jakiro
The concept of Restaking is closely related to the sharing of distributed network security.DAO researcher Jane, Gimmy, started from her curiosity about Babylon/BTC Restaking, and then accidentally jumped into the rabbit hole of a long discussion on underlying consensus mechanisms such as PoW and PoS, and then clarified the core idea of ”safety rental” and fromThe first principle considers the existence significance of AVS, and finally explores some feasible ways for Web3 project parties to combine Restaking.
Restaking is undoubtedly one of the most important topics in the Web3 field at present.After Ethereum’s consensus mechanism smoothly transitioned from Proof-of-Work (PoW) to Proof-of-Stack (PoS), in addition to solving the problem of long-term inflation of ETH tokens, it has given it (In addition to the brand new native staking function, the possibility of restaking is also enabled through Liquidity Staking protocols such as Lido, Rocket Pool, Frax Finance.
The essence of re-pled is to use liquid assets such as LST to provide security guarantees to other AVSs to obtain corresponding returns, which can be regarded as a secure rental service.However, in the context of Bitcoin, the current definition of nouns is relatively chaotic. The often referred to as “re-staking” refers to the use of Bitcoin as the staking asset (BTC as the staking asset).For the sake of simplicity and clarity, the following is a unified call of “bitcoin as a pledged asset” practice. On this basis, it is assumed that the already pledged Bitcoin can be technically taken away again.Only when pledge is the so-called BTC Restaking (there are no good cases or usage scenarios yet, we will also prove the rationality of this matter).
The origin of BTC Staking
Both PoW and PoS are a consensus protocol, and the purpose is to maintain synchronization between distributed nodes (Nodes).The way to keep synchronized is to select a node, whichever node is the basis.The method of selection is like a lottery draw, and the weight is represented by a scarce resource. In the case of PoW, the scarce resource is computing power (hash rate) and the physical energy represented by the behind it; in the case of PoS, thisScarce resources are capital.
There have been countless debates in history about which of the two are better (https://www.youtube.com/watch?v=8-_CuPtzoDU&feature=youtu.be).PoW can guarantee liveness in extreme cases, but at the cost of only obtaining probabilistic finality; PoS, on the contrary, can obtain economic finality, but cannot obtain usability.Assure.The choice between the two is more about the choice between these two characteristics, rather than being easily used as environmental protection and energy consumption for marketing.
Even in the long run, Bitcoin has the potential to be unsustainable due to the continuous halving of token rewards from miners’ economic incentives, so it may be necessary to iterate towards relatively sustainable models such as PoS at the consensus mechanism level.But in short-term practical operation, PoW and PoS are not opposite systems. For example, Bitcoin can be used as a pledge asset to introduce the concept of PoS pledge in the PoW ecosystem.From the perspective of Bitcoin holders, BTC Staking has created a new use scenario for it; from the perspective of PoS chain rental security, Bitcoin can be used as a supplementary alternative to when pledged assets are insufficient (temporarily) or are expensive..
Choice of two paths
To implement BTC staking, there are two mainstream methods at present:
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Bridge: First bridge Bitcoin to a PoS chain that can support smart contracts, and then use this “bridged version of Bitcoin” as a pledged asset. This is an intuitive and relatively simple approach.
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Remote staking: Keep Bitcoin on the main website of Bitcoin and staking it on other PoS chains remotely. The core of this method is that when a node does evil, the PoS chain must have the ability to use it on the main website of Bitcoin.Bitcoin performs instant, permissionless, trustless confiscation (Slash), and how to achieve confiscation in the current original performance of Bitcoin is an extremely challenging engineering task.
Let’s use Bouncebit and Babylon as examples to explore the specific solutions.
Bridge to PoS chain – BounceBit
Most of the current solutions to Bitcoin L2 are to first transfer the native Bitcoin to other PoS chains through bridges or maps.For example, Stacks uses the mechanism of Proof of transfer (PoX) to package Bitcoin into sBTC; CoreDAO uses a multi-signature bridge to package Bitcoin into coreBTC; B² Network uses a bridge to package Bitcoin into B² BTC; BounceBit uses a bridge to package Bitcoin into B² BTC;BBTC.
