Bankless - The LRT Episode

Episode Date: February 22, 2024

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 

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 an 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. 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 in each one of the LRT teams that you're going to hear, 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, and there's a prediction in the year

2024, probably in the first half. But diving headfirst into the LRTs might be kind of of a lot. So first we're going to talk to Chunda from Ion Protocol. An 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. 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 interview is maybe 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 Chundit Mekane of Ion Protocol. Chunda, welcome the show. Thank you for having me, David. It's a pleasure to be here. 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. Because 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 can explain a little bit about ion protocol and what it does and how it informs your thinking about the LRT space? 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. because 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 in the birth of D5, 1718 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 in the more stratified context, 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 build an approach from more, like, heuristic data to say, like, okay, how can we assure that these un-and-underbanked people in America gain access to the traditional financial roles that other people have? And so, you know, thinking about those types of things in crypto, kind of emerging, like, defy emerging onto the scene at around the same time, at least set the stage for me to, like, it just immediately clicked. And so for me, I spent, you know, kind of the next, I guess, until now seven years, kind of getting engaged in the space, working from, you know, being a software engineer, like a smart contract engineer.

I like a neobank building out crypto infrastructure there. So working at defy startups to even spending a little bit of time and venture. And it was actually my time in venture. I was working on the blockchain capital team back when we were looking at the Eiglare deal. I think this was late 2020. that I got my first glance into what Iguelair was as a concept. And it just, and me, it was one of those, like, I'd say it's probably like the second most important light bulb moment of my time in crypto,

because the idea of extending the core concept of crypto economic security of ether as an asset, which is basically the whole position why we all use eth as kind of the current status quo settlement layer 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 was kind of a big problem that existed within this context in Defi in particular, which is that we don't really have permitted that internalize all this infrastructure risks that exists in restaking platforms, this idea that instead of underwriting traditional financial leverage or these terms that were more familiar with in D5,

I think you guys kind of mentioned this recently, there is no inherent leverage in restaking. The risk that you're taking on effectively is like there's a bit of game theoretical risk about like Dode operator activity. There's a bit of infrastructure-based risk about like ABS setups and consensus network setups. And then you also have a bit of risk around like the balancing the 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 built high 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 staking positions. without having to kind of depend on the traditional means of financial underwriting that exists with like counterparty AMM liquidity and really deep like dex liquidity and also all these like price oracles 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 that was a super useful explanation i think one of the very interesting things about um eigenlayer and liquid restaking tokens is that at first glance everyone sees eigenlayer and they see the concept of

you take your eat 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 uh 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 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 eigen-Layer matched with, like, okay, but, like, let's contain all of the risks, too. because ultimately at the end of the day, Eigenlayer, like you said, is going to reach out far beyond the horizons of crypto, leveraging crypto economic security, providing new products to like Tradfai, 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-faced nature of like restaking, which is like more risk, more yield, more upside, 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 their 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 LRT? is like what are the inputs that are actually being evaluated?

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. 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 they act in a very similar kind of function.

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 EigenLayer being live. We need to answer a question and make sure that everyone 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 permissionless? How exactly are you choosing these node operators? Who are these node operators? Are they docks?

or they undogged. 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 TEEs 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 ABS delegation, which creates

this is actually interesting thing, which I think we wrote a bit of a paper on it with some folks, I'm sure we can link that later, but what we call it 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 AVS's, 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 AVS's, thereby technically earning more yield, but also finding that balance where you don't over-allocate to AVS. is that take on additional risk.

And so this idea of, like, creating silos of where you're allocating and delegating your risk and diversifying that risk across multiple different ABS delegations is something that we're considering a lot. 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 prolonged. We understand their risks really well. And, you know, as we've seen throughout the history of Ethereum, we can mitigate those risks 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 that. 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 of people building that we're already used to underwriting

and we're already used to kind of assessing within the context of Ethereum and the consensus protocols that exist today. One of the roles that ion protocol will do is it'll have a algorithm, I'm assuming, to actually 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. Or LSTs. Yeah. Or LSTs on, yes, right.

Yeah. Any sort of ETH derivative on one side. And that's bait 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 waiting 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? Yeah, that'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 eigen layer, it has nothing to, has nothing actually to do with eigen layer of the product, but instead on how we are able to observe the product.

Those two things are opacity on data, basically the limitations on being able to see access and view data 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. I feel like there that is kind of 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, one of the things that we want to be one of the pioneers in is we, We built out right now where we built out a ZKML-based framework that ingests Ethereum consensus data.

