The LRT Episode

Welcome to the LRT episode, covering the entire playing field of liquid restaking projects and what makes each one unique and special. On the show we have representatives from Ion, Ether.fi, Puffer, Kelp, Swell and Renzo making this your one stop to go from zero to expert on the restaking landscape. ------ 🏹 USE PODCAST24 FOR 10% OFF https://bankless.cc/Citizen2024 ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2 ⁠ 🔗CELO | CEL2 COMING SOON https://bankless.cc/Celo 🗣️TOKU | CRYPTO EMPLOYMENT SOLUTION https://bankless.cc/toku 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle 💸 CRYPTO TAX CALCULATOR | USE CODE BANK30 https://bankless.cc/CTC ⚖️ARBITRUM | SCALING ETHEREUM ⁠https://bankless.cc/Arbitrum ------ TIMESTAMPS 00:00:00 Intro 00:02:45 Ion Protocol 00:17:06 Before You Listen 00:26:45 Ether.fi 00:37:46 Puffer 00:54:02 Kelp 01:10:26 Swell 01:21:40 Renzo ------ RESOURCES Ion: https://ionprotocol.io/ Chunda: https://twitter.com/ChundaMcCain Ether.fi: https://twitter.com/ether_fi Mike: https://twitter.com/MikeSilagadze Puffer: https://twitter.com/puffer_finance Kelp: https://twitter.com/KelpDAO Amit: https://twitter.com/GAmitej Swell: https://twitter.com/swellnetworkio Daniel: https://twitter.com/daniel_swell_ Renzo: https://twitter.com/RenzoProtocol ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures⁠

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Hoffman?

  Bankless Nation, welcome to the LRT episode. Today, we have a different kind of podcast than what you would normally expect out of the Bankless Podcast feed. Today, we are talking with six different teams at different times, not all at once, all in the LRT space. Five different LRT teams, and then Chunda McCain from Ion Protocol, who can give us a little bit more of a meta perspective as to how to view the entire LRT landscape. I'm making this episode because there are so many questions that we have about the restaking and LRT ecosystem. It is developing at a mile a minute, and the number of questions that we have are growing faster than the answers that I think we have for them. And so I'm hoping to help answer some of those questions that we have in the LRT space.

• 0:43David Hoffman?

  What are the risks of LRTs? What are the different strategies of LRTs? What are the different directions that different LRTs are going in? I've always thought that the LRT game is won by maximizing exposure and minimizing risk. And each one of the LRT teams that you're going to hear from in the episode has different strategies of getting that done, and different priorities, different orders of operations. In this episode, you're going to hear from EtherFi, Puffer, Kelp, Swell, and Renzo, in that order, all about their different LRT strategies, what they are doing, and what their roadmap is. Some of them have explicitly teased their token generation event, but all of them will have a token, I bet, I'm guessing, there's a prediction, in the year 2024, probably in the first half.

• 1:25David Hoffman?

  But diving headfirst into the LRTs might be kind of a lot. So first, we're going to talk to Chunda from Ion Protocol. And Ion Protocol is an aggregator of LRTs, kind of like, it's kind of like a compound. So LRT and LSTs go in one side, and then vanilla Ether goes out on the other side, where all of the different LRTs are producing different flavors of ETH. Ion uses a compound-style market maker application to re-aggregate and re-homogenize all of the ETH that comes out of Eigenlayer, so we can more efficiently use capital in DeFi. And because of this position that Ion Protocol has in the space, They have to be extra cautious and extra informed about all the different choices that LRTs are making.

• 2:10David Hoffman?

  So that is why Chunda comes first in this interview. He is going to provide a framework for understanding how to evaluate LRTs at a meta level. And then we will go into the individual LRT projects. Every single interview is 15 minutes or less. I think the Chunda interviews may be 18 minutes, but this is meant to really give you broad exposure to the entire LRT landscape and kind of download you very quickly about all the different players here so that we can all be informed about what's coming inside of the Eigenlayer ecosystem. So let's start with our interview with Chunda from Ion Protocol first, and then we will get into the LRTs after that. We got Chunda McCain of Ion Protocol. Chunda, welcome to the show.

• 2:50Speaker 01

  Thank you for having me, David. It's a pleasure to be here.

• 2:52David Hoffman?

  I want to peek into your brain about how you think about the LRT ecosystem. Before we do that, I think we need to explain to listeners what Ion Protocol is and what vantage point it provides for viewing all of the different LRTs. Cause you're kind of at the meta level. You're at the bird's eye view, satellite level view of the whole LRT landscape. Maybe you could explain a little bit about Ion Protocol and what it does and how it informs your thinking about the LRT space.

• 3:21Speaker 01

  Yeah, 100%. So I guess I'm going to give a little bit of context about myself and kind of how the idea of Ion kind of came about. Cause I think I'll provide a good kind of foundational starting point to kind of understand a little bit more on how we're approaching the problems of addressing LRT risk. And specifically, how do we want to approach financial underwriting of LRT risk? So a little bit about myself, been in the crypto space. I'd say I first learned about it back in 2015, but really got into it in the birth of DeFi 17, 18 era. And just started writing white papers on like peer to peer lending market design. And then starting doing research on AI based credit risk analysis frameworks, not for DeFi, but actually for in the more traffic context.

• 4:01Speaker 01

  Thinking about how we can actually build systems for people who don't have access to like FICO scores or extensive credit history. And trying to get, build an approach from more like heuristic data to say like, okay, how can we assure that these unnamed underbanked people in America gain access to the traditional financials that other people have?

• 4:21Speaker 01

  And so, you know, thinking about those types of things in crypto, uh, kind of emerging like DeFi emerging onto the scene at around the same time, really set the stage for me to like, it it just immediately clicked. And so for me, um, I spent, you know, kind of the next, I guess, in until now, seven years, um, kind of getting engaged in the space, working from, you know, being a software engineer, like a small contract engineer, like a neo bank, building out crypto infrastructure there, uh, so working at a DeFi startups to even spending a little bit of time in venture. Um, and it was actually my time in venture. I was working on the blockchain capital team back when we were looking at the Eigenlayer deal. I think this was late 2022, um, that I first, I got my first glance into what Eigenlayer was as a concept.

• 5:04Speaker 01

  Um, and it just, and me, it was one of those, like, I'd say it's probably like the second most important lifeboat moment of my time in crypto, because the idea of extending, uh, the core concept of perfect crypto economic security of ether as an asset, and which is basically the whole position why we all use ETH as kind of the current status quo settlement layer, um, in the crypto ecosystem. Extending that kind of power that Ethereum had to other networks and other services just immediately made sense. And I realized there, there was kind of a big problem that existed, uh, within this context and in in DeFi in particular, which is that

• 5:41Speaker 01

  we we don't really have primitives that internalize, um, all this infrastructure risk that exists in, um, restaking platforms. This idea of that, instead of underwriting like traditional financial leverage or or these terms that we're more familiar with in DeFi, I think you guys kind of mentioned this recently, there is no inherent leverage in, uh, restaking. The risk that you're taking on effectively is like, uh, there's a bit of game theoretical risk about like node operator activity. Um, there's a bit of infrastructure based risk about, um, like ABS setups and consensus network setups.

• 6:16Speaker 01

  Um, and then you also have, um, a bit of risk around like the the balancing the, uh, principal agent problem and like decentralization from node operator to network perspective, right? And so for us, we were like, all right. In order to tackle this problem, we need to first ask the questions of like, what is needed in the restaking space? And then like, all right, how do we build this infrastructure? So in terms of what is needed, we're but I on effectively is a lending platform meant to underwrite all of these different types of risks to allow people to financialize their restaking positions as well as taking positions without having to kind of depend on the traditional means of financial underwriting that exists with like, you know, counterparty AMM liquidity

• 7:01Speaker 01

  and and really deep like Dex liquidity and and also all these like price or calls and and kind of taking a step away from that infrastructure and thinking about, all right, what are the specific things about this market that are important for us to address?

• 7:14David Hoffman?

  That was a super useful explanation. I think one of the very interesting things about Eigenlayer and liquid restaking tokens is that at first glance, everyone sees Eigenlayer and they see the concept of you, you take your ETH, you stake it, and then you stake it again, and then again, and then again. And then everyone is like, oh, but that's like, we're like stacking risk on risk on risk, which is true. And so like, then people's like heckles start to like rise up a little bit about just like, okay, what are the risks of Eigenlayer? It's a very natural response. And then like you layer on LRTs on top of that and LRTs are all playing the same game of like managing that risk. And then there's

• 7:53David Hoffman?

  your game, which is managing the net aggregate of all the LRT risks. And so it's this simultaneous like yield seeking, risk seeking inherent nature about Eigenlayer matched with like, okay, but like, let's contain all of the risks too. Because that ultimately, at the end of the day, Eigenlayer, like you said, is going to reach out to far beyond the horizons of crypto, leveraging crypto economic security, providing new products to like TradFi, to the SaaS model, to like San Francisco, Silicon Valley. And so it actually measuring and containing risk is really, really important. So like, it's this kind of like two face nature of like restaking, which is like more risk, more yield, more upside.

• 8:34David Hoffman?

  But we're going to manage it all. And that's kind of how like, that's why I think this space is so interesting. And your perspective is not just like a user. We have a lot of users listening to this episode. Who are trying to get their, just get educated about the risks of LRTs. You are coming from a protocol perspective because you are building a protocol. And so you have to think about it a little bit differently. Can you illustrate some of the inputs that go into the risk assessment? Like, what are the different things that ion protocol assesses? When it does its underwriting of the LRTs, like, what are the inputs that are actually being evaluated?

• 9:12Speaker 01

  Yeah, that's a really good question. I think a good thing to remind everyone as well is this concept that LRTs at first, before they're ever LRTs. They're LSTs, a lot of them. Anyone that supports native staking, you're building an LST protocol first. And then you're building an LRT on top of that, right? So our first approach is to actually tackle that and say like, all right, we need to evaluate all of these different providers. I call them providers because effectively that they act in a very similar kind of function.

• 9:47Speaker 01

  And we need to assess, all right, specifically, how do you look as a provider first? Because that's your core, that's the core dependency that exists right now, especially without Ikon layer being live. We need to answer a question and make sure that everyone in, from a provider infrastructure standpoint, is being safe. So for those things we look at, we take into account node operator setups. The idea of kind of two things. One, it's like a technical implementation standpoint. Are you requiring bonds? Who has access to the node operator keys? Is it the user? Is it the underlying node operator that has all the control? Who decides what node operators get included? Is it permissioned, permissionless? How exactly are you choosing these node operators? Who are these node operators?

