Restaking Alignment with Vitalik, Sreeram, Tim Beiko, Justin Drake, Dankrad & Jessy

What are the implications of restaking? Not every Bankless listener will be prepared for this conversation. This one is a hard one. If you want to be adequately equipped for the conversation that awaits, we recommend listening to the Bankless episode we did with Sreeram a few weeks ago. That episode will get you up to speed to understand some of the nuances and problems that are discussed in today’s episode. Because, today on the show, we have the largest and most gigabrain panel that we’ve ever had on Bankless…Vitalik Buterin, Justin Drake, Dankrad Feist, Jessy (aka 13-year-old VC - that’s her pseudonym), and of course… Sreeram Kannan himself, founder of Eigenlayer and perhaps the creator of restaking…all moderated by Tim Beiko! ------ 🚀 Unlock $3,000+ in Perks with Bankless Citizenship 🚀 https://bankless.cc/GetThePerks ------ 📣 CYFRIN | Smart Contract Audits & Solidity Course https://bankless.cc/cyfrin ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2 🦊METAMASK LEARN | HELPFUL WEB3 RESOURCE https://bankless.cc/MetaMask ⚖️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum 🧠 AMBIRE | SMART CONTRACT WALLET https://bankless.cc/Ambire 🦄UNISWAP | ON-CHAIN MARKETPLACE https://bankless.cc/uniswap 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle ----------- TIMESTAMPS 0:00 Intro 4:45 Setting the Panel 8:51 Jessy’s Restaking Thoughts 10:20 Justin’s Restaking Perspective 11:40 Dankrad’s Restaking Views 12:30 Sreeram’s Restaking Arguments 14:00 Why Justin is a Restaking Doomer 18:30 EigenLayer’s Restaking Architecture 22:05 Restaking Builder Hooks 25:05 Vitalik’s Restaking Concerns 30:05 EigenLayer’s Acceleration 32:50 Sreeram Addressing Vitalik’s Concerns 37:48 Ensuring Restaking is Aligned 46:04 Reputation Systems & Alignment 51:35 Ethereum Protocol Complexity 59:00 Credible Neutrality 1:03:30 MEV Boost & PBS 1:07:10 One Shot Signatures 1:09:10 Closing Thoughts, Arguments, & Next Steps 1:16:30 Closing & Disclaimers ----------- RESOURCES Sreeram Kannan https://twitter.com/sreeramkannan https://youtu.be/HcEGXoC57Rw Vitalik Buterin https://twitter.com/VitalikButerin Tim Beiko https://twitter.com/TimBeiko Justin Drake https://twitter.com/drakefjustin Dankrad Feist https://twitter.com/dankrad Jessy https://twitter.com/13yearoldvc ----------- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. 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.

• 0:04David Hoffman?

  Welcome to Bankless, where we explore the frontier of internet money and internet finance. And today on Bankless, we are going deep into the frontier of restaking. We are going so deep, in fact, that we are bringing in some extra help to guide us down the very thorny and unmapped landscape of restaking. What is restaking? If you don't know what restaking is, this episode might not be for you. This is not an afternoon hike of a conversation. We are not strolling around the park. We are going so far into the unknown that we need a guide to make sure that we don't get lost. Tim Baker on this episode is tapping in as our technical moderator for this conversation, our guide for the journey into restaking. So, not every Bankless listener will be prepared

• 0:47David Hoffman?

  for this conversation. This one is a hard one. If you want to be adequately equipped for the conversation that awaits, I recommend listening to the Bankless episode with Sreeram about the restaking meta that we are embarking upon. We did that episode with Sreeram just a few weeks ago. That will get you up to speed and ready to understand some of the nuances and problems that we are going to suss out here on today's episode. Because today on the show, we have one of the largest and most giga-brained panels that we've ever had on Bankless. We have Dankrad Feist, we have Jessy, aka 13-year-old VC, that is her pseudonym, Justin Drake, Vitalik Buterin, and of course, Sreeram Kannan himself, the founder of Eigenlayer and perhaps the creator of restaking, all moderated by Tim Baker. Bankless Nation, I'm going to be with you in the audience on this one. This one is

• 1:32David Hoffman?

  well above my pay grade, but you are in good hands with Tim. So, I'm going to sit back and get my learn on, and I'm sure that you will as well. So, let's get right into our conversation with one of the most brainiac panels that we've ever had on Bankless. But first, a moment to talk about some of these fantastic sponsors that make this show possible. Kraken Pro has easily become the best crypto trading platform in the industry. The place I use to check the charts and the crypto prices, even when I'm not looking to place a trade. On Kraken Pro, you'll have access to advanced charting tools, real-time market data, and lightning-fast trade execution, all inside their spiffy new modular interface. Kraken's new customizable modular layout lets you tailor your trading experience to suit your needs. Pick and choose your favorite modules and place them anywhere you want in your screen. With Kraken Pro, you have that power. Whether you are a seasoned pro

• 2:17David Hoffman?

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• 2:26David Hoffman?

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• 3:08David Hoffman?

  The Mantle Treasury is one of the biggest DAO-owned treasuries in DeFi, which is seeding an ecosystem of projects from all around the Web3 space for Mantle. Mantle already has sub-communities from around Web3 onboarded to help the growth of Mantle, like Game7 for Web3 gaming, or EduDow for the world of D-si, and Bybit for TBL, liquidity, and on-ramps. So if you want to build on the Mantle Network, Mantle is offering a grants program that provides milestone-based funding to promising projects that 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. If you haven't experienced the superpowers that a smart contract wallet gives you, check out Ambire.

• 3:51David Hoffman?

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• 4:36David Hoffman?

  its wallet token to early users for simply just using the wallet. So, if you want to get started with Ambire, all the links that you need are in the show notes. Bankless Nation, welcome to our restaking deep dive. This episode is not meant to be an introduction to restaking. This will be a much more technical conversation as to the current frontier of thought from the ETH core devs and other restaking enthusiasts about how the meta of restaking might interact, interfere with the goals of the Ethereum execution later. For an explanation of restaking and what restaking is, there is a 101 or 201 level of content that we did with Stryram not too long ago. So see that previous episode if you need to get downloaded as to the state of Eigenlayer,

• 5:19David Hoffman?

  what restaking is and what it does. We hopefully want to go very deep in this episode, so deep in fact, that I am only able to guide us so far in this conversation. So moving forward, I am tapping in Tim Baker as our guide into the frontier of the staking meta and the Ethereum protocol. Tim, welcome back to Bankless and thank you so much for taking the reins here.

• 5:39Speaker 01

  Yeah, thanks for having me again.

• 5:41David Hoffman?

  Before we bring on the largest panel that we've ever had here at Bankless, I want to pick up a little bit of your brain, Tim. What are you hoping to accomplish in this episode? And what context and frame of minds should listeners have as they enter this conversation?

• 5:56Speaker 01

  Right, so we're going to have people from both Eigenlayer and then the research side of Ethereum and kind of the broader community. And my goal is like, if everyone can understand everyone's perspective a bit better by the end of the call, I'll be happy. And I think as a byproduct of that, we're going to have to dive into all of the issues around restaking. So folks can expect, you know, discussion of like the technical issues, the trade offs, the general roadmap and the potential risks around restaking. And then hopefully the folks on the panel have a better understanding of each other's perspective by the end of the hour.

• 6:32David Hoffman?

  Why would you say that this has captured the attention of so many of the Ethereum core devs and surrounding Ethereum community? Like, why in simple terms is this a big deal?