We use a variety of different data sources, some kind of centralized data provider APIs, some utilizing, you know, building our in-house solution that draws like we can chain data directly. Eventually, we're going to be incorporating inputs via ZKState Proofs to further decentralized and make our inputs more trustless. And we built this ZKMLL framework or Zeronautical Machine Learning Framework, that allows us to analyze what we see as like common potential risk vectors in Ethereum's network in order to be able to kind of necessarily mitigate, but have a better understanding of what kind of volatility could exist on a fixed time basis for slashing on Ethereum.

The extension of that is now that we've built out the system for Ethereum, and like I mentioned before, most consensus protocols are going to fit within this like, kind of like BFT-based consensus model. We plan on extending this kind of framework and, of course, testing it before we really allow robust capital efficiency for allow these ABSs. But testing this framework with other networks as well and benchmarking it based off the initial results we get from Ethereum to be able to see whether we can actually kind of scale these robust data frameworks across ABSs. And ideally, hopefully we can eventually open source these frameworks and allow other people to build their own kind of unique frameworks to assess these different networks as well.

So, tune to doing 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 times, just so 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? 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. And I'll actually split them up into verbal. That'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 each one of these boxes and see which LRT or 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 eigenlare. They're the lifeblood of staking. They're the ones who are running the hardware instances, or AWS instances, depending on the person, that make all of these networks run. Right. And so within the operator framework, you should be asking yourself, who are these operators? How are 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 technical from these operators? Or do the operators control those keys? Well, which is it, right? Asking about operator decentralization, how many operators exist? Are, 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 else going to be a plan for the long run? So that's kind of the operating. framework. 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 any time, right? Or is it the node operator that's access to that? How are you actually able to retrieve the underlying rewards here? 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,

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. And then finally, actually, I have four of these. But finally, the last one for the LRTs, which I think is, I call it like 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

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 TEE 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 TEs, you're able to kind of mitigate slashing risk as well. Those are kind of the two main things, but I'm sure other people will be building really interesting and innovative ways to kind of future-proof staking and restaking the law. 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 Indyfire? Are they prioritizing implementations in L2's bridges? Can you reduce your cost? 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 bad rap for good U.S., I think, you know, is something we should be asking ourselves in prioritizing as well. Although, of course, you know, I put this as one vertical.

I think we should also wait this idea of like safety and security a lot more and just kind of leads you you accept everything. Trinta, I'm so glad that I brought you into this conversation. I think that it 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 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. Trunda here just gave you the frameworks to do your homework with and buy. So thank you, Tunda, for that. Tuna, you talked about some resources. 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? Yeah, 100%. If you want to check us out at Ion Protocol, we post a lot of content about the

this kind of stuff as well as the things we're thinking about internally when it comes of 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 Scholl Research and the guys at BSU Finance. 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

the different solutions that we claim to underwrite these LRTs. We put a couple 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 little random things about Ethereum for Impressed stuff and, you know, how they may have implications on staking and restaking. feel free to follow me just to at Chuna Bucane on Twitter. You can check everything out there. Beautiful, Chudel. We'll get all those links and your Twitter into the show notes.

Thank you so much for all this knowledge. Yeah, appreciate the invite, man. Yeah, sure. All right, thanks so much, Chunda. Now, let's go ahead and get into all of the different LRTs. But first, I'm going to talk about some of these fantastic sponsors that make this show possible, especially Cracken, our preferred crypto exchange in 2024.

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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. 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

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and I'm excited to help revolutionize the restaking universe. 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 to come from and how did you end up building Etherfi? Etheri actually started as a fund, an ethestaking 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 EtherFite 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. How did the team come together? Who are your co-founders? What does the company look like? The core team consists of myself, Rock, Joseph, and Rupert. I founded the team, and the CEO. Rupert is our head of engineering. Joseph's our C-O-O-O-N-Roc is our head of revenue.

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. 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 proof of stake on Ethereum. Was it always meant to be an LRT that would also allow users to deposit or as an LRT for like just increasing the yields of the funds, Ether?

Or has the North Star always been the same? 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 wanted to do that again in Ethereum rather than running a fund. 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? 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 in 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 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 then includes us, includes SLO, includes SLO, includes Renzo, which are really awesome teams that we think are building cool things in space. Let's unpack those one by one. Let's start with that first one, the one where node operators retain their own keys.

Can you just unpack that a little bit? Kind of explain like I'm five what that means. 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.

You need that validator key that the 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 ETHI, Stakers act as bondholders and generate the key. and there's an economic incentive mechanism to make sure you get your eith back. So when you go to Etherify and request the withdrawal,

if your withdrawal is not honored, somebody's eth gets slashed. And so that basically, it means it very likely that you're going to get your, your ETH back. 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 forward delegated staking. 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 LSTI because we think all LSTEs eventually are going to have restaking baked in.