• 10:31Speaker 01

  Are they docs or they undocks? All these questions that you would traditionally ask in a liquid staking provider context, we're also asking for these LRTs. So that's the system wide kind of perspective. You also have technical implementation details that are important as well. How much are you using DVT? Are you using DVT at all? Do you plan on integrating TES to abstract away key ownership? What's your client diversity looking like, right? All of these kind of more infrastructure based questions are also things that we're looking at internally. When it comes to assessing these various different providers on the staking level. Now, after the staking level, then the approach is, okay, you kind of have to balance two things when it comes to

• 11:14Speaker 01

  AVS delegation, which which creates is is actually interesting thing, which I think we, you know, we we wrote a bit of a paper on it with with some folks, I'm sure. We can link that later, but what we call it is is the efficient frontier of restaking risk. Where, you know, even if you're delegating capital to what we seem as like the most safe AVSs, you still end up centralizing your risk vectors. And so there's actually this interesting balance that you have to take where you want to decentralize your delegation, your internal delegation to multiple AVSs, thereby technically earning more yield.

• 11:55Speaker 01

  But also finding that balance where you don't over allocate to AVSs that take on additional risk. And so this idea of like creating silos of where you're allocating and delegating risk and diversifying that risk across multiple different AVS delegations is something that we're considering. A lot and and the one big thing right now, and this goes a little bit more on kind of like infrastructure based underwriting, is this idea of like. How common is this type of consensus model? Proof of stake and BFT-based consensus protocols have existed for a long time. We understand their risks really well. And, you know, as we've seen in throughout the history of Ethereum, we can mitigate those risks

• 12:40Speaker 01

  pretty decently well so far. But one of the big concerns is when we start innovating on novel consensus models, even DA-based consensus models have some interesting things that make things like anti-slashers unviable for DA, which is an interesting kind of constraint there. You then, we kind of start ending up walking into uncharted territory where we're not exactly sure what black swan events look like in these situations, what can cause them, and even what does the status quo of that network look like? And so for us, I think we're going to be heavily indexing, and I think users should also think about heavily indexing on what kind of consensus models and what kind of underlying infrastructure people building that we're already used to underwriting and

• 13:24Speaker 01

  we're already used to kind of assessing within the context of Ethereum and the consensus protocols that exist today.

• 13:31David Hoffman?

  One of the roles that Ion Protocol will do is it'll have an algorithm, I'm assuming, to actually like judge parameters, just to make it super clear, Ion Protocol like compound, but LRTs go in one side and just normal ETH goes out the other.

• 13:47Speaker 01

  Or LSTs, yeah.

• 13:49David Hoffman?

  Or, or LSTs on, yes, right. Yeah, any sort of ETH derivative on one side, and that's with a protocol underneath, and then vanilla ETH on the outside, which means that you need to have an algorithm to like produce parameters, risk parameters about the collateral assets. This will of course ingest some of the inputs that I asked you about earlier, but like, also, how do you even design the algorithm? Because where do you get the data to even make weighting decisions, right? Like, we've never done this before. You're doing it first. How the hell are you doing it? What do you know? Like, how do you actually like build this thing?

• 14:25Speaker 01

  Yeah, no, it's a very good question. And it actually goes to the thing, like, the two things that concern me the most with Eigenlayer, like holistically, right? The two things that concern me the most about Eigenlayer, it has nothing to, has nothing actually to do with Eigenlayer, the product, but instead on how we are able to observe the product. Those two things are opacity on data, uh, basically the limitations on being able to see access and and view data uh in real time. When it comes to all of these networks. And then two is like the ability to then ingest and analyze that data.

• 15:00Speaker 01

  I feel like there that is kind of a a sector of restaking where we haven't really seen too many announcements of people building infrastructure like scalable infrastructure around that. And that infrastructure is going to be crucial to informing users on how to actually participate in this ecosystem. And that's hopefully, you know, so one of the things that we want to be one of the pioneers in is. We we built out right now, we're we built out a Z K M L based framework that ingests Ethereum consensus data. We use a variety of different data sources, uh, some kind of centralized data provider APIs, some utilizing, you know, billing our in-house solution that.

• 15:41Speaker 01

  Uh, draws like we can chain data directly. Eventually, we're going to be incorporating inputs via uh Z K state proofs. Uh, to further decentralize um and and make our inputs more trustless. And we built this uh Z K M L framework or zero knowledge machine learning framework that allows us to um analyze. What we see as like common potential risk vectors in Ethereum uh Ethereum's like. Uh, network in order to be able to kind of necessarily mitigate, but uh have a better understanding of what kind of volatility could exist. Um, on a, you know, fixed time basis uh for slashing on Ethereum. The extension of that is now now that we've built out the system for Ethereum.

• 16:23Speaker 01

  And like I mentioned before, most consensus protocols are going to fit within this like kind of like B F T based um consensus model. Um, we plan on extending uh this kind of framework and of course, testing it uh before we really allow uh robust capital efficiency for a lot of these A B Ss. Uh, but testing this uh framework with other networks as well to and benchmarking it based off the initial results we get from uh Ethereum to be able to see whether. Uh, we can actually kind of scale uh these like robust data frameworks across A B Ss. And ideally, hopefully, we can um uh eventually open source these frameworks and allow other people to build their own uh kind of unique frameworks to assess uh these different networks as well.

• 17:07David Hoffman?

  So, Trunta, during the middle of this interview that we're doing right now, I have decided to, instead of having this interview be at the very end, I'm going to put it at the very beginning because I think it provides a framework for listeners to have as they enter these five different LRT projects. You've actually listened to every single one of these. We gave you the material ahead of time, especially you could review. What do you think listeners should know? Or what frameworks should they understand? What do they need to think about as they are listening to these different LRT projects? Talk about their own strategy. What would you want to have known going into this the first time around?

• 17:42Speaker 01

  Yeah, so there's a couple of things that I think is really important for every user to kind of ask themselves. These are a few questions that we always want people to ask themselves. I mean, and I actually split them up into verbs. It's really easy for you to create this kind of like internal checklist to go and say like, "Okay, I'm going to check off, you know, each one of these boxes and see which LRT or, you know, restaking solution or what have you has each one of these things." So, the first one, like, you know, we've been chatting a little bit before about is operators and specifically operator setups and operator risk. The operators are the lifeblood of Eigenlayer. They're the lifeblood of staking. They're the ones who are running the hardware instances or AWS instances,

• 18:27Speaker 01

  depending on the person,

• 18:30Speaker 01

  that make all of these networks run, right? And so, within the operator framework, you should be asking yourself, "Who are these operators?

• 18:40Speaker 01

  How were they selected? How much control do they have over the capital? Do you, as the user who holds the asset, are you permissionlessly able to kind of retrieve your capital from these operators? Or do the operators control those keys? Well, which is it, right?

• 18:56Speaker 01

  Asking about operator decentralization. How many operators exist? Or is there a network of them, right? And then finally, asking yourself, like, is there a roadmap to permissionlessness with operator inclusion? Is that on the roadmap? Is that something that's going to be a plan for the long run? So that that's kind of the operator framework. The the other framework I like to ask is just about kind of access control for you as a user. Do you have access to withdrawals? Right? Do you have access to your underlying capital at at any time, right? Or is it the node that has access to that? Um, how are you actually able to retrieve the underlying rewards here?

• 19:41Speaker 01

  Um, is that something that you're always able to retrieve when you withdraw? Things like this, you should always be asking yourself when you're kind of depositing to these frameworks. And also, what is actually happening underneath the hood when I deposit? Understanding i- is it actually getting staked into an LST? Is it getting staked into their own validators? Where is that capital actually going? Questions you should be asking yourself. Um, and then finally, uh, I'll actually, I have four of these. Um, but finally, the last one for the LRTs, which I think is, um, uh, I call it like the the future, the future proofing vertical is the questions of like, okay, what are they looking towards in the future of like future proofing the system?

• 20:24Speaker 01

  Uh, DVT usage, is DVT a large priority for them? I think DVT and the idea of even taking a single node operator and then splitting up the access control between multiple entities and a single node operator makes the difficulty of slashing that much higher, right? The same thing with T E usage. Humans and human input is for Ethereum at least is most of the reason why slashing events ever happen. If you remove humans from the equation, your risk of slashing goes immensely down, right? So by removing humans out of the equation by using things like T E's, you're able to kind of mitigate slashing risk as well. Um, those are kind of the two main things, but I'm sure other people will be building uh, really interesting and innovative ways to kind of future proof staking and restaking along.

• 21:09Speaker 01

  The final thing I would ask is also, you know, the more practical thing, what can you do with this asset? Right? Is it just going to be restaked? Can you use Indify? Are they prioritizing implementations in L2s bridges? Can you reduce your costs? Things like that. Those are also things that are important just from a user experience standpoint. And although in crypto, we tend to have a, you know, bad rap for good UX. I think, you know, it's something we, we should be asking ourselves and prioritizing as well. Although of course, you know, I put this as one vertical. I think we should also weigh this idea of like safety and security a lot more than just kind of these UX.

• 21:45David Hoffman?

  Trinda, I'm so glad that I brought you into this, this conversation. I think that was immensely helpful for the listeners as they are about to hear all five of these interviews. Just one, maybe one last message for the listeners is like, we're starting to color in a picture here. The interviews that you are about to hear are going to help you further color in that picture. But there's just so much more research to be done. I've only really was able to, you know, touch on the surface level of each one of these, each one of these LRT projects. So like each one kind of represents some homework to be done. Trinda here just gave you the frameworks to do your homework with and by. So thank you, Trinda, for that. Trinda, you talked about some resources.

• 22:27David Hoffman?

  We will put those links in the show notes, but overall, if people just want to learn more about Ion Protocol and learn more about the way that you think about risks in LRTs, where should they go?

• 22:36Speaker 01

  Yeah, 100%. If you want to check us out at Ion Protocol, we post a lot of content about this kind of stuff as well as the things we're thinking about internally when it comes to building out the protocol. So just check us out on Twitter at Ion Protocol, one word. You can take a look at our recent work with Shol Research and the guys at B2 Finance. We, this framework that I've been talking about, we put that on and added even more kind of a larger checklist that you can kind of run through and ask yourself questions of, okay, what is important about, you know, me using all these different LRT solutions? And then also we had a little bit of a sprinkle in there about what is important about D5 solutions that we claim to underwrite these LRTs.