These methods are similar, and the difference lies in the degree of trust in the bridge: some use less multi-sign, some use more multi-sign, some use random multi-sign, etc., and some use mapping, but new trust assumptions are still needed.
bouncebit doc
Taking BounceBit as an example, referring to the above architecture diagram, users can deposit Bitcoin through BounceBit Protocol. Then BounceBit Protocol will retain the assets deposited by the user in a multi-party computing (MPC) custody account.(And will not leave), and then give the user BBTC (BounceBit BTC) as a deposit certificate on the EVM-compatible chain BounceBit Chain in a 1:1 form.Then there will be the familiar usage scenarios such as pledge, re-pled, and DeFi.This method of not facing technical difficulties directly, but borrowing the public’s trust in MPC account management is an efficient and pragmatic strategy.The specific operation method and details can be found in this previous article (https://medium.com/@BuidlerDAO/Binance-megadrop-first project-bouncebit-can it become-btc-ecological-ethena-3939a0ff4dda).
Remote staking —— Babylon
Simple mapping and bridges will not be the ideal way to stake.Simple mapping does not have the ability of PoS chain to punish Bitcoin on the main Bitcoin network, which seems to be impossible to even call the PoS mechanism; because the main Bitcoin network does not have a native smart contract layer, it is difficult to build it.It can be called a secure bridge in various senses, and additional trust in third parties is required.
For Bitcoin holders, the first thing is to ensure the security of Bitcoin assets first, and the second is to consider the benefits that can be obtained.When the Bitcoin Bridge cannot achieve enough trust, placing assets on the Bitcoin main network is a prerequisite.
For PoS chains that want to rent security, the core lies in how to have an instant, effective, trust-free and Slash Mechanism for assets on the main Bitcoin network.Under the conditions where both sides have Turing-complete smart contract layers, it is not difficult to have a penalty and confiscation mechanism.For example, between Ethereum and AVS, you can pass through Eigenlayer’s Modular Dual Staking, or between Cosmos Hub and Cosmos Zone, you can pass through Mesh Security.
Under the current Bitcoin restrictions, from credible neutrality:https://nakamoto.com/credible-neutrality/) Considering this, Babylon proposed a solution that seems to be the best technical level right now.
How does Babylon work?
The key to the establishment of the pledge mechanism is that there is a trustless and effective penalty and confiscation mechanism.To achieve BTC staking, we can split it into the following small goals:
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Bitcoin needs to stay on the Bitcoin main network for pledge.
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There is a mechanism to determine whether a node has committed evil.
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Without doing evil, the pledger can retrieve his assets and pledge rewards without permission after the Unbonding Period.
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In the case of evil, the PoS chain must be able to fine Bitcoin on the Bitcoin main network without permission during the unbinding period.
In order to allow Bitcoin to stay on the Bitcoin main network for remote staking, the necessary condition is that two-way instant communication can be conducted between the Bitcoin main network and the PoS chain.Babylon’s approach is to design a three-layer structure, allowing Babylon Chain to act as a bridge for communication between the two. After all, it is hard to imagine that a large amount of information on the PoS chain can be directly transmitted to the Bitcoin main network without compression and processing.
https://docs.babylonchain.io/docs/introduction/architecture
Specifically, Babylon Chain will communicate with the two chains in two directions. On the other end of the PoS chain, they use IBC Relayer to communicate; on the other end of the Bitcoin main network, they use Vigilante Reporter to send messages from the Bitcoin main network toBabylon Chain, use Vigilante Submitter to pass messages from Babylon Chain to the Bitcoin main network, use Checkpointing Monitor to supervise the correct two-way messages, use BTC Staker to record pledge-related information, and use BTC Staking Monitor to deal with confiscation-related issues.
There are two mainstream approaches to the PoS mechanism’s judgment on evil deeds:
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In the Casper consensus mechanism used by Ethereum (https://medium.com/taipei-ethereum-meetup/intro-to-casper-ffg-and-eth-2-0-95705e9304d6), there are two types of fines: a1) Sign two different blocks at the same block height, a2) Nodes cannot vote with a height around another voting height. For more detailed information, please refer to this articlearticle.
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In the CometBFT consensus engine used by Cosmos (https://medium.com/r?url=https%3A%2F%2Fdocs.cometbft.com%2F), there are two kinds of fines: b1) at the same block height, two different blocks are signed, b2) the nodes carry out a forgetful attack (Amnesia Attackhttps://docs.cometbft.com/main/spec/light-client/accountability/#flip-flopping-amnesia-based-attacks).