Beautiful. Okay. So this, I'm guessing this implies that individuals can become node operators with ether. 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-eath bond and DVT managed keys, be able to spin up a validator, run it, and generate an income. Beautiful. Okay, leveraging DVT. What are the collateral requirements? Is there collateral in this system? Yeah, so there's a two-eath bond requirement for anybody that runs a validator in order to have one shard of the validator cluster. One of unique thing about etherfi is you guys are incubating an AVS. Is that correct? And can you tell me more? 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 that 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 for it right here. It's called Dapbridge, and it is a decentralized RPC service, similar to like a pocket network,

but built on restaking on eigenlayer. 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 months after that. Okay. So how does a decentralized RPC leverage Ethereum security to improve its product? So every Ethereum node in the world has an RPC endpoint. That's just how the protocol works.

An RPC endpoint is basically just a way to talk to the Ethereum node and get 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. Okay. So Etherfi was built to be an LRT from the ground up from day one. You guys had your 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 set up, which allows for more permission. Stakers have their own keys,

which allows for just more permissionlessness and staker sovereignty in the system. And you guys have your own AVS that you guys are incubating internally. What else would you add to this report card? 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 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 wealth so that it can't be taken away from them. And so we're super Ethereum aligned. You know, we're giving 1% to the Protocol Guild, which is the team that builds the Ethereum protocol, 1% of our token supply. We've got, you know, Sassel 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 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 trying to make the right decisions for the long term. So Etherfi is coming in at approaching $700 million ether deposited into your guys' contracts, that we're placing it as number one in the LRT race. To what do you credit the reason why EtherFi is currently the number one

attracted capital. 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 timing. I think, I'd 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 defy protocols than anybody else. We're starting to deploy on layer two's and, you know, a bunch of other areas that make the token ultimately more useful for users. Is there something in Etherfi's future roadmap item that is exciting that users might be interested in? So the thing that I'm most excited about 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 air, as we have already announced it. So we're working with some pretty awesome investors that we're really excited about. And then 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 launch. And we hope that it ultimately ends up helping the ecosystem. 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? Just go to ether.5. Ether.5 and then you could, you know, hang out. You can stake your eth. You can check out our Discord, whatever you want. Awesome. Thanks, Mike. Bank this station. I'm super excited to introduce you to Amir from Puffer. Amir, welcome to the show.

Thank you, David. Thank you so much for having me. 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. Absolutely. Well, I'm the CEO at Puffer Labs where we're building the entire Puffer ecosystem. And how did Puffer come to be? Where did Puffer come from? 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 comfort.

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. This was back in the day where actually all the talks were about Lido and Rocket Pool, 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 Shiream to enable restaking. So both validators and stakers can now generate more rewards. This opened the window for us to actually do specialized AVSES 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. 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?

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 it in Puffer? The easiest way to explain this with Justin Drake is a very good at explaining this is you can think of it as a 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 TE, but also we protected 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. If that signature is going to produce a slashable message, basically this anti-slashers says rejects it. that's where it becomes an anti-slisher and that's how TEEs working buffer. Okay, so I've defined the LRT game as a competition to maximize exposure to AVS's 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 like delineate between the types of slashing events that TE, leveraging TE protects against and what class of slashing events it does not? 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 re-staking and staking works on buffer. Just please go to docks.puffer.5. 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 these like more future roadmap and future steps. If an operator would like to break the trust boundaries of this TE, 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. But really this anti-slasher prevents all slashing on Ethereum L1. Preventing all slashing is like, that's a really big statement. Is it really that big? Is it really that like rock solid?

It is because really it is so hard. The concept of slashing is so easy defined on Ethereum proof of stake. 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 MEP by causing a reorg, or it's been just a mistake by big node operators. 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. really mitigates these all existing risks from mistakes. Really, it's something to protect against all the mistakes. There is a mystery and demystification here. If someone turns off their hardware and don't commit to attestation or proposing blocks, they do not get slashed.

They're just going to miss rewards and have a very small penalty. And I think this is very important. Okay, so we talked about TE as like 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 near-term roadmap, the plan for action? Like, what does the near-term look like for Puffer? What's the plan here?

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 introduced 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-7,0002. This is going to enforce a smart contract ejection off validators on Ethereum from execution later. This is good because especially in liquid staking platforms, if a trustless, 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 hardware and lock 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, it means the E that is protecting these AVS is also more protected.