• 6:41Speaker 01

  Yeah, I think it's because it introduces changes to the incentive landscape, which the protocol is not aware of, you know, natively. So obviously, we have all these incentives in the Ethereum protocol, like how much stake do we issue, or sorry, how much rewards do we issue to stakers? What are the penalties? What do we do with transaction fees? And you know, those sort of all work really well if you think of Ethereum as a closed system, where you know, there's not too much interference with it. But then when you see something like restaking, you know, which fundamentally changes the reward landscape for stakers, and it might end up changing sort of the decisions they make around the risk they're

• 7:21Speaker 01

  willing to take. If they, if they take risk and things go poorly, then it might change the decisions they make with regards to their role as a staker on the Ethereum mainnet. So it's really this intersection of like, the incentive design and the edges of the protocol, and how they interact together. I think that's something that people in recent years have become much more attuned to. And yeah, that's why it causes so much conversation.

• 7:45David Hoffman?

  All right, Tim, are you ready for me to hand over the reins to you?

• 7:48Speaker 01

  Yeah, let's do it.

• 7:49David Hoffman?

  All right, Tim, I'm gonna let you go. But first, I'm gonna introduce you to Dankrad, the father, father of modern dang sharding researcher at the Ethereum Foundation. Dankrad, welcome back to Bankless.

• 7:59Speaker 02

  Thank you for having me.

• 8:00David Hoffman?

  We also have Justin Drake, father of ultrasound money. He's been on the show a large number of times before. Justin, also welcome back to Bankless.

• 8:09Speaker 03

  Thanks for having me, too.

• 8:10David Hoffman?

  And first time on the show, we have Jesse, who I think has posed some of the biggest questions about restaking is definitely on the frontier of restaking thought. Jesse, welcome to Bankless for your first time.

• 8:21Speaker 04

  Thank you for having me.

• 8:23David Hoffman?

  And then, of course, we have Vitalik Buterin, just some guy on Twitter, and also famous for having the most ignored EIPs in Ethereum. Vitalik, welcome back to Bankless.

• 8:31Speaker 05

  Hello, everyone. It's good to be here again.

• 8:34David Hoffman?

  And last, but definitely not least, we have Sreeram, the father of modern restaking himself. Sreeram, welcome back to your second time on Bankless.

• 8:40Speaker 06

  Thank you so much, David. Excited to be here. Thanks to all the EF friends for coming here. And Jesse.

• 8:47David Hoffman?

  Tim, I am out of here, my man. This is all you.

• 8:50Speaker 01

  Awesome. Thank you, David.

• 8:53Speaker 01

  I guess one place to kick this off to make sure that we sort of dive into the deep end pretty quickly is if the four of you, Dankrad, Justin, Jesse and Vitalik, maybe just want to take a minute to share like your current brain dump of like where your head is at with regards to restaking, we can kick it off from there and then I'll make sure to give you some time after to respond to the comments that'll come up. I think yeah, quickly, Jesse, I don't know if you want to kick us off. Yeah. What do you think of restaking? Like, what are the things that are coming through your mind right now?

• 9:28Speaker 04

  Oh, yeah. So I think to me, restaking is that one simple elegant idea that's inevitably coming true. I think it has real yoke for users that come from a real utility. It has real excitement and traction behind it. I think there's in the process, real value capture as well. However, it's also an opportunity that I believe has been slept on because I probably talked to hundreds of, you know, developers one on one and tens of ecosystems and some of our most like smartest people are working on ZK, launching games, MEV, but restaking is, I think, some of the biggest upcoming nerds type that there's just not that many experts and there's many interesting topics to be explored that comes out of this Pandora's box. My friend Kaido, you know, once said that you could probably get a PhD just studying any of the

• 10:12Speaker 04

  rabbit holes into restaking. And there's just that not that many experts in this space. So I would encourage everyone to study and become experts.

• 10:22Speaker 01

  Awesome. Thanks. Justin, want to go next?

• 10:27Speaker 03

  Sure. Yeah. So my perspective is that restaking is a little bit like AI. On the one hand, there's an opportunity to really upgrade Ethereum, kind of make make it the center of economic security and really strengthen its network effects, have more applications, more cash flows. But on the other hand, there's systemic risks. There's big, big downsides. There's a large blast radius. And you know, what we potentially could be losing is the decentralization of the staking operators. That's what I'm most worried about. And that could have ripple effects around losing credible neutrality, losing monetary premium and things like that. Now, I guess personally, I've been digging into restaking very seriously for the last two months.

• 11:11Speaker 03

  And I feel good about it as a researcher because it kind of extends my runway. But on the other hand, I must say that thinking about these systemic risks, you know, deeply has made me a bit more, you know, gloomy and doomy. But I'm trying to to remain optimistic in my research.

• 11:28Speaker 01

  Thanks. Vitalik, you want to go next?

• 11:32Speaker 05

  Yeah, I think I have pretty much the same perspective as Justin on this.

• 11:37Speaker 01

  Okay, Dan Krad, anything from you?

• 11:41Speaker 02

  Yeah, I mean, I would just like to continue what Justin was saying. I think it's super interesting because to me, like, restaking has many similarities to liquid staking and like, I think the risks are in many ways quite similar. So it is very interesting in that at the same time, it could actually help decentralization in that it makes solo staking more competitive and more capital efficient, but at the same time runs the risk of like completely compromising the protocol by rehypothecating basically all the stake and like, yeah, removing our

• 12:23Speaker 02

  security by using the stake for something else. So it's a super interesting topic to think about.

• 12:29Speaker 01

  Thanks. And yes, Riram, I guess we've heard it's almost like a barbell of opinions, right? Like, it could make solo staking better, a super, a super interesting problem for builders, new source of yield. But then it's like AI could destroy centralization and affect the credible neutrality. So how do you think about restaking, like, from your vantage point now?

• 12:52Speaker 06

  No, this is, I think we do agree that there are complex risks. And that's why I think it's important to take a constrained approach in building restaking. The constraints being like what is really good for the ecosystem? And having constraint on that, you know, building what new innovation can be unleashed based on, you know, this concept. So that's how we are thinking about it. Our driving value is permissionless innovation. The idea that anybody can come and build new things on top of. This massive trust source. And I think the fundamental thing we are all seeing here is there is a kind of a trade off

• 13:37Speaker 06

  between shared security and, you know, risk contagion. And I think understanding that sharply as well as building systems that make sure that

• 13:52Speaker 06

  the, there is, you know, a certain amount of innovation that can be unleashed while satisfying the constraints of minimizing risks and contagion is how we are thinking, Byron.

• 14:05Speaker 01

  Thanks. Um, yeah, I guess, Justin, to go back to you, you said, you know, the past couple of months have made you into a bit of a restaking doomer. Can you, can you paint us a picture of like your, your mental evolution and like what's your current view of the risks is and, and why they could be bad?

• 14:24Speaker 03

  Right, so things have actually evolved in the last few, few days where, you know, I feel like I've made some, some breakthroughs in terms of, um, you know, having solutions if we really want to kind of fight solo staking. So I used to believe for, for, for a long time that, um, restaking was inevitable, but actually maybe there are some like redesigns of proof of stake that make it like proof of work where you can't really do restaking with, with slashing. But putting this aside and just assuming that we continue on the current path where we're at, like one of the, my main concerns is basically the, the erosion of solo staking. So actually the opposite of what the Dankrad is, is, is hoping for.

• 15:08Speaker 03

  And basically the reason is that right now there's one staking application, restaking application zero, if you, if you will, which is to participate in the beacon chain and at the execution layer of Ethereum. But there's going to be many other options going forward. And for each one of these restaking applications, a decision needs to be made by the, the staker. Either you don't participate in that, that restaking application. And I think that might actually be, not be really an option for some restaking, restaking applications. And the reason is that there's this economic forcing function going on. If you don't want to play the game, you are uncompetitive from an economic standpoint. The other option might be to become a solo restaker.