Regarding a1 and b1, Babylon introduced EOTS (Extractable One-Time Signatures) to solve it.The nodes on Babylon Chain use EOTS to sign seals (that is, vote). Its characteristic is that when two transactions are signed with the same private key, the private key will be automatically exposed.In other words, anyone can use the information of those two transactions to return the signer’s private key.This can solve the problem of “signing two different blocks at the same block height”.(accountable assertions)
Regarding a2 and b2, since there is no good equivalent solution, Babylon introduced an “extra consensus round using EOTS” based on the original CometBFT consensus mechanism, which is the so-called “Finality Round”, which can be understood as,The node votes first, and after reaching the basic consensus basis, find another group of nodes (Finality Provider) to vote for an additional vote to confirm this consensus again. The condition for reaching the consensus for the second time is to obtain more than two-thirds of the pledge rights.EOTS signature.It is only when there is a consensus twice that it is judged to be successfully reached.The obvious benefit of this solution is its modularity and is compatible with the Finality Gadget consensus system commonly used in other PoS.
In the absence of evil, if the pledge user wants to retrieve his assets, he can solve the problem by adding a time lock (that is, the so-called unlocking period) to the UTXO spending conditions.In cases of evil deeds, the above-mentioned EOTS will be directly confiscated.At this point, this is how Babylon Chain reaches a consensus, judges doing evil, and conducts confiscation.It is also worth mentioning that EOTS is implemented through Schnorr signature, which is also a newly introduced feature after the Taproot upgrade of the Bitcoin main network.
Time stamp, unbinding time and long-range attacks
Compared with PoW, since PoS does not have the Nakamoto Consensus, it also leads to the possibility of long-range attacks (Long-Range Attack). Because of this possibility, PoS often has a relatively longer unlocking period..
Long-range attack refers to the fact that when an attacker has mastered the private keys of most nodes in a certain arbitrary block in history (that is, voting weights), he can use the characteristics that can be reused in his own control.In the small world of nodes, a large number of self-made blocks are quickly generated (even longer than the outside world’s block history).In the case of copying a legitimate timestamp, it can make it impossible to distinguish the newly added nodes, which one is a chain that took a lot of real time, and which one is a chain that the attacker fabricated in a short period of time.The fundamental reason for this is that blockchain represents the advancement of its native time by adding new blocks, and there is no exogenous time.
The previous solution was through Social Consensus:https://medium.com/@VitalikButerin/a-proof-of-stake-design-philosophy-506585978d51) to solve it, for example, regularly telling you what the real and legal block looks like in some place, such as the foundation’s website, forum, etc., and let the nodes that come in later see the historical data of two different chains., you can choose.This is called Weak Subjectivity by Vitalik:https://medium.com/r?url=https%3A%2F%2Fblog.ethereum.org%2F2014%2F11%2F25%2Fproof-stake-learned-love-weak-subjectivity).
But in the case of Babylon, if the timestampping method mentioned above is used to allow the two chains to communicate with each other, the exogenous time of the Bitcoin main network can be introduced on the PoS chain in disguise, that is, it can be directlySolve long-range attacks, and also shorten the unlocking period of pledges to, for example, six Bitcoin blocks (about one hour).
The core three questions about security leasing
How to balance external security leasing and native security (POS perspective)
BTC staking does not mean completely replacing the staking of native tokens.In fact, PoS project parties can have two types of pledged assets (Bitcoin + native tokens) or even more diverse combinations of pledged assets to ensure their own security.Considering the different holding costs of users holding Bitcoin and native tokens, the pledge rewards of both often require additional design.The form of pledge rewards may be native tokens, income sharing, etc.
Regarding security, let us think from the two dimensions of “dispersion” and “total amount” of funds.
From the perspective of the degree of dispersion of funds, it is more intuitive: based on the original pledged assets and nodes, if external pledged assets and nodes are introduced, no matter which method is used to combine, it will undoubtedly increase its decentralization.degree, increase resilience to the overall network.Specific combination methods can be:
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Native dual staking: Native token operators and ETH operators are regarded as one whole, and the staking shares of different operators are converted through external prices. The effective consensus only needs to reach the threshold of this whole.
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Modular double staking: Effective consensus requires that the number of supporters from native token operators and ETH operators meet the standards; this consensus standard is relatively strict, and it also means that attackers can only attack operators with lower security, it can prevent the formation of consensus.
