Exclusive Interview with Kelp DAO Founder: Kelp's Ambition Goes Beyond Re-staking

Author: Kaori, BlockBeats

With the approval of the Ethereum spot ETF and EigenLayer announcing the upcoming launch of its governance token, the two most important narratives in the Ethereum ecosystem have made breakthrough progress this summer. Amid this financial revolution, Kelp DAO stands out as one of the leaders, rapidly rising with its unique liquid staking solution.

According to official data, Kelp DAO's TVL has surpassed one billion dollars, reaching 1.06 billion dollars at the time of writing. Having just completed a $9 million private funding round, Kelp DAO is currently preparing for a broader ecological development plan.

In this interview, Amitej elaborated on Kelp DAO's unique advantages and future development strategies. By continuously expanding collaborations with Layer 2 solutions and actively promoting its integration into traditional finance, Kelp DAO is steadily advancing its path in the DeFi world.

Kelp DAO's Path in DeFi

Amitej Gajjala studied at a top business school in India and worked in management consulting before joining India's largest food tech company, Swiggy, as the head of strategy and transformation. At the end of 2019, Amitej became interested in DeFi, and during DeFi Summer, he began researching the staking sector in the crypto space.

In June 2021, Amitej co-founded the liquid staking protocol Stader Labs, marking the beginning of his endeavors in the Ethereum ecosystem. In the interview, Amitej mentioned that he started focusing on restaking in early 2023, realizing it would attract a significant influx of capital and was an area that could not be ignored.

When asked about the background of Kelp DAO's establishment, Amitej Gajjala responded, "At the end of 2022 and the beginning of 2023, we were very actively monitoring the restaking space and found that it attracted a large number of users and capital, while DeFi protocols would consequently lose a significant amount of capital. Therefore, it was necessary to provide substantial incentives to re-attract this capital, which would create a negative cycle where everyone was at a disadvantage. Thus, we realized there was a potential opportunity to establish a liquidity layer that complements restaking and DeFi."

Kelp DAO accepts LSTs, including stETH, sfrETH, and native ETH. Users earn points and tokens (rsETH) after staking, which can be used across multiple DeFi projects. Currently, Kelp DAO is live on the mainnet and several Layer 2 networks, allowing users to natively restake their ETH on networks like Arbitrum and Blast.

Kelp DAO shares some similarities with protocols like Lido, but its focus is on restaking rather than just ETH staking. Kelp DAO supports LSTs and native tokens, covering multiple L2s while acting as an abstraction layer on top of Eigenlayer. Users can invest without worrying about underlying technical interactions, simplifying the user process and reducing friction and costs.

How does Kelp DAO differentiate itself from projects like Ether.fi and Renzo, and what unique advantages does it have?

Amitej Gajjala: Kelp DAO has two key differentiating advantages. First, we are a full-suite LRT restaking platform, which means we accept LSTs like Lido, Stader Labs, Frax, etc., as well as native ETH. This gives us access to approximately $30 billion to $40 billion in ETH that users can utilize to participate in Kelp DAO without having to unstake.

Kelp DAO operates in real-time across 10 L2s, meaning users on these L2s, including Arbitrum, Optimism, Blast, and Scroll, can natively restake on Kelp DAO, not just Ethereum, and soon be able to restake stETH directly from these L2s without any slippage or gas fees, which is the second biggest advantage.

Kelp DAO has established partnerships with many Layer 2 solutions; how do these collaborations facilitate Kelp's integration into the Ethereum ecosystem?

Amitej Gajjala: Currently, we have enabled restaking functionality across 10 different blockchains. The advantages here include that users can directly stake their native Ethereum on these L2s.

We are collaborating with foundations to raise awareness among L2 users, making them eligible for restaking rewards, Eigen Layer points, and Kelp Miles, among other benefits. For example, we are the only LRT on zkSync, and on Scroll, we are one of the two LRTs included in the MARTS program.

As Kelp DAO prepares to launch its token, understanding its governance structure and user growth strategies is crucial. Can you provide some insights into Kelp DAO's governance structure and strategies for attracting and retaining users?

Amitej Gajjala: Kelp DAO's governance token will be a very important part of Kelp's roadmap, with multiple use cases. One of the biggest risks in the restaking ecosystem is the potential slashing risk triggered by EigenLayer. We have designed a mechanism that allows Kelp governance tokens to serve as insurance against any slashing events.

For example, any KELP holder can stake KELP, and these staked KELPs will act as insurance for any future slashing events. The benefit for users staking KELP tokens is that a portion of Kelp DAO's revenue will be distributed as staking rewards to users, which is the first and largest use case for the Kelp token.

The second main use case is governance; any Kelp token holder can participate in proposals, such as validator exits, selection criteria, AVS selection criteria, fee changes, and any significant protocol decisions will be determined by Kelp governance token holders.