If, like, a big challenge in native restaking today is, if there is an AVS-level slashing happens on Agin 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 eigenpipe 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 reestaking. One of them being that the node operators also can take advantage of the rewards, If any other protocol just turns on LSD 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 the other. native restaking, also a quick advantage is the advantages of restaking that can be brought to Ethereum Mainnet itself, including Mebos Plus, including base roll-ups that I know Justin talked about in the previous episode as well, and many other features that are not enabled without restaking on the Ethereum mainland itself. We save your 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 eat stake. And also, all these researches we're doing is aiming to keep decentralization

runway to Ethereum maintenance. Amir, you alluded to it a little bit, but I want to go into it a little bit more. Again, going back to 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. So you go get the rewards being paid out by the AVS networks. This is kind of why we're all doing this. This is really what everyone's excited about. How does Puffer and leveraging TEE? Can

TEE enable like relationships with AVS's that some sort of LRT without TEE could not access? Like how can how can this become like a service for AVS's? Absolutely. The first, the first and the foremost easiest way that the TE 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 and Ethereum to restaking. And it's very simple to use TE on top of middleware, 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, TE comes into play to play the similar role that it plays on the consensus layer, 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 AVU,

as an anti-slasher to all the other AVS's. 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 TEEs. If we want to bring AI, confidential AI, Something that I think WorldCoin 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. 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 PuffEath. 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. Absolutely.

To actually help reduce the dominance of one LSD player, we actually try to just focus on STE at this part of this campaign. Users actually get puffied in return where they can use it on D5 platforms, it's liquid. This campaign showed even if Agenleer is on Mainnet, people are ready for restaking. So yes, once we are going on Mainnet, we're going to redeem all these SteedE's from Lido. This actually today translate to almost 3.5% of existing STE, which is going to significantly actually help for the decentralization of the protocol.

On top of that, once we go on Mainnet to Puffith holders, there is no differences. They keep their Puffet. Only the rewards that is generated for them is now from Puffer, permissionless decentralized validators. We are aiming to go on Mainnet completely fully permission. less. Today we are on TestNet with our permissionless notes. We are opening the test not to public very soon, actually. I think this is going to be another very big milestone where people

can see, oh, wow, I can spin up a one-eat 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. They can spin up one-Eth notes. Moving forward, we're sprinting to mainnet. We're going to have main-net. On that layer, also,

we're going to natively restate the ETH on existing eigen-layer, agenpods. In parallel, we're going to work with existing A-VAS, and we're going to implement our own A-VAS as well. Another exciting part that I spoke about was this all-existing infrastructure turning into eigen-layer 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 going to generate fees. Since the security provided to this L2 is from the PuffEath holders, PuffEath holders are going to 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 they're essentially, this L2 is going to be a marketing,

create this marketplace for these validator tickets. But an L2 cannot just be standalone by itself. NL2 needs an Oracle. An L2 needs a bridge. All of these infrastructure today, there are many companies that run these as AVSSs. They can be deployed on top of Puffer, and we can create this infrastructure super dab, where they all feed back to the Puffield holder as extra revenue and also the node operators. That's on our roadmap, and that's like actually coming probably the second half of this year. Okay, so a layer two from Puffer leveraging TEE and being infrastructure for AVAS is a massive rabbit hole that sadly we don't have enough time to go into. But if people want to learn more about that and just learn more about Puffer, where can they go?

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. with a deep dive of how we're staking and staking works on puffer. Just please go to docks.puffer.5. 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 these like more future roadmap and future steps. Beautiful. Amir, thank you so much.

Thank you, David. Bankless Nation, I am here with Amit Gajila from Kelpdow. Amit, welcome to the show. Thanks, thanks, David, for having me here. Talk to us a little bit about your background. Where do you come from and how did you start Kelpdao? Yeah, I'm originally from Bangalore, India. I used to work at a consulting, strategy consulting firm here

and then had a 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 $4.50 million in TVL. And early 2020, we also started this new protocol called Kelpdaub, which is a liquid-staking platform. 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 are applying those lessons at Kelp. For 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 UST 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 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 UST collapse. 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. Okay, so Stater and ETHX is your staked ETH token. Talk about just like the growth of Stater because eventually this, like I said, we'll kind of like fold into Kelpdow. Talk about just like the experiences of growing stater and just like learning to build an LST. Numerous experiences there. We have learned it the hard way and understood what are the major competitive modes for

an LST and obviously drawing those lessons to KelpDAW 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, the largest hardware wallets like like ledger wallets like Metamask, etc, where status 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.