• 23:21Speaker 01

  We put a couple, a couple of different examples in there for you guys to interact with and learn a little bit more about. And then if you're interested in kind of hearing my thoughts about the like the post a little random things about Ethereum or infra stuff and you know how they may have implications on staking and restaking. Feel free to follow me just at Trunavacane on Twitter. You can check everything out there.

• 23:44David Hoffman?

  Beautiful, Trunav. We'll get all those links and your Twitter into the show notes. Thank you so much for all this knowledge.

• 23:48Speaker 01

  Yeah, appreciate the invite, man. Got you.

• 23:51David Hoffman?

  All right. Thanks so much, Trunav. Now, let's go ahead and get into all of the different LRTs. But first, I want me to talk about some of these fantastic sponsors that make this show possible, especially Kraken, our preferred crypto exchange in 2024. If you do not have an account with Kraken, consider clicking the links in the show notes, getting started with Kraken today. If you want a crypto trading experience backed by world-class security and award-winning support teams, then head over to Kraken, one of the longest-standing and most-secure crypto platforms in the world. Kraken is on a journey to build a more accessible, inclusive, and fair financial system, making it simple and secure for everyone, everywhere, to trade crypto. Kraken's intuitive trading tools are designed to grow with you, empowering you to make your first or your 100th trade in just a few clicks. And there's an award-winning client support team available 24/7 to help you along the way,

• 24:36David Hoffman?

  along with a whole range of educational guides, articles, and videos. With products and features like Kraken Pro and Kraken NFT Marketplace and a seamless app to bring it all together, it's really the perfect place to get your complete crypto experience. So check out the simple, secure, and powerful way for everyone to trade crypto, whether you're a complete beginner or a seasoned pro. Go to kraken.com/banklist to see what crypto can be. Not investment advice. Crypto trading involves risk of loss. It's everyone's favorite season in crypto, tax season. And crypto tax is always an absolute headache, especially for all you D gens out there. But it doesn't have to be a nightmare. That's where Crypto Tax Calculator comes in. The software built for D gens by D gens. As Coinbase's official global tax partner, Crypto Tax Calculator focuses on making complex transactions into easy ones,

• 25:20David Hoffman?

  supporting over 300,000 currencies across Ethereum, Arbitrum, Optimism, as well as 1,000 other integrations as well. It's as simple as connecting your wallet, pulling in all your transactions, and following the automated suggestions to quickly and accurately calculate your tax obligations. Plus, for all the airdrop farmers out there, Crypto Tax Calculator has your back. Consistently adding support for new and upcoming Layer Ones, Layer Twos, and all the airdrops that you're currently farming. 2024 is the year where the D-gens do their crypto taxes with speed and confidence. Make taxes this year easy and affordable with Crypto Tax Calculator. Sign up at cryptotaxcalculator.io and get a 30% discount with code BANK30. Click the link in the show notes for more information. Are you launching a token? Is it already live? How are you managing the legal and tax obligations for providing token grants to your team?

• 26:04David Hoffman?

  It's no secret that token management gets complicated. Between learning all the legal language and tax obligations in every country that your team is in, token grant management can feel like an obstacle course. But it doesn't have to. That's where Toku steps in. Toku provides practical tools to handle token grants, allowing for effective oversight of token distributions and payroll tax compliance for employees, contractors, advisors, and investors. They also handle tax withholdings through their real-time tax calculations that can be done by Toku or integrated into any payroll EOR providers in any jurisdiction. Toku is a trusted provider of Protocol Labs, DYDX Foundation, Mina Protocol, and many more. Get started for free and make token compensation simple at toku.com/bankless. Bankless Station, I'm here with Mike Siligotze from EtherFi.

• 26:49David Hoffman?

  Mike, welcome to the show.

• 26:51Speaker 02

  Hey, great to be here. I'm Mike Siligotze. I'm the founder and CEO of EtherFi. Previously, I've built some pretty large businesses that were valued in the hundreds of millions of dollars, and I'm excited to help revolutionize the restaking universe.

• 27:04David Hoffman?

  Okay, so Mike, talk to us about how you came to the conclusion to work in the LRT space to build EtherFi. What was the inspiration? Where did it come from? And how did you end up building EtherFi?

• 27:15Speaker 02

  EtherFi actually started as a fund, an ETH staking fund. And we realized that there actually wasn't a product on the market that we were comfortable using ourselves. And so we really built EtherFi to solve our own problem, to solve the issue of ETH custody and risk management, and to build something that was natively integrated with restaking from the ground up.

• 27:34David Hoffman?

  How did the team come together? Who are your co-founders? What does the company look like?

• 27:39Speaker 02

  The core team consists of myself, Rock, Joseph, and Rupert. I founded the team and am the CEO. Rupert is our head of engineering. Joseph is our COO, and Rock is our head of revenue.

• 27:50David Hoffman?

  Okay, and then eventually EtherFi went from fund to LRT. Can you talk about that, like aha moment or eureka moment? Just talk to us about that decision.

• 28:00Speaker 02

  Yeah, so believe it or not, we plan to build EtherFi as an LRT from day one. When we were raising our seed round, we were talking about restaking at the core of the protocol because we saw that as a natural extension of stake on Ethereum.

• 28:13David Hoffman?

  Was always meant to be an LRT that would also allow users to deposit? Or is it an LRT for like just increasing the yields of the funds Ether? Like, or has the like North Star always been the same?

• 28:25Speaker 02

  That's a great question. So, no, initially, we started as a fund and within a few months, we pivoted to building a product because my previous life, I built a product company and I want to do that again in Ethereum rather than running a fund.

• 28:40David Hoffman?

  Okay, let's talk about EtherFi as a product. There are so many LRT teams out there. That's why we're doing this episode. What about EtherFi is unique? What makes it stand out?

• 28:50Speaker 02

  So there's two things that make EtherFi interesting. The first is that it's the only staking protocol that allows stakers to hold on to their keys. With every other liquid staking protocol, the node operator controls your keys and effectively has sort of a stranglehold on your custody of your ETH. The second thing is we were the very first protocol that was natively restaked from the ground up. And so that's why we were able to get to market first and become the largest liquid staking protocol. And the other thing I'll say is, believe it or not, it actually is not that crowded a space because although there are probably 50 different LRTs right now, nearly all of them are just wrappers of some LST or another. And there's only a handful of actual natively restaked liquid tokens and that includes us,

• 29:34Speaker 02

  includes Swell, includes Renzo, which are really awesome teams that we think are building cool things in the space.

• 29:41David Hoffman?

  Let's unpack those one by one. Let's start with that first one, the one that where node operators retain their own keys. Can you just unpack that a little bit? Kind of explain like on five what that means?

• 29:51Speaker 02

  Yeah, so there's a big challenge with most liquid staking protocols in that when you deposit your ETH into really any liquid staking protocol, a node operator generates the keys and spins up a validator.

• 30:06Speaker 02

  You need that validator key that node operator generates in order to be able to get your ETH back. So when you go to Lido or any other protocol that has withdrawals, which is actually not that many, and try to get your ETH back, you submit a withdrawal request. What it does in the background is it effectively just voluntarily requests that a node operator return the ETH by exiting a validator. And now that introduces a lot of counterparty risk, in particular with protocols that have centralized node operators. It basically makes them a target. It makes it very easy to have a situation where you are not able to get your ETH back. With EtherFi, stakers act as bondholders and generate the keys. And there's an economic incentive mechanism to make sure you get your ETH back.

• 30:49Speaker 02

  So when you go to EtherFi and request the withdrawal, if your withdrawal is not honored, somebody's ETH gets slashed. And so that basically, it means it makes it very likely that you're going to get your ETH back.

• 31:01David Hoffman?

  This sounds like an innovation on the LST layer, which the LRT layer is built on top of. But first, it sounds like a little bit like this is improving even just the raw, normal Ethereum staking stack for delegated staking.

• 31:15Speaker 02

  Yeah. So I don't think that there should be two categories. I think it's a dumb idea to have LRTs and LSTs. All liquid staking protocols are going to be LRTs within a year. It's going to be something that's foundational to staking on Ethereum. So yes, we call ourselves an LST because we think all LSTs eventually are going to have restaking vacant.

• 31:36David Hoffman?

  Beautiful. Okay. So this, I'm guessing this implies that individuals can become node operators with EtherFi.

• 31:45Speaker 02

  Yeah, that's exactly right. So currently, it is not a fully permissionless system. We've got about 100 solo stakers who are operating nodes for EtherFi. Within about two months, it's going to be a fully permissionless system. So anybody will be able to show up with a two ETH bond and DVT managed keys, be able to spin up a validator, run it, and generate an income.

• 32:07David Hoffman?

  Beautiful. Okay, leveraging DVT. What are the collateral requirements? Is there collateral in this system?

• 32:13Speaker 02

  Yeah, so there's a two ETH bond requirement for anybody that runs a validator in order to have one shard of the validator cluster.

• 32:21David Hoffman?

  One unique thing about EtherFi is you guys are incubating an AVS. Is that correct? And can you tell me more?

• 32:27Speaker 02

  We are, yeah, we're really excited about this. So we are, the plan is to build on top of our liquid staking protocol and add components to it to make it differentiated that hopefully generate higher returns for users. One of the ways that we're doing that is by actually building an in-house AVS specifically, and I haven't, this is a mouth fart right here. It's called DAP Bridge and it is a decentralized RPC service similar to like a pocket network, but built on restaking on IGN. We're super excited about that. We're actually going to be publicly talking about it. Aside from here, I guess for the first time in the next probably two or three weeks. And then we'll be launching a beta a couple of months after that.

• 33:09David Hoffman?

  Okay. So how does a decentralized RPC leverage Ethereum security to improve its product?

• 33:15Speaker 02

  So every Ethereum node in the world has an RPC endpoint. That's just how the the protocol works. An RPC endpoint is basically just a way to talk to the Ethereum node and get, you know, data out of it or submit transactions to the blockchain. So this is something that's already part of the network. EtherFi has now thousands and thousands, probably 10,000 different nodes that run on EtherFi. And each one of those has an RPC endpoint. And so the decentralized RPC service just leverages these existing RPC endpoints, puts a bunch of load balancers in front of them and allows users to make use of this mostly idle infrastructure that's kind of sitting there. You know, validating blocks periodically.

• 33:59David Hoffman?