The third important use case is providing liquidity to AMM secondary market users, who will be eligible for additional KELP rewards or incentives. Therefore, the Kelp token will become an essential part of the Kelp ecosystem.

Breaking into Traditional Finance, Kelp DAO Takes the Lead

On May 22, Kelp DAO announced the completion of a $9 million private funding round, marking an important milestone in its growth journey. This round was led by SCB Limited, a proprietary trading company based in the Bahamas, and Laser Digital, a digital asset subsidiary of Nomura Group, which invested $3.5 million. Other investors include Bankless Ventures, Hypersphere, Draper Dragon, GSR, DWF Ventures, and others.

As mentioned earlier, Kelp DAO is actively promoting collaboration with the Ethereum Layer 2 ecosystem, advancing its path in the on-chain world. At the same time, Kelp DAO is also expanding its territory in the traditional finance world. In the interview, Amitej stated that Kelp DAO will make breakthroughs in traditional finance, traditional asset management, and family office sectors.

With the smooth approval of the Ethereum spot ETF, the relationship between the upcoming crypto market and traditional finance will become increasingly intertwined. Kelp DAO has already established a good partnership with traditional financial institutions at this pivotal moment, laying a solid foundation for future ecological expansion.

Kelp DAO recently announced a funding round led by Laser Digital. Previously, Kelp DAO also collaborated with Laser Digital to launch a restaking solution for current and future digital funds. Can you discuss the impact of this partnership on Kelp DAO and its position in the traditional finance industry?

Amitej Gajjala: Laser Digital is one of the co-leads in this recent funding round. Laser Digital has many traditional clients who wish to hold ETH or earn additional staking and restaking rewards through their ETH. Therefore, we have a significant advantage in this regard, as we will become the preferred restaking partner in the funds that Laser Digital launches in the future.

From a macro perspective, whenever Laser Digital launches its ETH staking and restaking funds, they collaborate with many financial institutions that have a large number of traditional investors participating in these funds. As the primary manager of these funds, Laser Digital will choose Kelp DAO as one of its preferred restaking partners, deploying its users' funds with us.

This means that Kelp DAO will have a very promising future in traditional finance, traditional asset management, and family office sectors, as these entities seek exposure to Ethereum and staking or restaking. Kelp DAO will be selected as one of the primary restaking partners, leading to a significant organic influx of ETH into restaking through Laser Digital.

On the other hand, Laser Digital's involvement also brings legitimacy to us, indicating that our industry is taken very seriously, with major players like Laser Digital, backed by Nomura Securities, aiming to achieve great things in this field. So I believe this is a very important development for us and grants us legitimacy in the traditional finance sector, where people will understand that this is an emerging important asset class with a lot of interest.

Core Player in Restaking, Kelp DAO's Dual Assurance of Liquidity and Security

Eigenlayer, as a pioneer in the restaking field, demonstrates its strong capabilities in providing economic security and programmable penalty conditions. With increasing market demand and continuous technological maturation, it is expected that more restaking solutions will emerge across major blockchains, such as Bitcoin, Solana, and BNB Chain.

In this blue ocean, Kelp DAO, with its unique liquidity layer advantage, is actively promoting the development of the ecosystem by providing users with higher yields and utility, significantly enhancing the overall efficiency of the DeFi space. Meanwhile, the rapid growth of the AVS ecosystem also shows the profound impact of restaking on the entire blockchain industry.

Let's talk about the entire restaking field. How do you foresee the competitive landscape developing?

Amitej Gajjala: First, we must recognize that this field is only about six to eight months old; it is very, very young. We have just seen a large restaking player, Eigenlayer, emerge. I believe that there will be a large number of restaking solutions emerging across multiple blockchains, including Bitcoin, Solana, and other chains like BNB. Therefore, this field could grow 10x or 100x from now.

Many ecosystems will be built on top of these staking layers, such as the LRTFi ecosystem and the AVS ecosystem. In the next two to three years, we may see various types of sub-sectors emerge within the staking space. Therefore, my expectation for the future is that we will witness rapid expansion and innovation in this field.

What role will Kelp DAO play in this?

Amitej Gajjala: Built on Eigenlayer, Kelp DAO acts as a liquidity layer, further enhancing this ecosystem by providing users with higher yields and utility. These liquid restaking tokens can be utilized in the DeFi space for activities such as lending or participating in protocols like Uniswap, Balancer, or Gearbox. This will further leverage the ability of assets within DeFi, significantly driving the development of the entire ecosystem.

What are your thoughts on the AVS narrative?

Amitej Gajjala: I believe the AVS field is growing, and there are currently about 60 to 70 AVSs running on EigenLayer, which is a very positive outcome for the entire ecosystem.

