, multiple eats" opportunity for retail investors to avoid missing out.

Note: The above views are for reference only. Regardless, one should remain vigilant about the "leveraged" liquidity play of Restaking. After all, the overall situation is still unstable, so please participate rationally and moderately, and do not take blind risks.