For example, we have deep integrations with AVE compound and several other DFI protocols of the world where people find real use cases as opposed to Ponzi schemes where people go collateralize their LSTs while earning those statements. 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 goes on Ethereum and obviously carry those forward to Kelpddddh as well. Right. Okay. So there is a relationship between Stater and Kelp and Stater, the LST, of course, has Ether. 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 DFI. And this is something that you've sharpened your teeth

with with ether with ETHX and Stater, just like getting ETHX into like 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 DFI application. for LRT tokens. Eventually, we will all need these things. What you're saying, Stater's done this game before. And so you're going to have to,

you're going to just take the same playbook that you've developed at Stater. You're going to apply at Kelpdow. That's probably, I'm assuming, where this goes. Is that right? 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 ease, but the learnings are similar. Talk about the relationship between Stater and Kelpdau. Like, how did that whole thing work out?

What is the relationship there? The relationship is very simple. Just the founders are common, and Stader is one of the seed investors in Kelptow. Apart from that, everything else is different. And one tactical relation is Stater's Ethics is accepted as one of the deposit assets on Kelptown.

Okay, so founders are common, experiences are common. Is there like an ongoing relationship, or are these two things going to come together or diverge? They're going to be completely different. Kelp Dow, as you probably know, AXIPS, three different LSTs today, LIDO's STE, FRAX, as well as TADA's, ETH. 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.

Okay. All right. So let's get into more Kelptel-Specific subjects. What would you say are the strengths of Kelpdow? How does it stand out from the many different LRT teams out there? What's your guys is like strategy? Yeah. It's a very interesting question and useful question in the current context of the competitive

environment. So some of the, like based on our experience, so far. The biggest focus areas or strategies that we will employ with Kelpdav is one creating access for restaking. 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 10, 20, maybe 30 billion dollars, right? 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's, is where we can attract capital in the right way and also the right set of capital that is

more stickier than some of the mercenary capital out there. So that's one most important strategy. The second critical strategy for us is going to be having majority of the defy integrations, which is where we are really bridging the nexus between restaking and defy. Today, both of them compete with each other for the same amount of Ethereum or capital. So the the PMF for us for KelpTau is going to be when there is real utility created for KelpDAO's RSETH among some of the largest DFI platform so that people can actually borrow using RSEAT or people could participate in PIRPS using RSEAT, collateralize it for some of the use case. So that is where we believe we have solved a real user problem.

So those are the two most important competitive modes in the long run and also that is where we'll spend disproportionate time and efforts. Okay, so the strategy here is that if you want to restake with kelpdow, one of the main benefits is that you will also be able to take your kelpd out eth and then take that capital and put it back into defy and do the thing you were already doing with your eth and defy just now with the kelpdow east. Is that kind of the idea? Yep, of course. And what is the kelpdow eth token?

It's called R-S-Eth. restaked eth okay so in terms of like a brand perspective like just having restaked eith i actually think is like pretty valuable like lido has steaked eth like easy and so you guys have r s 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 east we have r s eth yeah that's that was that was very easy to come up with in hindsight mm-hmm okay beautiful uh talk Talk about a little bit under the hood of Kelpdow. Who is doing the validating nodes?

Like who is actually running the hardware or doing the actual like ETH layer one like validation? Is there native resaking? Talk about the Kelpdow system under the hood. Absolutely. So just zooming out about the Kelpthau's product today. So far we have been primarily accepting LSTs as deposit assets on Kelpdal. So there is no validators yet that are live on Eiger layer. that take LSTs and validate.

But soon, which is probably in two to three days, we are also launching native restaking on Kelptow. Okay, so that means it's out by the time this episode is released. So this is now a live product. Yeah, absolutely. So we will have native restaking live, and we're talking to some of the top validators and going to onboard them.

Okay, are you able to share who you're talking to? It's still confidential. Okay. What about just like anyone entering into CalPDAO with their validator? Are you going to be able to open this up or what's the strategy around there? That's a very interesting question. For context, Stader allows any type of node operator to actually participate in validating nodes with just 40th worth of capital. That is the permissionless way of operating validators.

So we do have permission. We do have the opportunity to allow permissionless validators to take part Kelplau. But the constraint that we face today is we do not know the slashing and penalty restrictions that some of these Aveses 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 to allow anybody because that means we're putting users capital at risk. Like we said, by the time this episode goes, out, Kelptow will have announced native restaking. What is on the near-term roadmap that is worth

highlighting? Yeah. So there are a few 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 L2s, working with a couple of partners there who can offer native restaking for Kelpta on L2s directly so users don't have to bridge their assets back to main net and restake. This is first of its kind, and I think it is going to save a lot of gas fees and effort for users. So L2 expansion is the most important thing that we're focusing on, apart from creating DFI opportunities. We already have over $15 million in LP pools across four decks is soon getting to $40 million, and then that opens up a lot of lending market integrations and CDP protocol integrations that users can access.