Clearly, restaking has several advantages for the AVS ecosystem. The first major advantage is that anyone can launch an AVS without significant economic security, as they can borrow economic security from EigenDA, while not needing to issue millions in rewards as inflationary tokens.

Does the Kelp DAO team have plans regarding AVS?

Amitej Gajjala: We are evaluating and conducting some internal research and development to determine if there are opportunities for us to build AVS within the AVS ecosystem. Currently, our expansion plans mainly include extending our products to different ecosystems.

Regarding AVS, we are delegating LSTs to all AVSs, or at least to most AVSs, to leverage our existing capital.

How does Kelp DAO ensure the security and safeguards of its projects?

Amitej Gajjala: I believe the systemic risks of restaking are very limited. We must understand that slashing events are negligible and statistically almost insignificant. However, I remain cautious because we have not yet seen these situations occur in practice or reality. So, I am optimistic but also cautious.

Kelp DAO places a high priority on security. We have completed three comprehensive audits, and a fourth audit is currently underway. We have chosen top auditing partners like Sigma Prime, MixBytes, and CodeFarina to audit our smart contracts.

In addition, we have internal monitoring and alert systems to monitor suspicious behavior of smart contracts throughout the system. Security is paramount, and it is the most important thing we focus on every day.

Macro and Future, How Kelp DAO Plans Ahead

None of the currently approved Ethereum spot ETFs have adopted any staking mechanisms. What are your thoughts on this? How will this affect the ETH ecosystem?

Amitej Gajjala: Yes, I think the most important point we need to understand is that the SEC or any government needs some time to form opinions and develop policies regarding staking. The approval of the spot ETF itself is the most important and positive prospect for the entire ecosystem. As the spot ETF ecosystem matures, staking will gradually be realized in the future. I do have hope, but I think it will take some time.

Given the recent discussions about the U.S. elections and cryptocurrency regulation, how do you view the current regulatory environment?

Amitej Gajjala: This is a very complex issue. Without delving too much into the U.S. political environment, I firmly believe that regulating through policy rather than enforcement is the right approach.

Governments should provide clear guidance on how to treat cryptocurrencies as an asset class (not just Bitcoin and Ethereum, but other tokens as well). They should provide a strong policy framework to guide developers and industry participants in the right direction, which is the correct approach regardless of which party is in power in the U.S. or any other country. This gives developers more clarity, enabling them to make informed choices rather than being enforced and penalized for past actions.

What strategies does Kelp DAO have to respond to regulatory developments and ensure compliance with evolving regulations?

Amitej Gajjala: In terms of regulation, we consult lawyers and advisors from multiple countries to obtain their professional guidance, helping us think through product development and marketing. Based on this guidance, we follow these recommendations throughout the process and incorporate them into our work.

In monitoring the evolving regulatory environment, we always keep a close eye on any policies or frameworks that may impact staking and restaking. We adjust our strategies and operations in a timely manner to ensure that Kelp DAO remains compliant with the latest regulatory requirements.

In summary, we ensure our compliance through collaboration with legal experts and continuous regulatory monitoring, maintaining flexibility and proactivity in a constantly changing regulatory environment.

In the funding announcement, we learned that Kelp DAO is building multi-chain restaking services. Can you talk about this plan?

Amitej Gajjala: We will share more details about this plan once the product development work in these L1 ecosystems is completed. Currently, this work is still ongoing, and what is worth looking forward to is that we will further explore some interesting developments across multiple ecosystems.

We are currently undergoing multiple phases of testing and auditing, and once we complete product development and preliminary testing, we will officially release more details and a specific timeline. We look forward to sharing more information in the coming weeks.

Finally, would you like to add anything else?

Amitej Gajjala: We have become an L2 enterprise focused on products for retail and institutional clients, such as enterprise cash, liquidity, etc. We are not sure what Puffer and Renzo are specifically doing, but they seem to lack the ambition to become the entire restaking layer.

I think one of the most important things we have always wanted to do is to build an ecosystem around our products. Clearly, as an LRT, it is just an application and does not generate an ecosystem. What we see developing on EigenLayer is that EigenLayer has created a complete ecosystem around them, including AVS, LRT Fi, etc., which is exactly what we want to build. Therefore, thinking about how to build a restaking layer on these elements is our motivation.

Technically, this means we will build a platform that allows not just our own products but a complete ecosystem to run and interact on it. This will include deep integration with other chains and platforms, ensuring users can seamlessly restake and maximize their returns.

The reason for making this decision is that we see the potential and success of developing on EigenLayer and realize that creating a similar ecosystem will bring tremendous value to our users and partners. We believe that by establishing such a restaking layer, we can bring more innovation and opportunities to the entire industry and occupy an important position in the market.

Therefore, our goal is not just to provide a single solution but to create an ecosystem that supports a wide range of applications and collaborations, bringing more vitality and development to the restaking field.