  Okay, so EtherFi was built to be an LRT from the ground up from day one. You guys had your own own capital that I think you guys have put into the EtherFi system because you guys were a fund prior to that. You have this unique node operators retain their own keys setup, which allows for more

• 34:19David Hoffman?

  stakers have their own keys, which allows for just a more permissionlessness and staker sovereignty in the system. Again, you guys have your own AVS that you guys are incubating internally. What else would you add to this like report card?

• 34:33Speaker 02

  So I would say, you know, it's always hard to make a subjective claim, but I would say we're super Ethereum aligned. I mean, the reason that we're doing this is because we're really, we really are passionate about Ethereum and crypto and what it stands for. You know, the founding team, myself, certainly, we've made enough money that we don't need to be, you know, working for a living day to day. We're doing this because we actually believe that it's going to help the network and because we believe in the mission of crypto of self sovereignty and giving people more control over their, their wealth so they can't be taken away from them. And so we're super Ethereum aligned. You know, we were giving 1% to the Protocol Guild, which is the team that builds the Ethereum Protocol, 1% of our token supply. We've got,

• 35:17Speaker 02

  you know, Sasso on our advisory board. We've got a member of the, James Smith, member of the Ethereum Foundation on our advisory board. You know, we're, we treat this stuff seriously. At the start of our white paper, you know, outlines our principles and what we believe in. And at the core of it is that we'll do the right thing for the network. I think that matters. I think, you know, it's easy to think about short terms and token pumps and all that nonsense, but genuinely, we plan to be doing this for another 10, 20 years. And so we're, we're trying to make the right decisions for the long term.

• 35:52David Hoffman?

  So EtherFi is coming in at approaching $700 million Ether deposited into your guys' contracts, that placing it as number one in the LRT race. To what, to what do you credit the reason why EtherFi is currently the number one in attracted capital?

• 36:10Speaker 02

  Well, I think some of the things that we talked about, so one, we were the first. That naturally, you know, sort of confers an advantage. You know, aside from building a good product, that was just good, good timing. I think, I like to believe that our Ethereum alignment and messaging and the brand that we've put out there has made a difference that people, you know, believe that they can trust us. And we hope to live up to that, you know, expectation. So yeah, all those things. We've also done a really good job of integrations. So we're plugged into, I think, more DeFi protocols than anybody else. We're starting to deploy on layer twos and, you know, a bunch of other areas that make the token ultimately more useful for, for users.

• 36:52David Hoffman?

  Is there something in EtherFi's future roadmap item that is exciting that users might be interested in?

• 36:59Speaker 02

  So the thing that I'm most excited about in the in the coming months of EtherFi, the first is that we are going to be announcing our Series A fundraising, maybe by the time this episode airs, we have already announced it. So we're working with some pretty awesome investors that we're really excited about. And then the the second thing is that we are in fact going to be doing our token launch. We think our users are going to be super happy with that. We're doing some pretty interesting and unique things with the with the launch and we, you know, we hope that it ultimately ends up helping the ecosystem.

• 37:31David Hoffman?

  Mike, if you have piqued the curiosity of any listeners of this episode and they want to learn more about EtherFi, where should they go?

• 37:37Speaker 02

  Just go to ether.fi, ether.fi, and then you could, you know, hang out, you can stake your ETH, you can check out our Discord, whatever, whatever you want.

• 37:45David Hoffman?

  Awesome. Thanks, Mike. Thank you, Sebastian. I'm super excited to introduce you to Amir from Puffer. Amir, welcome to the show.

• 37:51Speaker 03

  Thank you, David. Thank you so much for having me.

• 37:53David Hoffman?

  Amir, tell us a little bit about yourself and how you came to be at Puffer, and then we'll get into how Puffer came to be an LRT. But first, the first two questions.

• 38:02Speaker 03

  Absolutely. Well, I'm the CEO at Puffer Labs, where we're building the entire Puffer ecosystem.

• 38:08David Hoffman?

  And how did Puffer come to be? Where did Puffer come from?

• 38:10Speaker 03

  Well, that's a very great question. We actually started to think about Puffer way like before on a foundational level. We started to look into bringing scalable compute to Ethereum through the use of TES. Of course, we met Justin Drake in our journey, and we realized that the blockchain is not decentralized enough and it's not ready for the confidential compute and AI that we're focusing to bring on chain. There, he proposed to use the same technologies that we were familiar with, trusted execution environments, to actually build anti-slashers.

• 38:46Speaker 03

  This was back in the day where actually all the talks were about Lido and Rocketpool. And we started to focus on building the most scalable and decentralized LSD. And from this idea, we came to an important conclusion that building anti-slashers, reducing risks, is not going to be enough. Reducing the bond is not going to be enough. And we need to actually grow the rewards pie for the validators to be able to make it more viable to host your own node, or even maybe run your node at home. That's where we were introduced to Shuram to enable restaking. So both validators and stakers can now generate more rewards. This opened the window for us to actually do specialized AVSs

• 39:28Speaker 03

  through the use of only TEEs enabled to our validators as well. That's where Puffer came from. It's basically on its base layer, it's an evolution to liquid staking on Ethereum. And the upgrades that we made to it actually enables many interesting features enabled on liquid restaking as well.

• 39:48David Hoffman?

  Okay, cool. TEE, Trusted Execution Environment. Sadly, every single time we talk, Amir, we're going to have to define what that is because most people don't know what that is. What is a TEE? And then what does it do for Puffer?

• 40:01Speaker 03

  Basically, you can think of a TEE, a secure portion of the hardware that runs computation in it. It's encrypted through cryptography. What does it do in Puffer? The easiest way to explain this with Justin Drake is a bit very good. I explained in this is you can think of it as a hardware validator, hardware wallet for your validator, where your keys are generated in there. They're protected in there. And in Puffer, we not only protect the validator keys inside of a TEE, but also we protect the database of previously signed material. So it's a separate stack running aside with a consensus client and an execution client that checks every signature that the validator operator is going to produce.

• 40:46Speaker 03

  If that signature is going to produce a slashable message, basically this anti-slasher says, rejects it. That's where it becomes an anti-slasher and that's how TEE is working Puffer.

• 40:58David Hoffman?

  Okay, so I've defined the LRT game as a competition to maximize exposure to AVSs and therefore yield while also minimizing risks. There are a variety of different reasons, categories of slashing events that could happen to an LRT, to an operator. And then what you're saying is that there is this trick, this hardware trick with using TEEs, Intel SGX, people might be more familiar with, that actually protects against a certain class of slashing events. Can you kind of delineate between the types of slashing events that TEE, leveraging TEE protects against? And what class of slashing events it does not?

• 41:39Speaker 03

  Well, we are actually releasing articles, like one at a time. We're actually, our docs is very up to date. We recently uploaded the docs. We did a deep dive of how restaking and staking works on Puffer. Just please go to docs.puffer.fi. The Twitter is a good source. Our mediums are a good source as well with our latest views. But we are going to release more on this, like more future roadmap and future steps. If an operator would like to break the trust boundaries of this TEE, basically break into it, grab their key out, which we will be back to the status quo of running an Ethereum node, they can cause, like his self, slashing event, which is of course malicious.

• 42:24Speaker 03

  But really, this anti-slasher prevents all slashing on Ethereum L1.

• 42:30David Hoffman?

  Preventing all slashing is like, that's a really big statement. Is it really that big? Is it really that, like, rock solid?

• 42:38Speaker 03

  It is because really it is so hard. The the concept of slashing is so easy defined on Ethereum proof of stake.

• 42:45David Hoffman?

  Hmm.

• 42:45Speaker 03

  It is so hard to produce a slashing event. And therefore, like preventing it from the hardware side is also not that hard. But it's been mostly, if you've seen the past slashing events, either it was from a malicious actor who wanted to extract more MEV by causing a reorg, or it's been just a mistake by big node operators where what they usually do is they do this thing called load balancing. They spin up nodes spontaneously at the same time and they do a double signing on a block. And therefore, it causes slashing for them. This really mitigates these all existing risks from mistakes. Really, it's something to protect against all the mistakes. There is like a mystery and demystification here.

• 43:30Speaker 03

  If someone turns off their hardware and don't commit to attestation or proposing blocks, they do not get slashed. They're just gonna miss rewards and have a very small penalty. And I think this is very important.

• 43:43David Hoffman?

  Hmm. Okay, so we we talked about TEE as like a the competitive advantage with the fundamentals of Puffer, if you will, like what sets it apart from others. But what about the actual like strategy of Puffer? What is like the the near term roadmap, the the plan for action? Like what what does the the near term look like for Puffer? What's the plan here?

• 44:02Speaker 03

  Absolutely. I think we have beyond just anti slashers. Our strategy is focus on research, focus on native restaking and focus on ethos alignment. I can now unwrap each of these. Focusing on research. Puffer has been the decentralizing runway for Ethereum. Why do we say this? A lot of the research and products that we introduce to Puffer actually come from the wish list of all the EIPs that are yet to be passed but out of protocol. For example, there is EIP 7002. This is going to enforce a smart contract ejection of validators on Ethereum from execution layer. This is good because especially in liquid staking platforms,

• 44:45Speaker 03

  if a trust less, basically untrusted node operator drops below a certain value, we can just eject it from the execution layer. This is not going to be implemented maybe in the next two years. This is a key factor to have to creating a permissionless decentralized protocol. We got around that by introducing our guardians. So aside from anti-slashers, that makes it more secure to run a node. We introduced guardians, so the stakers actually don't lose money if the validators just turn off their hardwares and walk away. And we find out that actually implementing these are translating really well to restaking. If we have a more protected base layer of liquid staking through anti-slashers,

• 45:30Speaker 03

  it means the ETH that is protecting these AVS is also is more protected. If, like, a big challenge in native restaking today is if there is an AVS level slashing happens on Augen layer, there is no slashing can happen unless we can eject the validator first, their ETH goes to the withdrawal address, and withdrawal address that points to the Augen pie gets slashed. Without it, we can't really have native restaking live. That's where Puffer can enable native restaking go live through this implementation of the research that we did on the base layer. We say we focus on native restaking. Why do we say that? Because it has many advantages compared to just like LST restaking.