• 15:53Speaker 03

  So you retain your sovereignty. But my worry here, and I can, there's basically a whole laundry list of things that basically jeopardize the possibility for solo restaking. So right now, when we think of solo staking, we think of a low-powered node. That's, for example, DAP node. We think of distributed validators like Obo and MPC friendliness. We think of the minimum stake being 32 if. We think of low maintenance. We think of client diversity, determinism, smoothing, synchrony, all sorts of things that we think about, each one of which could be jeopardized even by one single restaking application.

• 16:35Speaker 03

  And so basically, what could happen is that these solo stakers might be forced to the third option, which is to do delegated restaking. And delegated restaking is all about trusted operators. And one of the problems here is there's a ransom attack. So we used to think that we can delegate and still hold custody of the stake. But it turns out that when you're delegating stake in the context of restaking, you're allowing this operator to slash you. And what this operator can do is basically threaten to slash you unless you pay a ransom,

• 17:19Speaker 03

  which is almost the full amount that they can slash. So for example, if they can slash you for 32 if, they can say, I'm going to slash you unless you pay me 31 if and you get one if back. And it's in your best interest to just go ahead and do that. And so you're effectively losing the benefits of the segregation between the staking key and the withdrawal key.

• 17:43Speaker 06

  Yeah. A brief comment there is it seems like you can have immutable services whose slashing contracts are immutable. And you know, as long as we encourage stakers to only operate to, only opt into a restaking where it is immutable service contracts, you don't have this risk that suddenly somebody can come and say something, because it's not a thing that anybody can say. Slash is written into a contract.

• 18:12Speaker 01

  Maybe, yeah, on that point, Sreeram, can you take a couple of minutes to walk us through exactly like what exists today in the restaking architecture, like Dragonlayer specifically? Because I think it's probably helpful, like I suspect most listeners have like heard of like restaking as a general concept. But like if you can walk us through the flow of like, I'm a validator, I set my withdrawals credential to this contract, this contract does X. Yeah, I think that would help kind of ground the conversation and what actually happens.

• 18:41Speaker 06

  Yeah, yeah, absolutely. So there are two kinds of restaking we allow. One is native restaking, which is essentially you go and stake in Ethereum and then you have a staking key and a withdrawal credential. You set the withdrawal credential to a smart contract, basically to the Eigenlayer smart contracts. And in particular, inside the Eigenlayer smart contract, you create your own zone or a part called an Eigenpod, which you control. And you basically, you know, set your withdrawal credential to that. And now like the Eigenlayer system thinks of you as having restaked. And then now you have the freedom to opt into new services. So what's a new service? So there's an Eigenlayer set of smart contracts on Ethereum, and then there are service contracts. Anybody who's building new services writes a service contract and has a service off-chain code.

• 19:27Speaker 06

  So imagine you're building a new consensus protocol. You basically, you know, have like a, like a get node and a prism node type of thing for that, you know, you ship it to people. You know, this is off-chain code written in arbitrary languages. They download and run it off-chain. On-chain, you have the service contract, which has basically three kinds of conditions. One is registration conditions. What, how to register into the, or who's allowed to register into the restaking for that particular service? Then you have payment conditions, or if you validate X number of blocks or do X number of signatures, you'll be paid X. And then the third one is slashing conditions. These three are written into the service contracts.

• 20:08Speaker 06

  So you're not really giving power to anybody else. You're giving power specifically to the service contract to enforce a certain kind of condition. And You know, in the ideal eventual world, both Eigenlayer and the core contracts will be immutable and service contracts, you know, as they ossify and become correct, could become immutable. And when you're opting in as a restaker, it is pretty much just fully algorithmic code that you're basically opting into. So that's the structure of the system. So essentially, as a staker, now, you know, you've set your withdrawal credentials. Why do you set your withdrawal credentials here is essentially you're adding one step in your withdrawal flow on the Eigenlayer contracts, you anyway setting the withdrawal credential for your EigenPod to your own like wallet, right?

• 20:53Speaker 06

  So essentially, it's just one more stop in the way of withdrawal. And the reason this is important is to impose any kind of slashing or negative penalties at the Eigenlayer level. You promise to do something, you promise to validate some other set of systems, and then you don't do it, then, you know, these systems can enforce the system of like positive and negative penalties, positive incentives and negative incentives there. I just want to kind of just state one, one more thing. Our eventual view is something like Eigenlayer doesn't necessarily remain as a separate layer on top of Ethereum. Just like we had a maybe boost and eventually it was understood what the right interfaces are, or it is getting understood what the right interfaces are, and it becomes part of a native PBS type system.

• 21:39Speaker 06

  We absolutely want to figure out how to make, you know, something like Eigenlayer a default part of Ethereum. That would be our ideal end state. So as to minimize the accounting uncertainties between Ethereum itself and anything else that can be built on top. You know, our vision, like I said, is permissionless innovation. We want to enable anybody who wants to build new kinds of infrastructure in the space to come and build it. As long as that goal is met, we have achieved our goal.

• 22:08Speaker 01

  Thanks. Yeah, I think this really helps like ground the conversation and kind of be a bit more specific going forward. And I guess following from that, Jesse, you mentioned earlier, like restaking is this really new primitive that builders should get excited about. Like when you sort of hear this entire description, like what are the, the, the hooks or like the things on which you think builders should be spending their attention and trying to extend and whatnot?

• 22:37Speaker 04

  Yeah, um, so in my spare time, I run some hacker houses and just even from the hacker house applications and some of the residents that, you know, some projects that they're building. Um, there's a few categories, one, right? One is with security. There's this project called Jusera that is a hacker that we're hosting. They're basically allowing, you know, restaked validators to tech and perform emergency responses for protocols of their choice whereby, you know, performing advanced validation validation checks on the protocol security. Um, this part can be offloaded from the blockchain, performed off-chain via, you know, commitments insured by their collateral via restaking, right? Another example is a lot of MEV projects, right? There's another project that is doing decentralized auction market,

• 23:21Speaker 04

  selling users' order flow to searchers. And in the process, they want to essentially slash malicious participants' stake who perform sandwich attacks. And this can be insured with, you know, Agulor. Another project that we see, um, this guy built restaking.wtf. It's essentially, instead of leveraging only ETH as collateral for restaking, you can essentially leverage any assets as collateral, right? And then he went on to build something else with objective credible commitments via ZK, where, you know, validators' actions that were previously non-binding via just crypto economic security, for example, maybe like non-inclusion of blocks, can now be made binding with ZK,

• 24:02Speaker 04

  uh, in a way where ZK would actually extend, uh, crypto economic security, um, and in a way that scales. So I think if I have the intel correctly, maybe Agulor has like three stages, right? And there's like one year away from actually launching middleware marketplace. I think a potential, um, pattern or of of behavior that I observe is we may see faster experiments where restaking emerge where there is an allegiance of restaking protocols, meaning maybe five, uh, protocols out there are friends with each other and they want to essentially restake onto each other's network and share this, uh, security with amongst themselves. I think that's a very interesting approach where, you know, like risk is limited only to the set of protocols

• 24:47Speaker 04

  and they can launch these experiments much faster. Um, and then later I was told that this actually is happening on Cosmos with mesh security where, you know, sovereign chains and rollups are cross-carrying each other. Uh, but now we could potentially have this behavior on Ethereum and other ecosystems as well.

• 25:04Speaker 01

  Got it. Thanks. Um, and I don't know, Vitalik or Dankrad, if either of you want to maybe, uh, again, to make things more precise, based on this entire flow of like, you know, Eigenlayer and what people build on top of it, like, what are the things that can break, uh, through this, you know, what are the specific like attack surfaces that we should be really concerned about and, uh, where we should maybe try and like limit degrees of freedom?

