Similarities and differences between restaking and dApp staking

[psneemo]

Hey guys, hope you all are doing well!

I wanted to run a thought experiment here and prompt a few discussions around:

“Similarities & differences between dApp staking and restaking”

I know it comes off as a very wild idea. And, tbh, technically, those two concepts might seem kinda similar at the surface but when you dig deeper they are technically different. But I still wanted to run this by everyone and get everyone’s thoughts.

So let me first start by addressing the similarities and then I’ll share why I think they are different.

Why I think dApp staking and restaking are similar

Restaking, in general, is a way for protocols to bootstrap economic capital by simply providing a yield in return to users who provide that capital. Any decentralized infrastructure on Ethereum requires initial capital to run. But where do you find that capital?

1. Getting people to commit to your protocol can be hard because you might not already have a reputation of building decentralized products
2. You’ll have to heavily inflate your rewards to incentivize those skeptical stakers.
3. Even if you do get stakers interested in committing capital to your protocol, they might unstake at some point in place of better yields (assuming your network’s yield goes down as more stakers participate)

Thus, finding those stakers to commit capital is hard. That’s where EigenLayer and the concept of restaking comes in.

Now, say you want to build a decentralized sequencer. Instead of going through to Optimism or Arbitrum and pitching your idea, you can simply go to EigenLayer, pitch your idea to the restakers and stakers on EigenLayer, offer them an enticing yield and they can then delegate their capital to you.

Let’s say that you get extremely lucky and you get $100m worth of stake for your sequencer. Now that’s enough stake to get every user of that L2 interested because there’s $100m worth of stake securing it.

In return for that stake, you provide a return to users (which could very well come from your own inflation or from the fees you generate etc.).

Now, let’s look at dApp staking.

Let’s say you are a developer of a new perp protocol that offers upto 100x leverage on ASTR. You want to build this protocol because you think there’s enough interest, speculation, and trading volume for ASTR that its holders are willing to take on leveraged positions for it.

But you don’t know if people actually need it.

So what do you do?

You head to the Astar Forum and start asking questions whether people would appreciate a protocol like that. Better yet, you apply to the dApp staking program, market yourself to the Astar community and if enough people are interested they stake their ASTR on your dApp. And you start earning rewards from the network inflation.

Pretty cool, right?

In both cases, it is the protocol that is creating something of utility that is pitching to users/stakers and asking for economic support. The users can decide to commit their capital to the protocol/application that they deem most fit. And if at any point they feel that they don’t wish to support that project anymore, they can simply decide to withdraw that capital.

While so far it looks very rosy similar, but there’s a critical difference that I haven’t highlighted yet. Perhaps you have understood it yourself.

Why I think dApp staking and restaking aren’t similar

Let’s go back to our example of a decentralized sequencer wanting to bootstrap capital. Now the question comes: how do the users of that sequencer know that the $100m capital staked on it can be trusted and that the operators/validators running that decentralized sequencer won’t just do something malicious? Through slashing.

A slashing guarantee stipulates that if the operators/validators of that decentralized sequencer behave maliciously, they run the risk of getting a portion of the stake slashed. This aligns the interests of stakers and operators/validators, thereby giving assurance to the users that the sequencer is indeed decentralized.

Essentially, slashing acts as a proof that stakers and operators will not engage in anything bad. This is like asking them to take ownership of ensuring that the sequencer keeps running smoothly.

In the case of dApp staking slashing exists collators.

In fact, it is purely on dApp developers to deliver on their milestones and targets to ensure that stakers keep supporting them. If those developers miss out, then the users can simply remove their ASTR and proceed to stake on another dApp.

The other crucial difference is that in the case of dApp staking, neither the user nor the dApp developers assume any counterparty risk. Users simply lock their stake/lock their ASTR within the network on their favourite dApps. And dApp developers receive ASTR as rewards. In the case of restaking, however, both the developers and the users assume counterparty risk i.e.,

• risk associated with the underlying liquid staking protocol whose LST is being restaked
• risk associated with the additional slashing conditions that the restaking protocol enforces - on top of the LST protocol risk

While a majority of these risks are contained within the protocol itself, in the case of a black swan event these layered risks can turn out to be fatal for all parties involved.

So…what does it all mean?

You’re probably wondering why the hell did I decide to compare restaking with dApp staking.

And the answer to that is:

Most protocols today struggle with bootstrapping capital. And I believe both restaking and dApp staking present novel ways for them to solve that problem. While both have their benefits, I like the idea of dApp staking because it puts users in the dominant seat where they can decide the kind of innovation that actually happens on the network.

Thus, innovation on the PoS network isn’t determined by a centralized entity calling all the shots; rather it is purely dependent on the users and their preferences.

In future, I can envision a few bribery marketplaces coming up (curve-convex style) where smaller sub-communities can support a particular type of dApp such as a perpetual protocol, an oracle etc.

Also, I think liquid staking presents a highly novel opportunity for supercharging dApp staking. Roughly 20% of the ASTR is currently staked today. I contend that a majority of it isn’t staked because users lose liquidity of their capital. Liquid staking alone can supercharge this number. I recently covered this in a post on Twitter. Check it out on official neemo finance twitter.

What do you guys think? Do you agree with the comparison? Also, how do you envision the growth of dApp staking? Do you think other protocols might develop similar models?

Curious to hear everyone’s thoughts!

[Juminstock]

Hi @psneemo, thanks for starting this conversation!

Mainly I do not come to give my opinion on the matter, at least not yet since I do not understand very well what the subject is about, I will wait for my colleagues or the rest of the community to give their opinion to gather more data on the matter.

[psneemo]

Np and sure! I look forward to what other folks have to say

[you425]

Hello!

You have an interesting perspective. However, I don’t see as much similarity between these two as to warrant a direct comparison (though, of course, there are some similarities).