• 46:12Speaker 03

  One of them being that the node operators also can take advantage of the rewards. If any other protocol just turns on LST restaking, the base node operators on those platforms get nothing. They don't get exposed to the rewards from the restaking. That's where we say we increase the rewards pie and users can make more. Therefore, it's easier for me to run a validator at home and make more rewards. Imagine Puffer is this platform, you run an ETH validator with one ETH only, and you also get restaking rewards, which is not enabled on any other platform. So that's on native restaking. Also, a quick advantage is the advantages of restaking that can be brought to Ethereum

• 46:54Speaker 03

  mainnet itself, including Mabus Plus, including base rollups that I know Justin talked about in a previous episode as well, and many other features that are not enabled without restaking on the Ethereum mainnet itself.

• 47:10Speaker 03

  We say we're ethos aligned. We need to actually keep Ethereum decentralized as much as possible, and that has been our strategy. That's why we're self-capping our liquid stake into 22% total ETH stake. And also, all these researches we're doing is aiming to keep decentralization runway to Ethereum main.

• 47:29David Hoffman?

  Amir, you alluded to it a little bit, but I want to go into it a little bit more. Again, going back to like the whole idea, LRTs are trying to maximize exposure while minimize risks. One way you could another present that is being sufficiently defensive, as in making sure nothing gets slashed, while also being sufficiently offensive, which is making sure you go get yields. You go get the rewards being paid out by the AVS networks. This is kind of why we're all doing this. It's really what everyone's excited about. How does Puffer and leveraging TEE? Can TEE enable like relationships with AVSs that some sort of LRT without TEE could not access? Like, how can this become like a service for AVSs?

• 48:12Speaker 03

  Absolutely. The first and the foremost easiest way that TEE enables is just the anti-slash. Key management is a very important concept. And like, we really like to see like Eigenlayer as transferring all the existing infrastructure in Ethereum to restaking. And it's very simple to use TEE on top of middlewares like Bridges, Oracles, and everything else to actually make sure that the activity that is supposed to be done is getting done in those key management scenarios. For example, even if we want to create an L2 based on basically an AVS, TEE comes into play to play the similar role that it plays on the consensus layer.

• 48:57Speaker 03

  Just prevent slashable offenses from being signed by the sequencers. So these are the very basically unique things that Puffer can provide. But also, the kind of like the craziest thing is... Puffer notes can become one AVS as an anti-slasher to all the other AVSs. Basically, we can provide anti-slashing as a service as an AVS across the map. And as you know, there is a lot of research going around confidential compute and also verifiable computation. There is FHE, there is MPC, there is ZK. One of the more practical forms of confidential compute is TES.

• 49:40Speaker 03

  If you want to bring AI, confidential AI, something that I think WorldCoin like focused on a little bit. This actually can be enabled with a big network of TES on Puffer, which sets it apart from all the others.

• 49:54David Hoffman?

  Interesting. Okay, so let's go into the specific state of Puffer, the specific implementation. Y'all have collected a bunch of Lido staked ETH. There's a plan to swap that into Puff ETH. Can you talk about, and that's where we currently are in the Puffer roadmap. Talk about that event. What's the roadmap for that? And then what's the following roadmap after that?

• 50:14Speaker 03

  Absolutely. To actually help reduce the dominance of one LSD player, we actually tried to just focus on STE. At this part of this campaign, users actually get Puff ETH in return, where they can use it on DeFi platforms. It's liquid. This campaign showed even if Agileer is on mainnet, people are ready for restaking. So yes, once we are going on mainnet, we're going to redeem all these STE from Lido. This actually to date translates to almost three and a half percent of existing STE, which is going to significantly actually help for decentralization of the protocol.

• 50:56Speaker 03

  On top of that, once we go on mainnet to Puff ETH holders, there is no differences. They keep their Puff ETH, only the rewards that is generated for them is now from Puffer permissionless decentralized validators. We are aiming to go on mainnet completely fully permissionless. Today, we are on testnet with our permissionless nodes. We are opening the testnet to pu- uh, public very soon, actually. I think this is gonna be another very big milestone where people can see, oh, wow, I can spin up a one ETH validator. I think this is for the kind of like first time with no extra overhead. They just have the same stack that they have at home. With just the addition of like the anti-slasher, which runs separate from that part of stack.

• 51:40Speaker 03

  They can spin up one ETH nodes.

• 51:43David Hoffman?

  Hmm.

• 51:43Speaker 03

  Um, moving forward, we're sprinting to mainnet. We're going to have mainnet on that layer also. We're going to natively restate the ETH on existing Eigenlayer Eigenpods. In parallel, we're gonna work with uh, existing AVSSs and we're going to implement our own AVSSs as well. Another exciting part that I spoke about was this all existing infrastructure turning into Eigenlayer restaking. And that's where Puffer is capitalizing on it. Puffer is going to deploy its own L2 on its platform as an AVS. Now imagine this L2 is gonna generate fees. Since the security provided to this L2 is from the puff ETH holders.

• 52:27Speaker 03

  Puff ETH holders are gonna get a take advantage of the fees that L2 is captured. Of course, we implemented validator tickets. That's a one-hour conversation of what they are. But uh, they're essentially, this L2 is gonna be a market, create this marketplace for this validator tickets. But an L2 cannot just be standalone by itself. An L2 needs an oracle. An L2 needs a bridge. All of these infrastructures, today, there are many companies that run these as AVSSs. They can be deployed on top of Puffer and we can create this um, infrastructure super app. Where they all feed back to the puff ETH holder as extra revenue and also the node operators.

• 53:08Speaker 03

  That's on our roadmap and that's like actually coming probably the second half of this year.

• 53:14David Hoffman?

  Okay, so a layer two from Puffer leveraging TEE and uh, being infrastructure for AV- AVSSs. Uh, is a massive rabbit hole that sadly we don't have enough time to go into. But if people wanna learn more about that and just learn more about Puffer, where can they go?

• 53:30Speaker 03

  Well, we are actually releasing articles like one at a time. We're actually, our docs is very up to date. We recently uploaded the docs. We did a deep dive of how restaking and staking works on Puffer. Just please go to docs.puffer.fi. The Twitter is a good source. Our mediums are a good source as well with our latest views. But we are going to release more on this like more future roadmap and future steps.

• 53:59David Hoffman?

  Beautiful, Amir. Thank you so much. Thank you, David. Bankless Nation, I am here with Amit Gajila from Kelp Dow. Amit, welcome to the show.

• 54:07Speaker 04

  Thanks, thanks David for having me here.

• 54:10David Hoffman?

  Talk to us a little bit about your background. Where did you come from and how did you start Kelp Dow?

• 54:15Speaker 04

  Yeah, I'm originally from Bangalore, India. I used to work at a consulting, strategy consulting firm here and then headed strategy and transformation at India's largest food tech player. Been in crypto since 2020. Started Stater Labs, one of the largest liquid staking platform with 450 million in TVL. And early 2023, we also started this new protocol called Kelp Dow, which is a liquid restaking platform.

• 54:40David Hoffman?

  Beautiful. Okay, so Stater into Kelp Dow. Talk about just like the creation of Stater and like the lessons and experiences that you learned there. And then we'll carry that into how you were applying those lessons at Kelp.

• 54:53Speaker 04

  A pretty amazing experiences at Stater. So we were one of the early protocols on Terra 1.0. We had about a $1.5 billion in TVL that completely had gone to zero right after the USD collapse. Multiple learnings, first and foremost learning as a founder is diversify treasury and risks as much as possible, which kind of led us to expand to multi-chains. And today we are across, present across six different chains with majority being on Ethereum and Polygon. Back then, we already diversified treasury, but we learned the lessons of treasury management in the hard way by losing some money in the USD collapse.

• 55:34Speaker 04

  The third thing is team and people are the most important things. People who believe in your vision as well as your leadership will stick. So the most important lesson from the entire experience is hire people that are passionate as well as believe in the vision of the protocol.

• 55:53David Hoffman?

  Okay, so Stater and ETH X is your staked ETH token. Talk about just like the growth of Stater because eventually this, like I said, will kind of like fold into Kelp Dow. Talk about just like the experiences of growing Stater and just like learning to build an LST.

• 56:11Speaker 04

  Numerous experiences there. We have learnt it the hard way and understood what are the major competitive modes for an LST. And obviously drawing those lessons to Kelp Dow as well. The biggest competitive modes for LST are creating these access or distribution points. That is taking staking or taking LSTs to places where people are already using. Like for example, some of the largest hardware wallets like MetaMask, largest hardware wallets like Ledger, wallets like MetaMask, etc., where Stater's solutions are already embedded natively. That's where we see a majority of growth for our LSTs. The second and the most important things are creating real utility for these LSTs.

• 56:54Speaker 04

  For example, we have deep integrations with Awe Compound and several other DeFi protocols of the world where people find real use cases as opposed to Ponzi schemes where people go collateralize their LSTs. While earning those staking yields, they can also borrow stable coins or they can borrow other assets that help them get to other yield opportunities. So these two have been the most important and crucial learning aspects or competitive modes that we built with our LSTs on Polygon or building those on Ethereum. And obviously carry those forward to Kelp Dow as well.

• 57:33David Hoffman?

  Right, okay, so there is a relationship between Stater and Kelp. And Stater, the LST, of course, has ETH X. And one of the big experiences that all LRT teams are going to have to fight against is like integrations for their LRT tokens into DeFi. And this is something that you've sharpened your teeth with ETH X and Stater. Just like getting ETH X into Ledger and MetaMask. So you can stake your ETH with Stater via. Like Ledger Live or MetaMask and then also like getting ETHX into Compound, right? Just normal DeFi applications for LRT tokens. Eventually, we will all need these things. What you're saying is Stater's done this game before.

• 58:16David Hoffman?

  And so you're gonna have to, you're gonna just take the same playbook that you've developed at Stater, you're gonna apply it at Kelp Dow. That's probably, I'm assuming, where this goes, is that right?

• 58:24Speaker 04

  That is one of the strengths that we borrow from our experience with Stater. But obviously, LRT's, given this, given this is a new, entire restaking and Eigenlayer being new technology, there are multiple risks associated with it. Obviously, we can't apply the same playbook as these, but the learnings are similar.

• 58:45David Hoffman?

  Talk about the relationship between Stater and Kelp Dow. Like, how, how did that whole thing work out? How, what is the relationship there?

• 58:51Speaker 04

  The relationship is very simple. Just the founders are common and Stater is one of the seed investors in Kelp Dow. Apart from that, everything else is different. And one tactical relation is Stater's ETHX is accepted as one of the deposit assets on Kelp Dow.

• 59:09David Hoffman?

  Okay, so founders are common, experiences are common. Is there like an ongoing relationship or are these two things going to like come together or diverge?