• 25:28Speaker 05

  Yeah, so I think I have basically two types of concerns. Uh, so one concern is the, uh, type of concern that I mentioned in my post about a month ago, right? Like basically where, restaking in the sense of just like collateralizing, um, or reusing your collateral for other applications kind of slides into, restaking in the sense of like finding ways to sort of sneak other protocols into being, enshrined as part of Ethereum in some way. And I think it's good to see that there is a desire from, um, you know, so many people across the spectrum here to try, not to do that and to try to, you know, limit ways of getting into that. And then the second type of concern, I think,

• 26:13Speaker 05

  I mean, I think it's important to stress that this is like not uniquely Eigenlayer's fault. This is a discussion that stretches, way beyond Eigenlayer. It also, you know, gets into Lido. It also gets into like just the limits of the protocol itself, which is, uh, like basically, um, you know, the erosion of solo staking and how do we make sure that solo staking, continues to be viable and competitive going forward. And, that's a, uh, a place where I think, it's very possible to imagine ways in which, uh, all of these protocols can be designed in ways that are solo staker friendly.

• 26:56Speaker 05

  Um, I think, uh, the biggest challenge is tends to come in places where, like you're not just relying on stakes collateral as, uh, like what economists would call a hostage, you're relying on it as a deposit. Right? So like a hostage is, um, you know, if you do something bad, it burns. A deposit is, uh, if you do something bad, then it compensates to people who get hurt. And like one example of the deposit would be if you look at something like Rye, right? Like something like a CDP backed stablecoin. Like for people holding the stablecoin to actually be safe, you need to actually have a deposit, right? It would be nice for that deposit to be staked if so that the interest rate from the or the the return rate from holding the Rye

• 27:39Speaker 05

  doesn't have to like compete with the with the returns from staking and instead you can stack the two on top of each other, right? But you would actually need this reliable guarantee that, you know, if there is a margin call, like you actually get all of the ETH out instead of like potentially getting some random amounts from zero to thirty two of the ETH out. And like, most of the time it's thirty, but some of the time it could be much less and, you know, it it gets weird, right? And so that's like one of those kind of challenge points where I think there's a lot more room for any thinking around protocol design, right? But there's a but like that's. Yeah, like like that's one particular application of our restaking that's a little bit more more challenging.

• 28:24Speaker 05

  And like the challenge is basically that it also creates centralization risks because kind of trustworthy stakeholders would be valued more by the system than untrustworthy stakeholders, because trustworthy stakeholders would would be much less likely to actually get slashed. And and it creates reputation systems, reputation systems, weak decentralization and all of those things. The I think it's and then it's also important to remember that there's like a side to the whole, and you know, solo versus centralized staking thing that has ultimately the responsibility of the staking system itself. Right? Like one simple example is like, probably the biggest reason why I personally am not like just

• 29:05Speaker 05

  staking all of my ETH and instead like staking a fairly small portion is because if you stake your ETH, it has to be on like the keys that access it have to be public on some system that's online. And like for safety, it has to be a multi-sig and multi-sigs for staking are still fairly fairly difficult to set up. And and you know, it just. It gets complicated in a bunch of ways. And like, that's the sort of thing that probably could be improved through infrastructure, right? Like, there's this entire other conversation of like, if we want to make solace taking easier, then there's just like a lot of infrastructure work that needs to be done. That's independent of, you know, what all of these staking protocols do.

• 29:50Speaker 05

  But yeah, other, but, but at the same time, there's definitely a lot of these problems where kind of better integration with restaking and, you know, better integration with or alternatives to delegation. All of these things can actually help a lot.

• 30:05Speaker 01

  Thanks. Um, maybe another framing for this question as well is, um, you mentioned, I guess, that like that, uh, this is not just an eigenlayer problem, you know? It's like a broader problem and, and we see similar parts of it in LSCs. Um, but I'd be curious to maybe dig into this more like, are there specific concerns about eigenlayer's approach? Um, and Sri Ram, don't worry, we'll give you some time after to, to respond on this. But like, um, are there things, you know, with eigenlayer specifically that can, uh, or that have, you know, shifted us towards a slightly worse equilibrium rather than, um, beside from just, you know, doing restaking.

• 30:46Speaker 01

  Um, and yeah, let's, let's start here and then I'm sure some follow-ons from that.

• 30:51Speaker 05

  Sorry, can you go like?

• 30:53Speaker 01

  Yeah. So, so basically is there something about eigenlayer's approach or design or, you know, uh, like way it's gone to market that, um, beyond just the raw restaking, uh, risks that like you mentioned, um, has, has like made things worse?

• 31:11Speaker 05

  Hmm. Ways that it's made things worse aside from just, uh,

• 31:15Speaker 01

  Be restaking. Yeah.

• 31:17Speaker 05

  Aside from being restaking and, um.

• 31:23Speaker 05

  So like specific decisions that the team has made?

• 31:26Speaker 01

  Yeah, or approaches, because like, you know, you mentioned like, or and three Rami touched on this as well, you know, you've obviously thought about like how people are gonna be able to restake, you know, which are like the first applications. Um, how you think about your roadmap? Um, so are there parts of that that, you know, could be better or it could have been different? Um, it's fine if there's not, don't have to like find something.

• 31:47Speaker 05

  Yeah, I I can't think of any amazing answers.

• 31:51Speaker 01

  I don't know if anyone.

• 31:53Speaker 03

  I mean, I guess one thing that could be said is the the accelerationist argument, right? Like three Rami, it just is is here. And it is accelerating the discussion. And I think one thing which would be, you know, very nice is if there also was an accelerationist effort for alignment. So I'm thinking maybe like a an in-house team. Um, that that is just dedicated to to to alignment. Um, and I think there's there's some catching up that we're doing within the firm foundation in terms of building, you know, such a team. And, you know, plug, if you want to do restaking alignment research, uh, do DM me.

• 32:31Speaker 06

  Yes, uh, we also want to organize an event at DevConnect, uh, in Istanbul. So that would be one, uh, one place where we can discuss both alignment and applications. And, um, we're very much open to the suggestion of actually building a not only a team, but also a culture of alignment.

• 32:54Speaker 06

  I want to just address like one or two, uh, points that were brought up by Vitalik. Uh, one is on, um, solo sticking. I think one of the things, you know, uh, we are doing, I so before that, I want to phrase the scope of what we are doing at Eigenlayer relative to general restaking. I think you could restake and like reuse collateral in financial or other applications, what Vitalik called deposit. And you could restake and use only that, you know, your collateral for promising that you are, uh, doing validation correctly. The so-called hostage, I think that Vitalik referred to.

• 33:36Speaker 06

  Eigenlayer's goal is to be a marketplace of decentralized trust, not a financial hypothecation platform for taking collateral stake in Ethereum and then using it in other ways. I think this is much more slippery slope and one has to go very tread very carefully. And one may ask, like, how how do you, Sri Ram or somebody else decide like what what set of use cases kind of get built on on the system? Again, there is the starting point and there is kind of equilibrium for these systems. The starting point that we are taking is, you know, because, you know, new applications, when they are launched on Eigenlayer,

• 34:20Speaker 06

  their contracts may have like bugs and other issues. One of the things we are building is that these be subject to a social layer inside of Eigenlayer. We call this a slashing veto. The only role of the veto is to slash, the only role of the committee is to veto slashing decisions. And initially, of course, this would be like a a single committee, but eventually this could be an intersubjective thing like relays. Right? Relays in the Ethereum ecosystem, you know, anybody can be a relay. They just are a doubly trusted party. If a proposer agrees to a relay and a builder agrees to a relay, they have like a potential market making opportunity.

• 35:02Speaker 06

  In the same way, they can emerge a marketplace of slashing vetos where like somebody can say, hey, we are a committee. We want to propose, you know, participate in mediating, you know, these slashing veto decisions. And as long as the stake and the service are comfortable, you can actually make the market there. But the the point is whoever is doing this kind of a slashing veto also needs to onboard services because they have to veto the slashing. And so the way we restate the scope of applications is first by shelling point. The idea that we are actually only building a decentralized trust marketplace or a validation marketplace, not a financial primitive. And number two, you know, things like the slashing veto committee have the ability to onboard services.