Those are the two things. And then apart from that, obviously, under the same theme of access, working with Leisure and several other wallet partners to have restaking right where users are using their platforms. Okay. So just taking that same relationship that you built at Stater, instead of, hey, stake with Stater via ledger, you are saying, hey, restake with Kelp via Ledger, is a partnership that is underway. Yep, yep, absolutely. And the third most important thing that we are focusing on is actually creating some interesting products and use cases for AVSSs because those, so the AVASS 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 AVSs on some of their requirements. Like some AVS has won triple staking.

They want to stake their governance token user as security and their part. governance token, use that as security along with IGLEA security. So all of these interesting use cases are coming up during our conversations and learnings with the ABSS. So focusing on that and soon we'll probably see some interesting products coming out of that stream as well. Beautiful. Ama, if people are peaked about Kelp Dow and they want to learn more, where should they go? So they should just simply log into Kelpdau.XYZ. you can find all information about KelpDAO smart contracts are security, which is the most important thing, along with option to stake or restake your assets.

Beautiful. Where do the name kelp come from? Kelp is this algae that powers this entire underwater ecosystem. And we believe restaking is going to be such ecosystem, which is rich and supports a lot of taps and applications. So hence the name Kel. We want the RSEs token to kind of nurture the entire ecosystem. Beautiful. Love it. Amit, thank you so much.

Mantle, formerly known as BitDAO, is the first Dow-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 Dow-owned treasuries,

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that help expand, secure, and decentralize Mantle. If you want to get started working with the first Dow-led layer 2 ecosystem, check out Mantle at mantle.xyZ and follow them on Twitter at ZeroX Mantle. SELO is the mobile-first EVM-compatible carbon-negative blockchain built for the real world. Driving real-world use cases like mobile payments and mobile defy. And with Opera MiniPay as one of the fastest growing Web3 wallets, Sello is seeing a meteoric rise with over 300 million transactions and 1.5 million monthly active addresses.

And now Sello is looking to come home to Ethereum as a layer two. 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 Sello is a community-governed protocol. This means that Sello needs you to weigh in and make your voice heard.

Join the conversation in the cello forums. Follow Sello on Twitter and visit sello.org to shape the future of Ethereum. Arbitrum is the leading Ethereum scaling solution that is home to hundreds of decentralized applications. Arbitrum's technology allows you to interact with Ethereum at scale with low fees and faster transactions. Arbitrum has the leading defy 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's secure scaling technology to build your own orbit chain, giving you access to interoperable, customizable permissions with dedicated throughput. Whether you are 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. Visit arbitram.io and get your journey started in one of the largest Ethereum communities. Bankless Station, we are here with Daniel from Swell.

Daniel, welcome to the show. Great to be here. Thanks for opportunity, David. 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 LR. T's. Yeah, absolutely. Yeah, so just a quick background on myself. My name's Daniel. I'm the founder as well. 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 year, sort of Ethereum my CEO, went into sort of a reading of Austria economics trying to understand central banking. And one thing led to another and then into Bitcoin into Ethereum and then into defy. 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 DFI to the next level to have a yield-bearing instrument backed by a theory of sort of consensus mechanism and then, yeah,

put together a seed round and then was up and away from there. and then we launched our LST in early 2023, and then basically saw some good tracks from there, got up to about 100 million in TVL, and then saw the writing on the wall when reading the eigen layer white paper and seeing that, look, what the LSTs did for DFI,

the LRTs are going to do in a much bigger way. If the mental model is sort of like you have this yield-bearing instrument powering DFI as a base layer asset, well, the LRT is sort of like a double-edged, plus yield bearing instrument powered by this new sort of ecosystem of upcoming aBS as an eigenlayer. And then it made sense for Swel then to really triple down on that. Yeah, 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

in 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. Yeah, absolutely. I'd say like generally speaking, we're still sort of earlyish in the like evolution of LRTs generally. I think that LRT design will continue to shake out as I can layer moves through its various stages in this roadmap with stage two, stage three or M-TM-3 respectively. And so far as like swell is concerned, one of the biggest integrations from the LSTT

perspective was always to get the LSTECEDAXT accepted as restaking collateral on eigenlayer. So that was a big unlock for us when Igen layer did decide to expand its universe of LSTICLs to be accepted. And then throughout that entire time, we were building a very strong community that was passionate, not only about liquid staking, 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 Igelayer points too. And then we recently launched about two weeks ago our own native LRT called Arsweeth.