• 59:17Speaker 04

  They're, they're gonna be completely different. Kelp Dow, as you probably know, accepts three different LSDs today, Lido's STE, Fraxis' SFRX ETH, as well as Stater's ETHX. So Kelp will be a completely neutral entity that serves its own interests and has its own tokenomics and PNL. So as much as possible, they will continue to be two separate entities.

• 59:43David Hoffman?

  Okay. All right, so let's get into more Kelp Dow specific subjects. What, what would you say are the strengths of Kelp Dow? How does it stand out from the many different LRT teams out there? What's your guys' like strategy?

• 59:56Speaker 04

  It's a very interesting question and useful question in the. Current context of the competitive environment. Uh. So some of the like based on our experience so far. The biggest focus areas or strategies that we will employ with Kelp Dow is. One, creating access for restaking. What I what I mean by that is like. We need to take restaking to where users already are. That is when we can potentially scale this to like ten, twenty, maybe thirty billion dollars, right? Which we have seen what happened with staking with Lido and some of the largest validators of the world. So creating access for users is going to be top priority for us. And that is where we uh can attract capital in the right way and also the right set of capital that is more stickier.

• 1:00:42Speaker 04

  Than some of the mercenary capital out there. So that's one most important strategy. The second uh critical strategy for us is going to be having. Majority of the DeFi integrations, which is where we are really bridging the nexus. Between restaking and DeFi. Today, both of them compete with each other for the same amount of Ethereum or capital. So the PMF for us uh for Kelp Dow is going to be when. There is real utility created for Kelp Dow's RS ETH. Among some of the largest DeFi platforms so that people can actually borrow. Using RS ETH or people could participate in perps. Using RS ETH collateralize it for some of the use case.

• 1:01:24Speaker 04

  So that is where we believe we have solved a real user problem. Uh. So those are the two most important competitive modes in the long run and also. That is where we will spend disproportionate time and efforts.

• 1:01:38David Hoffman?

  Okay, so the the strategy here is that uh if you want to restake with Kelp Dow. One of the main benefits is that you will also be able to take your. Kelp Dow ETH and then take that capital and put it back into DeFi. And do the thing you were already doing with your ETH and DeFi just now with the the Kelp Dow ETH. Is that kind of the idea?

• 1:01:56Speaker 04

  Yep, yep, of course.

• 1:01:58David Hoffman?

  And what is the Kelp Dow ETH token?

• 1:02:01Speaker 04

  It's called RS ETH.

• 1:02:03David Hoffman?

  Restaked ETH, okay. So in terms of like a brand perspective, like just having restaked ETH, I actually think is like pretty valuable. Like Lido has STE, staked ETH, like easy. And so you guys have RS ETH. Uh, maybe you guys just like got there first, maybe the, the playing field was open. But just like, I do think there's like some benefit just having like, we are restaked ETH, we have RS ETH.

• 1:02:25Speaker 04

  Yeah, that's, that was, that was very easy to come up with in hindsight.

• 1:02:30David Hoffman?

  Mm hmm. Okay, beautiful. Uh, talk about a little bit under the hood of Kelp Dow. Uh, who is doing the validating nodes? Like who is actually doing like running the hardware? Or doing the actual like, um, uh, ETH layer one, like, uh, validation? Is there native restaking? Talk about the Kelp Dow system under the hood.

• 1:02:48Speaker 04

  Absolutely. So just, uh, zooming out about the Kelp Dow's product today. So far, we have been primarily accepting LSTs as deposit assets on Kelp Dow. So there is no validators yet, uh, that are live on Eigenlayer that take, uh, LSTs and validate. But soon, which is probably in two to three days, we are also launching native restaking on Kelp Dow, which is we.

• 1:03:12David Hoffman?

  Okay, so that means it's out by the time this episode is released. So this is now a live product.

• 1:03:16Speaker 04

  Yeah, absolutely. So we will have, uh, native restaking live and, uh, some, we're talking to some of the top validators and going to onboard them.

• 1:03:27David Hoffman?

  Okay, are you able to share who you're talking to?

• 1:03:30Speaker 04

  It's still confidential.

• 1:03:32David Hoffman?

  Okay. Uh, what about just like anyone entering into Kelp Dow with their validator? Is this, are you going to be able to open this up? Or what's the strategy around there?

• 1:03:41Speaker 04

  That's a very interesting question. Uh, for context, Stader allows any type of node operator to actually participate in validating nodes with just 4 ETH worth of capital. That is the permissionless way of, uh, operating validators. So we do have, uh, permissionless, we do have the opportunity to allow permissionless validators to take part in Kelp Dow. But the constraint that we face today is we do not know the slashing and penalty restrictions that some of these AVSS are going to impose. So coming up with a collateral that is required or sufficient enough to cover for the slashing risks is an unknown today. So while we'll have that use case in the future, but at this stage, it's a little premature

• 1:04:26Speaker 04

  to allow anybody because that that means we're putting users' capital at risk.

• 1:04:31David Hoffman?

  Uh, like we said, by the time this episode goes out, uh, Kelp Tower will have announced native restaking. Uh, what is on the near term roadmap that is worth highlighting?

• 1:04:39Speaker 04

  Yeah, so, uh, there are a few, uh, most important aspects that we're working on. In the same theme of creating access for users, we are taking restaking natively live on some of the L twos, uh, working with a couple of partners there who can offer native restaking for, uh, uh, Kelp Tower, uh, on L twos directly. So users don't have to bridge their assets back to mainnet and restake. Uh, this is, uh, first of its kind, and I think it is going to save a lot of gas fees and effort for users. So L two expansion is, uh, the most important thing that we're focusing on, apart from creating DeFi opportunities. We already have over fifteen million dollars in LP pools across four daxes, uh, soon getting

• 1:05:23Speaker 04

  to forty million and then that opens up a lot of lending market integrations and CDP protocol integrations that users can, uh, access. Uh, those are the two things. And then apart from that, obviously, uh, under the same theme of access, working with Ledger and several other wallet partners to have, uh, restaking, uh, right where users are using their platforms.

• 1:05:48David Hoffman?

  Okay, so just taking the same relationship that you built at Stater, uh, instead of, hey, stake with Stater via Ledger, you are saying, hey, restake with Kelp via Ledger is a partnership that is underway.

• 1:05:59Speaker 04

  Yep, yep, absolutely. And the third most important thing that we are focusing on is actually creating some uh pro- creating some interesting products and use cases for AVSSs because those uh so the AVSSs are going to be a very important and critical part of the Eigenlayer ecosystem. So we've been running some experiments and problem solving with a few AVSSs on some of their requirements. Like some, some AVSSs want triple staking. They want to stake their governance token user as a security and their partner's governance token use that as a security along with Eigenlayer's security. So all of these interesting use cases are uh coming up during our conversations and learnings with the AVSSs.

• 1:06:41Speaker 04

  So focusing on that and soon we'll probably see some interesting products coming out of that stream as well.

• 1:06:48David Hoffman?

  Beautiful. Amit, if people are piqued about Kelp DAO and they want to learn more, where should they go?

• 1:06:54Speaker 04

  Uh, so they should just simply log into uh kelpdao.xyz. Uh, you can find all information about uh Kelp DAO's smart contracts, our security, which is the most important thing, uh along with uh option to stake or restake your assets.

• 1:07:10David Hoffman?

  Beautiful. Where did the name Kelp come from?

• 1:07:12Speaker 04

  Uh, Kelp is this uh algae that powers this entire underwater ecosystem. And we believe restaking is going to be such ecosystem which is rich and uh supports a lot of uh taps and applications. So hence the name Kelp. We, we, we want the RSC token to kind of nurture the entire ecosystem.

• 1:07:35David Hoffman?

  Beautiful, love it. Amit, thank you so much. Mantle, formerly known as BitDAO, is the first DAO-led Web3 ecosystem, all built on top of Mantle's first core product, the Mantle Network, a brand-new, high-performance Ethereum Layer 2 built using the OP stack, but uses Eigenlayer's data availability solution instead of the expensive Ethereum Layer 1. Not only does this reduce Mantle Network's gas fees by 80%, but it also reduces gas fee volatility, providing a more stable foundation for Mantle's applications. The Mantle Treasury is one of the biggest DAO-owned treasuries, which is seeding an ecosystem of projects from all around the Web3 space for Mantle. Has sub communities from around Web3 on boarded like Game7 for Web3 gaming and Bybit for TVL and liquidity and OnRats.

• 1:08:16David Hoffman?

  So if you want to build on the Mantle network, Mantle is offering a grants program that provides milestone-based funding to promising projects to help expand, secure, and decentralize Mantle. If you want to get started working with the first DAO-led Layer 2 ecosystem, check out Mantle at mantle.xyz and follow them on Twitter at ZeroXMantle. Cello is the mobile-first, EVM-compatible, carbon-negative blockchain built for the real world, driving real-world use cases like mobile payments and mobile DeFi. And with Opera Mini Pay as one of the fastest-growing Web3 wallets, Cello is seeing a meteoric rise with over 300 million transactions and 1.5 million monthly active addresses. And now, Cello is looking to come home to Ethereum as a Layer 2.

• 1:08:55David Hoffman?

  Optimism, Polygon, Matter Labs, and Arbitrum have all thrown their hats in the ring for the Cello Layer 2 to build upon their stacks. Why the competition? The Cello Layer 2 will bring huge advantages like a decentralized sequencer, off-chain data availability secured by Ethereum validators, and one-block finality. What does that all mean for you? With Cello Layer 2, gas fees will stay low and you can even pay for gas natively using ERC20 tokens, sending crypto to phone numbers across wallets using social connect. But Cello is a community-governed protocol. This means that Cello needs you to weigh in and make your voice heard. Join the conversation in the Cello forums, follow Cello on Twitter, and visit cello.org to shape the future of Ethereum. Arbitrum is the leading Ethereum scaling solution that is home to hundreds of decentralized applications.

• 1:09:38David Hoffman?

  Arbitrum's technology allows you to interact with Ethereum at scale with low fees and faster transactions. Arbitrum has the leading DeFi ecosystem, strong infrastructure options, flourishing NFTs, and is quickly becoming the Web3 gaming hub. Explore the ecosystem at portal.arbitrum.io. Are you looking to permissionlessly launch your own Arbitrum Orbit chain? Arbitrum Orbit allows anyone to utilize Arbitrum's secure scaling technology to build your own Orbit chain, giving you access to interoperable, customizable permissions with dedicated throughput. Whether you're a developer, an enterprise, or a user, Arbitrum Orbit lets you take your project to new heights. All of these technologies leverage the security and decentralization of Ethereum. Experience Web3 development the way it was always meant to be: secure, fast, cheap, and friction-free.