• 35:44Speaker 06

  And eventually, the way we think about it is when you're not very trusted, it's the same like. Training wheels argument for roles, right? So when you're building a roll up initially, you need to add training wheels. But eventually you move off and say that I don't need training wheels. Same thing, services built on Eigenlayer will eventually go initially go through a slashing veto. Eventually, as they ossify, they will just say, I don't need a slashing veto. And stakeholders can trust me because I've been on this and running it for one year, two years. So they go to become completely non-subjective. So that is the roadmap that we envision and it is going to be very difficult to go beyond a certain credibility

• 36:23Speaker 06

  for services doing all kinds of random things and you know ransom attacks and other things to gain enough trust for stakeholders to put their own money at risk. You know, there is no incentive misalignment at the stakeholder level. Stakeholder doesn't want to lose their money to a ransom attack, right? Like and they're not going to stake to services which don't have not established enough credible trust or are fully immutable and programmable that they can actually verify. So anyway, that's, that's a couple of points. One final point on decentralization is, I think Dankrad mentioned this a little bit, which is how potentially Eigenlayer could help decentralization. You know, if, if you remove Eigenlayer from the equation, like for liquids taking, the only benefit was in DeFi

• 37:07Speaker 06

  applications and the only yield was coming from that. And I think this has very strong like centralization tendencies. Whereas what Eigenlayer is doing is try to establish a decentralization or decentralized trust marketplace where there may be a premium to be paid for decentralization itself. Because if people value decentralized nodes for doing validation, they could say, I only want to recruit the non-centralized nodes for my service. And this can lead to additional yield for like home stakeholders who might want to run lightweight services across the spectrum. So that's a few points on how we are thinking about both alignment and decentralization.

• 37:49Speaker 01

  Thanks. And I guess, you know, Justin, you were saying, you're talking about like in-house alignment teams. I feel like maybe the broader version of that is like, what should the Ethereum community be doing now as a whole? To ensure like restaking is aligned and there's different angles this can take, right? Like, but you know, it could be building different, like competing LSTs or restaking protocols. Like we started to see on the LST front, there's the whole area of like around protocol changes. And then there's also like middleware, like, you know, things like we've seen like MEV boost. So like, yeah, I guess pretty much from everyone here, if you have any ideas or suggestions to the broader Ethereum

• 38:33Speaker 01

  community of like, which paths should we be pursuing in parallel to like, maybe Eigenlayer accelerating, accelerating the restaking future so that we don't get caught by surprise?

• 38:47Speaker 03

  I mean, I'm happy to take this.

• 38:48Speaker 01

  Yeah.

• 38:49Speaker 03

  I mean, for me personally, there's this kind of three prongs. The first one is to just build a team and build the culture around it. And I think the, the culture will come from an awareness of the risks. And I think maybe that we could spend a whole podcast on, you know, what are the, the restaking risks? And really flesh those out so that there is a public consciousness. And then, you know, a second big prong of my research is around, you know, insurance, the nuclear option. Like if things go really, really bad, can we redesign Ethereum proof of stake in minimal ways? In such, such that, you know, we can neuter restaking.

• 39:30Speaker 03

  And I'm happy to say that the answer is probably yes, at least for trustless restaking, which is punitive, which has slashing. So that, that is a, you know, something that makes me sleep better at night, that we have this card in the back pocket.

• 39:45Speaker 01

  Can you explain maybe how that would work, just high level for our listeners?

• 39:49Speaker 03

  Yeah. Right. So there's two ways to unlock trustless restaking. One is through withdrawal contracts, which is what Eigenlayer is doing. And then the other way is to basically bootstrap yourself on top of the existing slashing conditions, either using hardware, but maybe even trustlessly using very fancy cryptography called witness encryption. Now, on the withdrawal contract side of things, what we can do is we can actually make the withdrawal contract updatable. And the reason why we didn't make it updatable by the staking key was that if your staking key gets compromised,

• 40:33Speaker 03

  then the most that you can lose is just the one if because you get slashed. And so the ransom attack is very, very limited. And so actually, you know, you still hold custody of your funds. But what will happen with restaking is that you're going to be max exposed to slashing. Like if you mess up, you're potentially going to lose the FET to be for some very large, large portion. And so the separation between the staking key and the withdrawal key is not that valuable. And so making it updatable, you know, could be a way to basically neuter restaking. And by the way, it also solves another problem, which, which is, you know, liquid staking token. So in that sense, it is really a nuclear option. And, you know, there would have to be a whole migration path, which might take several years.

• 41:19Speaker 03

  But, you know, if we do see that restaking, it doesn't lead to, to good equilibrium, then, then we at least have that option. And then the second thing that we can do is basically remove the ability to bootstrap on the slashing conditions by removing the slashing conditions. And the, basically, I discovered a, you know, a couple of weeks ago, this amazing cryptographic primitive called one-shot signatures. Basically, one-shot signatures allow you to sign a message once, and then the staking key magically destroys itself. And you can think, okay, how is that possible? And the, the

• 41:57Speaker 01

  You mean the signing key, right?

• 41:59Speaker 03

  The signing key.

• 42:00Speaker 01

  Okay, yeah.

• 42:01Speaker 03

  Okay, yeah. Yeah, the signing key, the staking key, the secret key destroys itself. And the way that it's, it's done is basically by combining Existing cryptography with quantum mechanics. So in quantum mechanics, you could have your secret key be a superposition of states. And then there's a theorem in quantum mechanics called the no cloning theorem whereby if you have an unknown superposition of things, you can't clone this quantum object. And then the way that you sign the message is by measuring the secret key by collapsing it and thereby destroying it. So you can only sign one single message. Now, everything else is just as normal.

• 42:43Speaker 03

  The signature itself is classical. And so really, it's a potential future upgrade for removing the slashing conditions. Now, one of the things I guess worth mentioning is that you get 80% of the neutering from the withdrawal credentials. And the reason is that the slashing conditions are kind of limited, right? If only a few validators get slashed around the same amount of time, they only lose a very small amount of ETH. They only really start kicking in when there's mass slashing going on.

• 43:21Speaker 03

  And so you get 80% of the benefits just by removing the withdrawal contract or making it updatable, which is very easy to do. And then the last 20%, you know, in maybe a couple of decades, we can remove for a very, very fancy cryptography.

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• 46:05Speaker 04

  So I guess I have a more vanilla idea, building on top of what Vitalik said about reputation systems. I think... I think this is much more maybe easily built uh like some sort of reputation dashboard where it's either built in-house by restaking protocols or by third parties. Where all three parties in the marketplace, the stakers, the validators, and the middlewares that require staking uh would essentially get. Uh, reputation points. For the stakers, you could, you know, bench on, you know, like the amount of time they've staked. I think Agilare is already doing some like this with reset points. Uh, you could have a retroactive calculation based on their on-chain or even off-chain behaviors of that stakers address.

• 46:47Speaker 04

  You on the spellators and you could, you know, display things like amount of uptime they've been running and, you know, some, some sort of effective. E- effectiveness rating like the Reddit dot network. I think this website that displayed this uh metric where. The maybe the bad validators not only get slashed, but also get de- decrease in the reputation points where. You know, they would maybe lose priority access to other middlewares. Uh, and then the good loud validators would then be rewarded with the reputation points, incentivizing them to behave more honestly and reliably for the longer term. And last but not least, for the middlewares that are actually requiring restaking, um, I think it's very, very important to displays the sort of the. Security measures that this protocol has taken, right? Whether it's through, are they done with auditing?