Restaking

Pros:

• AVS can offer services without having to provide its own economic security.
• Operators can earn rewards from AVS.
• Restakers can earn additional rewards by delegating LST to operators.
• Leverage can be applied to asset management.

Concerns:

• If an operator acts maliciously, it can cause significant damage to AVS.
• Slashing risks arise to prevent malicious actions by operators (currently not implemented).
• If something goes wrong with LST, the leveraged economic security could collapse in a chain reaction.
• Restaker’s slashing risk increases compared to normal staking.
• The economic viability is unknown due to unclear revenue from AVS.

dApp Staking

Pros:

• dApps can earn additional revenue beyond service earnings.
• Stakers can earn revenue regardless of dApp performance.
• Both dApps and stakers face very low risk.
• dApps may act to attract votes, potentially providing positive feedback to the entire ecosystem.

Concerns:

• Stakers might be less discerning in choosing dApps since the base rewards remain the same.
• dApps might continue to receive rewards without contributing, as long as they meet the listing threshold.

In my view, Restaking primarily aims to lend economic security to new projects and earn revenue from it. dApp Staking aims to provide additional revenue to specific dApps and stakers, as well as to invigorate the entire ecosystem.

Broadly speaking, they share the common goal of “supporting someone in some form and earning returns.” However, the nature of support differs: economic security in Restaking, and revenue in dApp Staking. There are also differences in the roles involved. Restaking involves AVS, operators, and delegators, while dApp Staking involves dApps and stakers. Thus, stakers can directly choose their support targets. (The mention of collators does not have a direct relationship with dApp Staking.)

Moreover, their positions differ even when considered at the application layer.

dApp Staking is closer to the PoS position, a relatively low-layer application, making straightforward comparisons even harder.

Therefore, I see these two not as direct comparisons but as complementary in terms of economic rationality.

[Matt]

Agreed with You! Your analysis succinctly distinguishes the goals and structures of Restaking and dApp Staking. Restaking focuses on providing economic security to new projects, allowing operators and restakers to earn rewards by leveraging assets, albeit with higher risks such as operator misconduct and slashing. Conversely, dApp

Staking aims to generate additional revenue for dApps and stakers, offering lower risk and promoting ecosystem growth by encouraging competition for support, though it may lead to less discernment in choosing dApps. Both systems share the common goal of supporting projects and earning returns, but they differ in their methods and focus areas.

[bao]

From a security perspective, dApp staking and restaking seem to have different purposes.

With restaking (ETH), it’s possible to give a portion of Ethereum’s security to projects seeking enhanced security. In Astar Substrate, since security depends on Polkadot, dApp Staking likely isn’t directly related to security.

Therefore, while dApp staking and restaking both involve the act of staking, they may need to be considered separately due to their differing purposes from a security standpoint.

[pithecus]

Thanks for opening and sharing @psneemo your knowledge to the community and opening this discussion thread, and appreciate for @you425 your compact and easy-to-compare summary!

[psneemo]

Hey thanks for taking the effort to explain the differences between restaking and dApp staking! And you’re 100% correct: both restaking and dApp staking are technically different. I just found them, at-least on the surface, to be similar because they provide economic support.

I think, in general, the idea is here for protocols to somehow bootstrap capital - in the case of restaking its focused towards bulk economic security for PoS applications and in the case of dApp staking it is economic incentive to support devs.

I think, in general, dApp staking might be closer to a highly decentralized and community-driven grants programme as opposed to restaking. I’d be curious to know your thoughts on it

[psneemo]

exactly! thanks for your response ser

and I think dApp staking might be closer to a decentralized grants programme than restaking because restaking and dApp staking are technically different!

i’d be curious to draw comparisons between famous grants programmes and dApp staking and see which programmes actually help in driving innovation

for instance in the case of arbitrum, the STIP and LTIP are quite popular grant programmes - and they have yielded some innovative products too (for example some perpetual products on arbitrum are purely the result of these grants)

[psneemo]

astute observation thank you!

[psneemo]

tyty! glad to hear people’s takes on it; this is really fun. I’ll keep posting threads like these because they help me widen my perspective and gain a few brain cells by listening to people’s perspectives lol

[pithecus]

That is a good way of interacting with the community and helping them understand more about your contribution to the network! Hope I also can get a few more web brain cells along with your threads!

[you425]

Yes, that is correct. I think providing some form of financial support is the similarity between the two. The difference is that the support is provided through infrastructure or directly through tokens.

dApp Staking was originally designed to support developers, so you are exactly right when you say “highly decentralized and community-driven grants program”. This would be more evident in the UCG.

[pitcoin777]

Brilliant! That’s what I was looking for. thanks @you425

[MrKarahanli-Emre]

First of all, as someone who started to be interested in LRT platforms with the release of EigenLayer and introduced this field to my followers very early on, I must say that both options have their own advantages and disadvantages.
I am constantly thinking about creating a DeFi product with positive collaboration between both dappstaking and LRT. If such a product is developed, I am sure the assets will be used more effectively.

[rezen]

This kind of discussion is very interesting!
Thank you for creating this topic.
I hope to see more Dapps effectively utilizing Dapp Staking in the future.

[psneemo]

nice i think some sort of collaboration/confluence between dApp staking and restaking might be interesting to see even though I am not quite sure about the technicalities of such a collaboration; but would love to hear what ideas you have!

[psneemo]

for sure! i’ll be creating a lot more topics like these to spurr discussions; love hearing what the community thinks!

[MrKarahanli-Emre]

It needs some thinking, until someone found LRTs there was only STAKE, maybe a merger between LRT and dApp staking can provide cumulative gains.

I still need to think about it and ask my friends in my software team.

I will write to you as soon as there is progress!