• 1:10:21David Hoffman?

  Visit arbitrum.io and get your journey started in one of the largest Ethereum communities. Bank Station, we are here with Daniel from Swell. Daniel, welcome to the show.

• 1:10:31Speaker 05

  Great to be here. Thanks for the opportunity, David.

• 1:10:33David Hoffman?

  Daniel, I think Swell might be the earliest, the oldest of all of these projects. You came onto the world of staking first before liquid restaking. Talk about the beginnings of Swell, the inspiration to build Swell, and then we'll get into the pivot into LRTs.

• 1:10:50Speaker 05

  Yeah, absolutely. Yeah, so just a quick background on myself. My name is Daniel. I'm the founder of Swell.

• 1:10:56Speaker 05

  Originally, my background's been a mix of like finance, technology and innovation. And then really went down the crypto rabbit hole a little after the Ethereum ICO. Went into sort of the reading of Austrian economics, trying to understand central banking. And one thing led to another, and then into Bitcoin, into Ethereum, then into DeFi. In terms of the original inspiration for Swell, saw an opportunity in late 2021, early 2022, to do something in what I thought would be one of the most powerful crypto economic privatives, which was the LST. I thought it would be the thing that would really take DeFi to the next level, to have a yield-bearing instrument backed by Ethereum consensus mechanism.

• 1:11:40Speaker 05

  And then, yeah, put together a seed round and then was off and away from there. And then we launched our LST in early 2023. And then basically saw some good traction there. Got up to about 100 million in TBL and then saw the writing on the wall when reading the Eigenlayer white paper and seeing that, look, what the LSTs did for DeFi, the LRTs are going to do in a much bigger way. It's the best model, sort of like you have this yield-bearing instrument powering DeFi as a base layer asset. Well, the LRT is sort of like a double plus, you're bearing instrument powered by this new sort of ecosystem of upcoming ABS as an Eigenlayer. And then it made sense for Swell then to really triple down on that.

• 1:12:24David Hoffman?

  And the timing, I think, was pretty interesting for you guys because you guys, like you said, you guys were going to build an LST, but then you were pretty like fortuitous and within the way and when Eigenlayer was born, if you will, for then you'd be able to like take that advantage, all of the deposits into the LST version of Swell and turn that into the LRT version of Swell. Talk about that transition because I think that is what Swell is currently going through. Talk about the transition from LST to LRT and like the logistics behind all that.

• 1:12:54Speaker 05

  Yeah, absolutely. I'd say like generally speaking, we're still sort of early-ish in the like evolution of LRTs generally. I think that LRT design will continue to shake out as Eigenlayer moves through its various stages in this roadmap, with stage two, stage three, or M2M3 respectively. And so far as like Swell is concerned, one of the biggest integrations from the LST perspective was always to get the LST accepted as restaking collateral on Eigenlayer. So that was a big unlock for us when Eigenlayer did decide to expand its universe of LST collaterals to be accepted. And then throughout that entire time, we were building a very strong community that was passionate not only about liquid staking,

• 1:13:35Speaker 05

  but also this new phenomenon of liquid restaking. And so when Eigenlayer did open those caps initially, we saw a massive influx of people basically looking to get exposure to restaking. And we're in the middle of this incentive campaign with our voyage and it made a lot of sense for people to effectively farm both Swell pearls and Eigenlayer points too. And then we recently launched about two weeks ago, our own native LRT called R-Sweath. R-Sweath is effectively a mechanism for people to get uncapped exposure to Eigenlayer points in a way that's has the underlying validators natively restaked. So this is the current sort of state of affairs at the moment with Swell.

• 1:14:17Speaker 05

  We're currently undergoing the development of R-Sweath V2. And what R-Sweath V2 will enable is not only the acceptance of native ETH at the underlying, but also LST such as Sweet. And that will sort of be a really important step to us, eventually hoping to unify some meaningful percentage of restaked liquidity on Eigenlayer for utilization in DeFi with maximum composability and optionality for restakers.

• 1:14:41David Hoffman?

  Beautiful, and that's when Swell will become like one unified system and be able to inject all of its liquidity from its LST into its LRT. So like bringing the advantage of being early into the into the world of native restaking, right?

• 1:14:55Speaker 05

  Exactly right.

• 1:14:56David Hoffman?

  Beautiful. Okay, what is, what would you say is the competitive advantage of Swell? What does Swell bring into the world of LRTs that is like, what's your guys' strategy?

• 1:15:06Speaker 05

  Yeah, absolutely. I think the, I think just generally in terms of it from an advantage perspective, I think the fact that we spent a lot of time thinking about Ethereum staking, like on the beacon chain side at first principles level for such a long time, is a competitive advantage and also like our understanding of DeFi, which is in some ways one-third of the total like LRT sort of spectrum. If you think about it in terms of the beacon chain, DeFi, and then everything on Eigenlayer. So we have the beacon chain and DeFi ready to go. And I think everyone's sort of starting at a similar point in time as regards Eigenlayer, trying to figure out, okay, how does this thing actually work? Where are the risks? Where are the, like, how does the rewards work? And where's the opportunities and how does one best position themselves to win the market?

• 1:15:51Speaker 05

  So I'd say like, that's firstly the advantage. And I think from like a legacy standpoint or from an origin standpoint. Moving forward though, I think in terms of our approach, there's been really three key things that we're really focused in on as regards our design for an LRT protocol. The first thing is really advocating for an ecosystem-first approach. So Swell's effectively created a liquid restaking council that comprises some of the best operators and most promising AVSs on Eigenlayer. So we have folks like Altlayer there, Witness Chain, Imstones, P2, and a whole host of others as well. And having them be part and parcel of the co-building process means that the LRT that we will build out and continue to iterate on

• 1:16:33Speaker 05

  will be purpose-built for those ecosystem actors within Eigenlayer. Because it's all about trying to like match up across the opt-in mechanism between restakers, operators, and AVSs.

• 1:16:45Speaker 05

  The second thing as well, in addition to the ecosystem approach, is also having a real focus on risk. And so part of that, we've been working together with like the Eigen Labs team directly and also with various risk experts, including Chaos and Gauntlet, as regards things like AVS selection, pricing, underwriting, and these sorts of things. So that we're going in with the eyes wide open as regards sort of risk return and these sorts of things. And the final thing for us is really just about trying to drive as much value to the underlying LRT as possible. And so being early to these sorts of collaborations and then driving, you know, the rewards and passing them through to our restakers. And also exploring ways in which we might be able to vertically vertically integrate some of this stuff.

• 1:17:28Speaker 05

  So looking at, okay, not only what like, what's an LRT ultimately, it's a liquefaction of restake liquidity. But then what else can you do on top of that? Could you create things like a sort of a proof of restake, L two, restake roll up? And then pass through the revenues to the LRT, like these sorts of things that we're sort of constantly ideating on, which is like really a part of like the swell corporate ship of the DNAs to, yeah, think about these sorts of things.

• 1:17:51David Hoffman?

  Beautiful. That was, that was a lot. Wow. One of the things that you touched on is about just making sure managing risk while also integrating with the AVS is right. And kind of the idea that I've had about LRTs, it's all about maximizing exposure to yields while minimizing risk, right? Like how much extra yield can you get while making sure that you never ever get slashed? Do you have any like sort of strategy or plan around this?

• 1:18:14Speaker 05

  Yeah, yeah, I think like generally speaking, the, the, the strategy is really about trying to quantify and qualify. What operators to work with and also what AVS is as well, that those operators will be opting into. And then understanding not only how those interact, but also like the underlying assets of the restaking pool itself. And so a lot of that is just going to be like constant dialogue with the operators and the AVS as well. And then being able to feed into these models and then applying governance and interventions when necessary, particularly in the nascent stages of the technology.

• 1:18:49Speaker 05

  Much in the similar way that IGLA has approached it with their committees, with their multi SIGs, with their step through in terms of sort of opening up gradually through a guarded launch liquidity. Getting battle tested audits and these sorts of things. So yeah, it's definitely multifaceted approach as regards risk.

• 1:19:09David Hoffman?

  What are you guys are working on right now? Like, what is on the near term roadmap for Swell? And then just overall, what would you say in the Swell community are people excited about?

• 1:19:18Speaker 05

  Yeah, definitely. I think the key, the new term things that we're working on is our TG. So we're getting busily ready for that. The other thing is governance and like DAO operations, which will come part of the token being live. We've got a flurry of DeFi integrations as well that we want to have for our LRT, including supporting that with various oracles and whatnot. And also some cross-chain plans too. In terms of what the community is most excited about, I'd say it's a token. So, yeah. Yeah. So I want to make that as successful as possible. And yeah, just keep, keep growing the protocol and keep providing as best as we can.

• 1:20:01Speaker 05

  The, we're really seamless and easy to use re-staking experience.

• 1:20:05David Hoffman?

  Since Swell, you guys have been around for a while because again, you guys did the LST before even like re-staking was even a thing. So you guys have grown a community, which I think is one of the kind of unique things of Swell. You guys have actually had the time to collect a bunch of people who are now, what do you call them? Swellians, swellers? Swellers, yeah. And so like, talk about the growth of the Swell community. What's the vibe of Swell culture?

• 1:20:30Speaker 05

  Yeah, I think the vibe of Swell culture is, I think a lot of people wanted the re-staking early. And we told them, look, we can't get into the first one. We didn't, we didn't make it to the first whitelist, but we'll be there for the second one. So I think the Swell community is really invested in re-staking. I think they're really invested in DeFi. I think we have a quite a crypto native and DeFi savvy user base. We've got circa, you know, 100,000 stakers or unique depositors at the moment. If, even if you were to sort of like take out some of the like potential like gaming or sibling, I think it's still a very strong community. So, yeah, I think people are really excited about re-staking, to be honest.

• 1:21:07David Hoffman?

  Beautiful. If people want to go and open up like the the technical documents or just read a higher level landscape about swell, where should they go?

• 1:21:15Speaker 05

  Yeah, they just go to our website, swellnetwork.io, and then just jump into the doc section. And then, and if you have any questions, feel free to jump to the Discord. The team's always happy to answer any questions and take on any feedback.

• 1:21:26David Hoffman?

  What about you, Daniel? Where can they follow you?

• 1:21:29Speaker 05

  Yeah, you could just follow me on Twitter. My handle is Daniel underscore swell underscore.