• 47:30Speaker 04

  Are they, do they have monitoring, like risk monitoring, or is there circuit breakers in place, et cetera, et cetera? Um, what are, you know, their slashing criteria, their slashable quota, the amount of ETH can actually slash. Uh, what is actually the hardware, et cetera, like things that you, you very like. I think um directly display for the users, whether they are individual stakers or the protocols to participate in such network. Um, where I think something like this would incentivize people to play repeated games with each other as opposed to one-off malicious games.

• 48:05Speaker 01

  Sir, you have any thoughts on?

• 48:08Speaker 06

  Yeah, I mean, in terms of alignment, I think one of the things that I think about a lot is, how do we make the Ethereum protocol, layer one by itself have a self sustained system of kind of karma? You know, the action and consequence at the layer one are fully like taken care of. So we don't really have to worry about these like extraneous fixes. Like, what are the things that we care about for Ethereum as a layer one? We want to make sure the system's safe and the system's live. Like, these are the two fundamental things. And I think rethinking a little bit deeper, what can we do to actually make sure that it doesn't matter who builds what on top of it?

• 48:50Speaker 06

  There is no externality because the system has internally kind of consistent,

• 48:58Speaker 06

  you know, punishment. And I think I'll just give two quick examples of like things that we've been thinking about. One is on safety. You know, one of the things is how much security budget is sufficient for Ethereum itself on the layer one? Right? And right now it equilibrates due to the rewards curve. And like what the market, you know, is happy with the returns on. It doesn't equilibrate to how much security is actually needed on Ethereum, because that's unmeasurable right now. And is it possible to actually build mechanisms where this information is solicited in some kind of like an incentive compatible way? So that's one example.

• 49:40Speaker 06

  And this may be things like, you know, a portion of the slash fronts from the Ethereum L1 is allocated as insurance to harmed parties. So that harmed parties or potentially harmed parties have a way to actually go and buy this insurance. So what we can start doing there is establishing markets, which can try to understand the security needs kind of more natively. That's number one on the safety side. On the liveness side, again, one of the most important things is, you know, how to make sure that we have like, you know, a system that doesn't have censorship. And I think this is something, you know, part of the main reason we worry about decentralization is that decentralization leads to censorship resistance.

• 50:23Speaker 06

  And what are the kind of like checks and balances that we can place on censorship itself? I think, again, here, but. You know, thinking a little bit more about what what we can do here. For example, is censorship? How do you make censorship easily observable by the vast array of wallets, which could then become light nodes, which are monitoring the system? You know, can can we make censorship observable there? I I think we have a bunch of new ideas coming up there, so that when you want to slash some block proposals for not only not including the transaction, but also not attesting on other people's blocks, which include the transaction, I think this is

• 51:02Speaker 06

  if you can slash people and very quickly detect and come to social consensus that actually censorship is happening, not only in proposal, but also in a testing. The faster we can come to a social consensus, the easier it is to impose like U A S F and other things to actually slash censorship. So by making the Ethereum L one much more powerful and self-contained, we simply don't have to worry about what anybody else is doing anywhere, thus actually unleashing way more, you know, uh, activities. So that's at least my like hopes and dreams for where this would go.

• 51:37Speaker 01

  And I'm I'm curious to hear from the folks on the EF research side, like, what, how do you think about the protocol complexity associated with something like that? Which is obviously the main thing we we have to consider in those changes.

• 51:53Speaker 05

  I feel like I've definitely like slowly becoming more okay with enshrining more things than I was like probably like five years ago. Like, I remember the dream in the early versions of account abstraction is basically that the base protocol would just define a call and the transaction would just be a call and everything else would be defined at higher layers. And account abstraction, for example, is like really starting to move away from that. And the reasons why it's moving away from that is because we realized that like we want to guarantee fairness of the mempool, guarantee censorship resistance of user transactions and all of these other goals. And being able to guarantee those goals does require having more legibility into

• 52:34Speaker 05

  the yes kind of the structure that's getting used to agree on what transactions are getting included, right? And so for that reason, more types of enshrining makes sense. And then, you know, there is other kinds of enshrining that, you know, Justin and various people have talked about, like even enshrining, you know, Z K E V M verification at some point. I mean, if like that's the way that I reduce costs for or reduce code risks for rollups, for example, or potentially other aspects of the protocol. So if adding more like more features to the base staking protocol reduces the risk that like weird stuff happens on L two, then I or I think that like that is something that we should be open to.

• 53:21Speaker 01

  Justin, thank you. Got any thoughts?

• 53:25Speaker 03

  I guess one of the difficulties is that you need to have adoption of this enshrined infrastructure. And I guess with with restaking, if you don't activate the the nuclear option, then there's always sneaky ways to to avoid this this enshrined infrastructure. But what I am hopeful will happen is that we will see a a a what I call a generalized PBS in infrastructure come come to play. So PBS proposed a builder separation is this really amazing thing because it basically allows solo stakers to delegate most of the work to to builders. And so the builders are extremely sophisticated, they could be centralized, whatever it is.

• 54:07Speaker 03

  But ninety nine percent of the sovereignty remains with the validator. Ninety ten percent of the rewards also remain with the validator. And then ninety nine percent of the work that needs to be done is delegated away trustlessly. And this is the key word is like trustless delegation. And I think what what we what we can do is basically come up with this framework where most restaking applications would, you know, play well in this generalized PBS. So we'd have generalized builders and generalized blocks. And we'd have generalized relays and generalized slashing conditions and generalized inclusion list. And all of that can be generalized. And that is kind of the happy path where we really delicately thread the needle

• 54:51Speaker 03

  and don't fall into this dystopia where we have the trusted delegation at mass scale. But there's a lot that needs to happen for that. One is a lot of engineering work. You know, even PBS and entrant PBS, that's just focused for one restaking application, which is, you know, the execution layer. That's already a humongous amount of work. And so doing it for, you know, a whole class of restaking applications will be, you know, very difficult. I think another thing that needs to happen is basically social norms and social education. We need to understand as a community, as developers, as users, that, you know, it is beneficial to fit within this framework. And so if you have kind of stray restaking applications that don't fit within this framework,

• 55:36Speaker 03

  then, then, you know, maybe they should suffer competitively relative to others that do. And then I think another, you know, really important component, and here it's kind of more of a wait and see, is what are the economic forces at play? So really what we want is the staking yield for institutions to be no greater than the staking yield for sort of validators. So what is, you know, likely going to happen unfortunately is that there's going to be, we're going to lose this property of fairness. So if you put one unit of stake, some amount of ETH, different people, different stakeholders are going to get different returns. Now, the reason is that there's going to be some restaking applications

• 56:21Speaker 03

  that only going to cater for institutions. So for example, if, if there's a resting application that can only support a thousand nodes, well, we have hundreds of thousands of validators. And so in order to become a node, you need to come in as multiple validators, as a lump. And so if you only have 52 ETH, then you're not even eligible to this restaking application. But the good news is that there might be some restaking applications that are kind of anti-institutional.

• 56:53Speaker 03

  Some of them maybe because, you know, they really want to tap into this decentralization. And but some of them, one of the things I've been thinking about is Ponzi games, right? If you have some sort of Ponzi games, a sort of dog token or whatever it is, that then the institutions, you know, the buttoned up coin bases and Black Rocks or whatever it is, they won't, they're not going to touch it. And so, you know, weirdly enough, I've become bullish on Ponzi games in the context of restaking.

• 57:21Speaker 01

  Wow. They could just give off you.

• 57:25Speaker 02

  Well, I mean, yeah, um, not, not want to encourage the last part. That's my least favorite part of crypto. But generally, like, I think my comment on like trying to enshrine and putting something into good rails, I think it's possible, actually, and we should be doing more of it. I think this is like a great point to start thinking about it. Like, how can we, um, how can we kind of take more active control of how people use the protocol? And I think if you give something that gives most of the economic rewards, then people will accept it and will not build around it. And, um, and then you can actually like, uh, yeah,

• 58:08Speaker 02

  make some opinionated decisions inside the protocol and try to avoid the worst.