Arsweath is effectively a mechanism for people to get uncared. exposure to eigen layer points in a way that's has the underlying validators natively restate. So this is the current sort of state of affairs at the moment with Swell. We're currently undergoing the development of R-Suite B2. And what R-Suite v2 will enable is not only the acceptance of native beat at the underlying, but also LSTs such as SWETH, and that will sort of be a really important step to us eventually hoping to unify some meaningful percentage of restate liquidity on eigenlayer for utilization in DFI with maximum composability. an optionality for restakers.

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? Exactly right. 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? 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 D5, 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, DFI, and then everything on eigenlayer. So we have the beacon chain and DFI ready to go. And I think everyone's sort of starting at the similar point in. time as regards Eignerlayer trying to figure out okay how does this thing actually work where where the risks where the like how does the rewards work and where's the opportunities and how

does one best position themselves to win the market 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've really focused in on as regards our design for an LIT protocol the first thing is really advocating for an ecosystem first approach. So Swells effectively created a liquid restaking council that comprises some of the best operators and most promising ABSs on Aegean layer.

So we have folks like Altlayer there, Witness Chain, Imstones, PTA, 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 will be purpose built for those ecosystem actors within Agenlayer, because it's all about trying to match up across the opt-in mechanism between resakers operators and AVSers. 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 Agin Labs team directly

and also with various risk experts, including chaos and gauntlet, as regards things like ABS selection, pricing, underwriting and these sorts of things. so that we're going in with 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 integrate some of this stuff. So looking at, okay, not only what like what's an LRT, ultimately it's a liquidification of restakers. liquidity, but then what else can you do on top of that? Could you create things like a sort of a proof of restake, L2 restake roll up and then pass through the revenues to the LRT, like these

sorts of things that were sort of constantly ideated on, which is like really a part of like this well core contributor DNA is to think about these sorts of things. 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 ABSs, 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 sort of strategy or plan around this? Yeah, yeah. I think generally speaking, 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 ABSs as well, and then being able to feed into these models and then applying governance and interventions where necessary, particularly in the nascent stages of the technology, much in the similar way that Eiglain has approached it with their committees, with their multi-sigs, with their step through in terms of sort of opening up gradually through guarded launch liquidity, getting battle tested audits and these sorts of things. So yeah, it's definitely multifaceted approach as regards

risk. What are you guys are working on right now? Like what is on the near-term roadmap for Swel? And then just overall, what would you say in the Swell community are people excited about? Yeah, definitely. I think the key 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 Dow operations, which will come part of the token being live. We've got a flow with defy 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. Surprise. Yeah. So I want to make that as successful as possible. And yeah, just keep growing the protocol and keep providing as best as we can, a really seamless and easy to use re-s soaking experience. Since Swell, you guys have been around for a while because, again, you guys did the LST before even, like, resaking 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, Swellian, Swellers? Swellers, yeah. And so, like, talk about the growth of the Swell community. What's the vibe of Swell culture? Yeah, I think the, The vibe of swell culture is, I think a lot of people wanted to restaking it early.

And we tell them, look, we can't get it in the first one. We didn't make it to the first white list, but we'll be there for the second one. So I think the swell community is really invested in restaking. I think they're really invested in defy. I think we have quite a crypto native and defy savvy user base. We've got circa, you know, 100,000 stakers or unique depositors at the moment. Even if you were to sort of like take out some of the potential like gaming or sibling, I think it's still a very strong community.

So, yeah, I think people are really excited about resaking, to be honest. Beautiful. If people want to go and open up like the technical documents or just read a higher level landscape about swell, where should they go? Yeah, they just go to our website, swarm network.io, and then, yeah, just jump into the docs section. 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.

What about you, Daniel? Where can they follow you? So yeah, you could just follow me on Twitter. My handles Daniel underscore Swell underscore. Beautiful. And we'll get all those links in the show notes. Daniel, thank you so much. Thank you so much, David.

I appreciate your time. Bankless Nation, I'm here with Lucas Kaczynski of Renzo. Lucas, welcome to the show. David, thanks for having us excited to talk about Renzo and what we're up to. 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 quick crypto background? 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 ABS 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. Beautiful. And how did the team come together? Who did this team form? Who were the other founders and team members?

Yeah. So the contributing founders to Renzo, we all know each other. So there's three of us, James and Crockick. I was a portfolio company for Crockett. when he was at a fund name Woodstock, and James previously co-founded Tokensoft. So when I worked at Tokensoft for two years, I reported directly to Hens.