• 1:21:35David Hoffman?

  Beautiful. And we'll get all those links in the show notes. Daniel, thank you so much.

• 1:21:39Speaker 05

  Thank you so much, David. Appreciate your time.

• 1:21:40David Hoffman?

  Bankless Nation, I'm here with Lucas Kozinski of Renzo. Lucas, welcome to the show.

• 1:21:45Speaker 06

  David, thanks for having us. Excited to talk about Renzo and what we're up to.

• 1:21:51David Hoffman?

  Hell, yeah. Let's talk a little bit about you first. Who are you? How'd you come to be at Renzo? What's your like quick crypto background?

• 1:21:57Speaker 06

  So I've been in the space full time since 2018. First joined the Tezos Foundation and was what a company called Tokensoft, and then a founding contributor to a project named Moonwell, which is a lending protocol. Earlier, over the summer, summer of 2022, a group of us got together and started just brainstorming about how Eigenlayer is going to play out, some of the challenges. And what we realized was that there was a need for two things. A product that could align incentives very well, both on users that are trying to stake and ABSs

• 1:22:41Speaker 06

  is trying to get those stakers, and somebody that a team that had experience on managing risk and has been around in the space for a long time. So we pulled together a small team. This is June, July of last summer and started building Renzo in August.

• 1:23:01David Hoffman?

  Beautiful. And how the team come together? Who did you? How did this team form? Who are the other founders and team members?

• 1:23:07Speaker 06

  Yeah, so the contributing founders to Renzo, we all know each other. So there's three of us, James and Krotik. I was a portfolio company for Krotik when he was at a fund named Woodstock. And James previously co-founded Tokensoft. So when I worked at Tokensoft for two years, I reported directly to him. So what you essentially have is three founding contributors that have a technical background, have a research quant background and a growth operations background across the crypto space for the last six, seven years.

• 1:23:48David Hoffman?

  So beautiful. Let's go into a little bit of that realization that you had about just the aligning of the incentives between the users, the liquidity and the ABSs. I really like that as an entrance point. Let's just keep, keep going down that conversation. Shed a little bit more light about just like the problem that you identified and wanted to help tackle.

• 1:24:08Speaker 06

  Yeah. So when you look at Eigenlayer and you take a step back, there's a lot of noise right now around points and everything else. But at its core, Eigenlayer has ABSs, as you've guys done a really good job explaining what they are. And they're services that other projects are going to be using, mostly rollups. And there's this really nice cycle that Renzo is able to help complete. And what I mean by that is ABSs have clients and those clients are rollups. Those rollups are going to use ABSs and they need security and that security has to come from, from somewhere.

• 1:24:53Speaker 06

  And there's a lot of complications, not complications, but complexity built into Eigenlayer because it's, it's a marketplace. It's a free marketplace. To attract those users and make it very simple for them to have an on and off ramp into Eigenlayer is really important for an ecosystem to thrive. You need both parts of the supply and demand of the marketplace to come together. So there's this issue right now where Eigenlayer is attracting rollups to use them. But rollups, so we're talking like Arbitrum, Optimism, Base, the same.

• 1:25:33Speaker 06

  Services that are being used and adding value, it's actually sucking liquidity out of those ecosystems. So Renzo is positioned in a way where we're actually aligned incentives with those rollups, L2s and L1s, and the AVSs, so that the value could also remain on those networks. And the reason we're able to do that is how we designed Renzo from the very beginning. So this past week, we introduced our next feature, which we launched with just native restaking. Renzo is the first protocol that is actually able to take native restaking and LSTs and use them as collateral to have one LRT.

• 1:26:16Speaker 06

  And the reason that's really important is where we're seeing other players having to do things like vampire attack, other networks to be able to bring that funnel in. Renzo is directly aligned with those ecosystems. So one of the partnerships that we announced was BNB. So in a few weeks here, BNB users are actually going to be able to come to Renzo on BNB chain, deposit BEith and get easy ETH back on that chain. So it completes this loop. Same thing with Arbitrum. We announced a partnership with Arbitrum and Connects, using Connects as the bridge layer. Users on Arbitrum are going to be able to deposit ETH, native ETH,

• 1:27:02Speaker 06

  get easy ETH back, and the TVL stays on that chain. And that same TVL is secure in the same services that Eigenlayer is essentially offering to rollups.

• 1:27:14David Hoffman?

  Okay, I really like this. So we have capital on these rollups, mainly ETH, usually ETH, some stables too, but ignoring the stables. And what you're saying is that if you can either put your ETH in Eigenlayer or you can put it on the layer two. And so right now, this thing, there's a tension here because any capital that goes into Eigenlayer is pulling away from liquidity in DeFi. And so Renzo is trying to actually complete this circuit. And so when you put it into specifically the Renzo LRT, then actually that Capital gets immediately turned, returned back to the ecosystem in the layer two. Is this, are you natively minting EZ ETH? EZ ETH is Renzo's liquid restaked token. So this is your guys' particular one.

• 1:27:57David Hoffman?

  Is EZ ETH natively minted on each of these layer twos? Or how does that actual flow? How does that actually flow back to the layer two?

• 1:28:06Speaker 06

  Yeah, so you're spot on. We're trying to close this loop because what's happening right now, that TVL has to get bridge back to mainnet. And the rollups are losing their TVL. Their users want access to Eigenlayer, so we are going to provide that. EZ ETH will be natively minted on each of these L2s. And the nice thing is it's not just native ETH, but also if that L2 has their own LST, you're able to actually deposit both into Renzo and get one LRT token back. So the fungibility and the user experience is much better because you're not fragmenting liquidity.

• 1:28:44David Hoffman?

  So that's like a Mantle ETH, for example. Is that, is that kind of what you're alluding to?

• 1:28:48Speaker 06

  Exactly. So like if you, if you look at Mantle, M ETH could get deposited into Renzo on Mantle. You get EZ ETH back on Mantle. But if they also have native ETH, you could also put that into Renzo and you still get EZ ETH back. And the reason that's really important, it, it seems like this slight differentiation, but the fungibility of a token is so important because for a user to have a good experience, when we say good experience, to actually be able to use DeFi properly, you need to have deep liquidity on DEXs. The more tokens that you have, LRTs kind of representing it, you're fragmenting it and the user experience becomes really bad.

• 1:29:31Speaker 06

  And then essentially you start compounding what the integrations could be, whether it's a lending protocol, an aggregator, a per-platform. The deeper the liquidity, the, the better experience that users have being able to use that asset.

• 1:29:48David Hoffman?

  Okay, so the strategy here from Renzo is you guys are just using layered twos as like your top of capital funnel into the Renzo liquid restaking protocol. Is that, is, are there any other tricks up your guys' sleeve? Or is that the main differentiator? Or like what else would you like to bring onto the table here?

• 1:30:04Speaker 06

  Yeah, so we're starting off with mainnet. So today you could go balancer, uni V3, curve pool, there's a pendle pool, and there's a couple other integrations in the pipeline. And then we're branching out to create the funnel, a bigger funnel for users to be able to actually access Eigenlayer, and we're the only ones that have those incentives perfectly aligned. The other piece that is super important, and we're going to start hearing about this a lot more as Eigenlayer DA and Eigenlayer mainnet comes a little bit closer. All the frenzy right now is on points and these DeFi integrations, but where our team is actually focused.

• 1:30:47Speaker 06

  So there's 11 people now contributing to Renzo. We're doing all these things, but at the same time, we're spending a ton of time aligning on the risk management and how AVSs are going to be captured. And what we mean by that is it's a huge coordination effort between operators and AVSs to safely and efficiently be able to get capital and then return those rewards that are getting generated by AVSs back to the users. And that sounds very simple, but there's quite a bit of complexity that's built in there.

• 1:31:28Speaker 06

  And not everybody's going to be able to capture those rewards. So for example, we see points right now on LRTs to be able to attract users and capital. We think that's going to actually get shifted down towards AVSs because you're going to have new AVSs that launch that can't pay stakers in ETH, right? They don't have anybody using them, but they're trying to attract capital and solve for their cold start problems. So what are they going to do? They're going to incentivize in either points or their native token. So thinking about these things and making sure that you have a protocol that not only accepts

• 1:32:09Speaker 06

  native ETH, but is also able to collect ERC20 tokens as rewards and efficiently return those to the users, that's where you start getting this risk return optimal strategy that we're building within Renzo.

• 1:32:30David Hoffman?

  Beautiful, beautiful. Okay, Lucas, what is near term on the roadmap that you want to highlight? What is getting users excited about Renzo?

• 1:32:38Speaker 06

  Yeah, the biggest thing is essentially what we're talking about right now. So in a couple weeks here, you're going to see Renzo launch on Arbitrum and on BNB Chain. And in the coming weeks, you're going to see a half dozen other L2 announcements come out, whether it's Base, whether it's Metis, whether it's Scroll. There's a lot of conversations going on with Linnea and bringing all these people to and all these ecosystems really to Eigenlayer, right? So Renzo is becoming this settlement layer. And in order to be able to

• 1:33:18Speaker 06

  do that, we also have to take into consideration how risk is managed on the protocol.

• 1:33:26David Hoffman?

  One last question before we tie this off here. What about becoming a validator in the Renzo system? Is this a closed? Is it open? What does the future of that look like?

• 1:33:37Speaker 06

  Yeah, so the way Renzo is going to market, it's following a similar playbook that you saw Lido do a few years ago, where there's a smaller set of operators, but they're extremely high quality. So right now, Figma and P2P are the two validators that are staking and will be restaking the assets deposited on Renzo. And over time, you'll see us decentralize that operator set. The reason that's really important is you want a high quality operator from a security standpoint, securing these AVSs because every single AVS is different and the operator

• 1:34:18Speaker 06

  has different requirements to be able to secure them. And the coordination effort to secure something very new is extremely high. So you'll see maybe three to five operators in the early days and then over time will decentralize as things become more easier and less risky.

• 1:34:41David Hoffman?

  Sure. Beautiful. Lucas, if people are piqued about Renzo, where should listeners go to find out more?

• 1:34:47Speaker 06

  Yeah, just go to renzo protocol.com. You could restate directly from mainnet. It's literally one click, super easy. That's we try to make it easy with easy ETH.

• 1:35:02David Hoffman?

  Beautiful, awesome. All those things will be available in the show notes. Lucas, thank you so much for joining me.

• 1:35:07Speaker 06

  Thanks, David.