• 58:14Speaker 01

  Yeah, this is, oh, go ahead.

• 58:16Speaker 05

  One other thing I would add is that if we want to add more kind of cheerios on top to encourage solo staking, then there is always, you know, off protocol things that we can do to encourage it. Like even things like, you know, if some off chain mechanism detects and verifies that you're a solo staker, you get a free DEFCON ticket or something similar.

• 58:41Speaker 06

  I, I, I, you know, I, I think, you know, the, the strongest such mechanism would be that basically, you know, Justin mentioned in a bankless podcast earlier that. Hey, you know, if you're a solo staker and you restake, you might actually get like an ad drop, which is kind of disproportionate to not just like the amount of heat, but also to to individual units, you know, using some kind of a quadratic mechanism there, for example. So I think there are, so the subjectivity layer, so the way we think about like restaking is this, you know, the platform itself would need to be neutral, but there is a lot of intersubjectivity, like services building on top

• 59:22Speaker 06

  can express their own subjective views on what what the important dimensions are. And I think that is, that is a new, I think, new powerful thing where the society and the community can guide where that energy goes. And I think, you know, you know, the EF researchers and team has a kind of a big role to play there.

• 59:53Speaker 01

  Yeah, I had a question, so around like the enshrining and potential, you know, neuter range of of these protocols. I feel like this is a topic that comes up over and over where, you know, we see this with obviously liquid staking tokens. There's a whole question around like, you know, should rollups be enshrined? And to what extent and what components? And now like with restaking.

• 1:00:15Speaker 01

  And there's a, there's, there's almost like a paradox around credible neutrality there. Where like, if you, if you make these protocol changes to like, keep things more credibly neutral, but then end up in a way like censoring what is like one of the largest users of the protocol, because we fear that it becomes a monopoly. You know, that's also like a form of like non neutrality of the Ethereum base layer, right? Like if, if we do, you know, a protocol change at like Neuters Eigenlayer or Neuters Lido or Neuters, you know, Arbitrum, because there's like this fear that like it's it's growing too big. Then effectively, it's like a weird form of censorship. And that, so like, I'm curious.

• 1:01:01Speaker 01

  Yeah, how do you think about doing these changes or potentially doing them in a way that's maybe less like adversarial or potentially risky to like?

• 1:01:14Speaker 01

  Not only in the in the restaking context, but generally people who want to build something that's going to end up being used by like most Ethereum users. Yeah.

• 1:01:27Speaker 02

  So my opinion would be this, that we should establish a social norm here that building on Ethereum, like building smart contracts, protocols on top, that should we we should almost never touch that. I mean, would be in a very extreme, very rare situation. But messing with the staking layer is a different matter. Like, for example, if some if like lots of validator starts censoring, we do want the ability to like intervene. And so I think I think it would be a good signal to send, yes, like, we might be opinionated on what you do on a staking layer, and that might include like messing with your protocol and destroying it.

• 1:02:14Speaker 01

  Just in the title, I don't know if you have thoughts on that.

• 1:02:18Speaker 03

  I mean, for Lido specifically, one of the amazing consequences of the the one-shot signatures that I mentioned is that you can do trustless delegation. So you can imagine a system like Lido, where you don't have to trust the 29 operators in any way. And that would basically give us all the advantages of Lido, which is the liquid staking, and really none of the downsides. For restaking specifically, I don't have the silver bullet right now. So it's kind of more of a, you know, hope for the best and embrace things and things go well. And kind of if things don't go well, then then neuter it.

• 1:03:06Speaker 05

  Yeah, I mean, I think, I mean, the other thing I'd add is that it's always, you know, importance to be careful about neutering things and to, you know, create a kind of, kind of maximally clear norms about like, what is an okay situation and what starts looking like a very not okay situation that that requires some kind of action. And, you know, hopefully, the very not okay situation is something that ends up happening zero times.

• 1:03:37Speaker 01

  Yeah, and I'd say, I think one spot where we're doing a decent job at this is around like MEV boost. This does feel like something where, although far from like perfect, having had, like, the, you know, MEV teams actively contribute to it, having had, like, obviously ultrasound relay and like, infrastructure that's been built around, it seems like this. Yeah, I wouldn't call it like an equilibrium quite yet, but it seems like we've at least created like a semi-stable middleware that we can have both like private companies and like protocol contributors work on and test some of the incentives at play, obviously see some of the issues with the sort of shortcuts that

• 1:04:23Speaker 01

  we're taking to make this possible a bit outside of the protocol. But, yeah, Justin, I don't know. Like, do you have thoughts from just more to like collaboration and engineering process of like, having done this around MEV boost and relays sort of outside the protocol to start as we go towards PBS?

• 1:04:43Speaker 03

  Right. So I guess one thing that I believe is that there's never rush, right? We always have a lot of time to discuss these big changes and part of the reason is that proof of stake has an inbuilt healing mechanism. So if the worst were to happen, mass censorship or reversion of finality or whatever it is, we have ways to, you know, identify the cancer and excise it from the system.

• 1:05:13Speaker 03

  Using either automatic systems or using the the the social layer.

• 1:05:19Speaker 03

  And because we have time, that means that we we can experiment with solutions that are off chain, as you said, and those might be good enough.

• 1:05:31Speaker 03

  Now, one of the, I think, things we should be striving for is doing all sorts of upgrades that, you know, have very little downsides. And so we should be using this time to think of end games that are, you know, maximally simple, maximally optimal, so that we, once we do the change, then we don't have to do it again. And I think another thing that's important is is around timing. So a lot of the future upgrades of Ethereum are actually security upgrades, but they're hidden in the back pocket. And if and when they start becoming problematic, so for example, secret single leader election, that's something we've been working on for years. And we haven't really prioritized it because we haven't seen, you know, validators being

• 1:06:13Speaker 03

  DDoS, despite the fact that, you know, their their identity and their IP address is is is public. But if and when this were to happen, this is something we can prioritize. I guess another thing in terms of timing is around, you know, making use of sunk cost. And so more specifically, I think there's going to be this massive upgrade to Ethereum that's going to come maybe in 10 years' time, 15 years' time, 20 years' time, I don't know, around, you know, making Ethereum post quantum. And there we really need to rip the Band-Aid and and and remove a lot of the cryptographic guts of Ethereum and make them, you know, post quantum.

• 1:06:53Speaker 03

  And this is kind of a great opportunity to put into place all the upgrades that we've wanted to put in place. Because we're going to be changing everything anyway, so might as well make Ethereum close to as close as perfect that as we can.

• 1:07:11Speaker 06

  I have a quick thought to add to Justin on, you know, his worry about restaking. In the post-one-shot quantum one-shot signature world, I think, you know, there's no use for restaking. Restaking was there to write, underwrite trust in distributed validation. If you could have like distributed validation already certified by one-shot signature, at least my own goals would be satisfied. So I think, because, you know, staking was there to underwrite trust in, you know, certain kinds of correctness. And if it's already kind of comes out of that quantum principle, so other people, not only Ethereum, that would be beneficiary of it. Other systems that want to build on top of are also beneficiaries of the same thing.

• 1:07:57Speaker 03

  Yeah, that's a great point that, you know, these one-shot signatures remove equivocation. And so a huge subset of restaking applications no longer really become meaningful because you can just do them with pure cryptography. But there's these two other things that still remain. One is liveness and the other one is non-determinism and subjectivity. If you're building oracles, for example, you, you, you can't use, you know, pure determinism and pure cryptography.

• 1:08:30Speaker 01

  Oh, sorry, I'm, were you gonna say something? Sorry.