So what you essentially have is three founding contributors that have a technical background, heavy research, quant background, and a growth operations background across the crypto space for the last six, seven years. Beautiful. Let's go into a little bit of that realization that you had about just the aligning and the incentives between the users, the liquidity, and the ABSs. I really like that as an entrance point.

Let's just keep going down that conversation. Shed a little bit more light about just like the problem that you identified and wanted to help tackle. Yeah. So when you look at eigenlayer and you take a step back, there's a lot of noise right now, round 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 there's services that other projects are going to be using, mostly roll-ups. 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 roll-ups. those roll-ups are going to use ABSs and they need security. And that security has to come from somewhere.

And there's a lot of complications, not complications, but complexity built into eigenlayer because it's a marketplace. It's a free marketplace. To attract those users and make it very simple for them to have on an 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 roll-ups to use them. But roll-ups, so we're talking like arbitram, optimism, Bates.

The same services that are being used in adding value, it's actually second liquidity out of those ecosystems. So Renzo is positioned in the way where we're actually. aligned incentives with those roll-ups, L2s and L-1s, and the AVS is 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 use them as collateral to have one LRT. 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 B&B. So in a few weeks here, B&B users are actually going to be able to come to Renzo on B&B chain, deposit B.Eath. 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, get easy ETH back, and the TVL stays on that chain, and that same TVL is securing the same services that EGN layer is essentially offering to roll-ups. Okay, I really like this. So we have capital on these roll-ups, mainly eth, usually eth, stem stables too, but ignoring the stables. And what you're saying is that if you, you can either put your eth in eigen-layer or you can put it on the layer two. And so right now, there's a tension here because any capital that goes into eigen-layer is pulling away from liquidity in defy. And so Renzo is trying to actually complete the circuit. And so when you put it into the,

specifically the Renzo LRT, then actually that capital gets immediately returned back to the ecosystem in the layer two. Is this, are you natively minting Easy ETH? Easy ETH is Renzo's liquid restaked token. So this is your guys' particular one. Is EZ, Eith natively minted on each of these layer twos? Or how does that actual flow, how does it actually flow back to the layer two? Yeah.

So you're spot on. We're trying to close this loop because what's happened. right now that TVL has to get bridge back to Mainnet and the roll-ups are losing their TVL. Their users want access to eigenlayers, so we are going to provide that. Easy-Eath will be natively minted on each of these L-2s. 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. So that's like a Mantle, Eth, for example.

Is that kind of what you're alluding to? Exactly. So like if you look at Mantle, M.Eath could get deposited into Renzo on Mantle. You get easy Eith back on Mantle. But if they also have native Eath, you could also put that into Renzo and you still get easy Eith back. And the reason that's really important, 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 defy properly, you need to have deep liquidity on dexas. The more tokens that you have, LRTs, kind of representing it, you're fragmenting it and the user experience becomes really bad.

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 the better um experience that users have being able to use that uh asset okay so the strategy here from renzo is you guys are just using layered twos is like your top of capital funnel into the renzo liquid restaking protocol um is that uh is are there any other tricks of your guys at sleeve or is that the main differentiator or like what else would you like to bring onto the table here yeah so uh we're starting off with main net. So today you could go Bouncer, UniV3, 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. Igen layer, 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 Igan layer DA and eigenlayer Mainnet comes a little bit closer. All the frenzy right now is on points and these defy integrations, but where our team is actually focused. 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 ABSs are going to be captured. And what we mean by that is, it's a huge coordination effort between operators and AVS's to safely and efficiently be able to get capital

and then return those rewards that are getting generated by AVS's back to the users. And that sounds very simple, but there's quite a bit of complexity that's built in there. 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 ABSs because you're going to have new ABSs 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 the cold star problem. So what are they going to do? They're going to incentivize an either point or their native token.

So thinking about these things and making sure that you have a protocol that not only accepts native ETH, but is also able to collect ERC 20 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 Renz-up. Beautiful, beautiful. Okay, Lucas, what is near term on the roadmap that you want to highlight? What is getting users excited about Renzo? 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 B&B 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 bring in 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 do that, we also have to take into consideration how risk is managed on the protocol. One last question before we tie this off here. What about becoming a validator in the Renzo system? Is this closed?

Is it open? What is the future of that look like? 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 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 we'll decentralize as things become more easier and less risky. Sure.

Beautiful. Lucas, if people are peaked about Renzo, where should listeners go to find out more? 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 EasyEath. Beautiful. Awesome. All those links will be available in the showdowns.

Lucas, thank you so much for joining me. Thanks, David, for having us.