• 1:08:33Speaker 06

  No, just one more thing on like, things like letting staking key change with wrong keys. Is I think there are complex second order effects that may emerge with these kinds of things, which may lead us to exactly the opposite of the goals. For example, it may just end up that if that's the case, I can only delegate to somebody who's really trusted. And then everybody delegates to the same party. And it's just going to be like, so I, you know, we all know here that we don't know the second order effects of any of these systems, including restaking. And we, we just need to kind of bones off each of those ideas into find what the best you could for the space and Ethereum is.

• 1:09:15Speaker 01

  Thanks. Yeah, I think this is a good place to start wrapping up. Maybe as a like closing question, I'd love to hear from each of you in like a minute or so like any thoughts or change in perspectives you had from this conversation? Or things that you'd like the community to take away? Jesse, you want to kick us off?

• 1:09:36Speaker 04

  Sure thing. Yeah, I am pretty excited because I think previously a lot of the protocols are secured by multi-sigs. And you know, whether it's crypto economic security or a security guaranteed by cryptography, I think it's huge step up to like much better security. And I would argue that like Justin said, right? Like crypto economic security plus cryptography are kind of the most comprehensive solution for both deterministic versus non deterministic results that you kind of want to get. And I, you know, like I have, I'm publishing some thoughts on like, you know, a lot of questions regarding restaking, but overall, I think I'm pretty bullish. I think Eigenler realizes the full value of Ethereum, right?

• 1:10:18Speaker 04

  Like the large trust layer is much more explicit than, you know, sort of like discussing staking, providing security to the network. And Eigenler makes that relationship to security much more explicitly, so.

• 1:10:33Speaker 01

  Awesome. Dankrad?

• 1:10:36Speaker 02

  Um, yeah, I mean, I think

• 1:10:40Speaker 02

  the takeaway for me is we need to like,

• 1:10:45Speaker 02

  at the same time, be careful, but also like probably nimble and and see how we how we need to develop both social norms and the protocol in the face of this. And it's a similar situation that we faced a few years ago with MEV and something new is added to our table and we need to handle it.

• 1:11:07Speaker 01

  Thanks, Vitalik.

• 1:11:10Speaker 05

  Yeah, I mean, I think same thoughts as everyone else. Like, I think there is a lot of value in using staked if in other protocols. And I mean, like, I personally, you know, continue to want to see stable coins work like decentralized stable coins have, you know, competitive rates. And so if like that use case can somehow be figured out in particular, then like, that would make me very happy. Though I'm definitely, you know, bullish on other kinds of restaking as well, but you know, at the same time, making sure that staking decentralization, it gets preserved as well as the neutrality of the protocol. It's is super important. So, you know, glad to see that we're all facing the challenge.

• 1:11:54Speaker 01

  Thanks, Justin.

• 1:11:58Speaker 03

  Yeah, I would I would echo with what Vitalik said, especially on the stable coins. One of the ways where restaking can help is to build just much better oracles. So right now, the oracles that we have are basically multi-sigs. So for example, Chainlink, I believe the if you use the oracle is a 21 out of 31 multi-sig.

• 1:12:19Speaker 03

  Can we build an oracle which, you know, reuses to a large extent the economic security of a firm layer one? And I guess another thought that I have is around, you know, maybe the evolving role of researchers. You know, we've been doing crypto economics for a long time, but maybe to an extent, we're going to move to memeto economics. And what I mean by that is that there's there's some things that are, you know, really rooted in in the social layer with humans. You know, there's this whole education thing, but there's there's also the social norms, for example, of not encroaching on the social governance.

• 1:13:05Speaker 03

  You know, the whole post around that Vitalik wrote. And then another kind of question that I've been wondering is, what is the value of decentralization? Because there is one possible scenario, which is that we lose decentralization with restaking, but it doesn't it doesn't actually matter. And maybe decentralization is is only a bootstrapping mechanism to gain credible neutrality.

• 1:13:33Speaker 03

  Up until the point where we basically have technology, we have systems that don't rely so much on decentralization of the operators specifically. We still need decentralization of the nodes. But if the if the operators are basically handcuffed, you know, they can't do censorship because we have inclusion lists. And they can't do any of the other bad stuff. Then then maybe we we only need decentralization for for the memes because it kind of looks good. But once we've won, you know, once Ethereum is a $100 trillion settlement layer for the incentive value. Then then then maybe the value of decentralization goes down a little bit.

• 1:14:19Speaker 01

  Thanks. Srinam, wanna close this off?

• 1:14:23Speaker 06

  Yeah, no, I think we're I'm really glad that we're having these discussions in understanding what the constraints and the contours around systems that that can be kind of built around this are.

• 1:14:37Speaker 06

  I think there are clearly, I think going back to my own theme, which is open innovation. I the there is a tension between open innovation and and security or safety. And one of the things that excites me is finding new things that actually has satisfies both of these things, you know, it's very safe, but it's also like expands the scope of innovation. One of the things that we have like this is the idea that anybody can build new consensus protocols, like arbitrary consensus protocols. But the slashing condition is very simple. It's just, you know, don't double sign. And, you know, on the node, we have like a separate zone, we call an anti slasher, where you check that you've never signed two signatures.

• 1:15:20Speaker 06

  And now you can like, you know, as a node operator, you don't need to kind of trust any of these special like node software that you're adding on. Because the anti slasher is the only thing that you need to trust and it's simple and it is universal across a whole class of applications. Now, anybody can write new like DFT protocols, you know, consensus protocols and you can just like download and run them without even having any program integrity on them because you already checked the slashing contract. It's just a double signing contract and you have an anti-slasher. Maybe this anti-slasher runs inside a trusted execution environment. So even if somebody delegates to you, they have a kind of a sense of assurance that they are never getting slashed. So finding examples like this is what gives me kind of hope that the the set of constraints

• 1:16:05Speaker 06

  and the set of like things that we want to do are not completely intentioned, that there's no use case, no interesting thing that can be done. There's actually a large class of useful and interesting things. And my own interest in actually starting Eigenlayer was because we had new consensus protocols. Now, as long as, you know, we can start enabling other people to start coming up with these new things and and and building it. I think that's already like super interesting.

• 1:16:31Speaker 01

  Amazing. Well, thank you all for coming on. David, do you want to wrap us up?

• 1:16:37David Hoffman?

  Yeah, guys, that was a fantastic conversation. I really enjoyed sitting in on the background for that one. And Tim, thank you for guiding us down this rabbit hole so well. I think this answered a decent number of questions, but also opened up the doors for further questions, further exploration. There's a lot of surface area here for conversation. So hopefully the listeners are routed to the spots that interest them the best and that they can contribute to the most. And Tim, I also want to give you a chance. What are your reflections on this episode that was? What are your what are your thoughts floating around?

• 1:17:09Speaker 01

  Um, I don't have much time to like think through as I'm doing this, but I have about five, six pages of notes from the conversation here. So, you know, I'll get back to you after the show. But I think we should definitely do one of these again in, you know, 12 or 18 months, once we've seen this go into production at scale and some more. Yeah, just more evolution in the space.

• 1:17:33David Hoffman?

  Well, like we like to say on on Bankless, we like to front run the opportunity. And so hopefully this conversation gives us a little preview of what could be in the future when it comes to restaking. Tim, once again, thank you for for guiding this conversation. And Jesse, Justin Vitalik, Sree Ram, Dankrad, thank you for for all being here. The largest panel that we've ever had, that went pretty damn well, I'd say.

• 1:17:52Speaker 05

  Thank you too. Thank you.

• 1:17:55David Hoffman?

  Thank you. You know the deal. Crypto is risky. Staking is risky. Restaking is even more risky. You can lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we are glad you are with us on the Bankless Journey. Thanks a lot.