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Double stake with veto: operators of native tokens meet certain quantity standards themselves, which is no different from traditional PoS.As an additional layer of guarantee, ETH operators have the right to veto when native token operators make mistakes.This solution differs in availability from modular dual stakes: Even if ETH-based operators are disconnected, the PoS network under this solution can still operate normally.
https://www.blog.eigenlayer.xyz/dual-staking/
From the perspective of the total amount of funds, we can simply calculate the calculation from the perspective of economic security. Assuming that the asset TVL bridged to a certain chain is $5M, in order to reach a security threshold of 1.5 times (corresponding to 2/3 of the agreement canIf you have not paid), the magnitude of the pledged assets should not be less than $7.5M.Assuming that the current pledged native token assets is only $5.5 M, it means that there is at least $2M of security budget deficit.At this time, it is possible to give priority to the introduction of tokens from other closely related protocols as auxiliary staking assets. If there is still a deficit at this time, external security (BTC, ETH, etc.) can be considered.In other words, Babylon provides services like mercenaries, which can obtain security by paying when they have to.
In addition to the different holding costs, holders of native tokens are more likely to choose to continue holding after receiving the pledge reward. After the pledged users receive the reward, they are very likely to be very likely to be veryQuick sell rewards bring selling pressure to native tokens.From this perspective, the project party can consider supplementing the security provided by Babylon and other parties and weighing the security costs under different solutions.This also means that it is risky for the project party to completely outsource security, and having its own independent validator set and native security based on it is still a better choice.
Based on the above discussion, from the perspective of security lenders, even though the cost of renting Bitcoin or Ethereum is usually low, since the loyalty of this fund is not within your own ecosystem, the hidden dangers of selling pressure need to be considered at the same time.On the other hand, different project parties can have different priorities for the total amount and degree of dispersion. From the rule of thumb, renting from a few concentrated fund providers will usually be lower in unit costs, but will be at the cost of centralization.;But the core here is to give different project parties the right to choose.
How to choose a good security renter (Node Operator perspective)
In a well-developed, decentralized bilateral market for secure leasing, the provider of funds (i.e., security providers) should be free to choose to pledge to any particular AVS.But if the AVS ecosystem flourishes as expected, how can we make the right choices and allocations among hundreds of AVS?We believe that a good definition should be a balance between reward and security.
Whether it is personal staking (Solo staking) or providing funds to Staking Providers, the selection logic is the same as that of traditional node operators (Node Operators, NOs), and they can directly draw on their accumulated experience.Common screening criteria, such as ensuring that the leaseholder has a good development team and good open and visible code, product concepts and sustainable returns, the reward ratio to security providers, the team’s past experience, and the recruitment of projects.capital situation and investor credibility, etc.
Another core here is that the final performance of AVS is likely to show a Power-Law Distribution, that is, the AVS whose returns are concentrated in the head.Therefore, being able to intervene in high-quality AVS in the early stages will be an important source of Alpha.This also means that intervening in all long-tail AVS will not be the optimal solution, but instead it brings a lot of additional complexity and risks.Node Operator may be charged a high commission fee as a result, thereby reducing the risk-adjusted benefits of pledged users.At the same time, it may also introduce more confiscation risks.
Think about it a little further. If an AVS is recognized as having potential, then people will have more high expectations for the value of its tokens, and it can rent security with a relatively small number of token rewards.Given that the token price is volatile, Node Operator also needs to balance it, and at least choose a part of the AVS that is rewarded with revenue sharing, so that its income is guaranteed with a lower limit.
How will the security rental market evolve in the future (Marketplace perspective)
The core of the blockchain world lies in the use of a set of mechanisms that enable each selfish individual to reach a consensus in a trustworthy way.In the PoS world, we can understand consensus as pledge, and the confiscated nature of pledge can be understood as the source of security, and “security leasing” can also be understood as a means to abstract consensus issues, that is, the core issue of the blockchain world.
Babylon The services they are building can be compared to a security marketplace, and its essence is to create a bilateral efficiency market that matches the supply and demand of “security”.The supply side here refers to the stakeholder, while the demand side is AVS with security rental requirements.It is obvious that the current dilemma is that there is a lack of a complete and diverse rental ecosystem, and there are not many AVS that can generate profits.Where is the breaking point?From the basic principles of economics, we can know that looking at demand in the short term and supply in the long term.
From the demand side:
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Regarding “whether there is a demand”, regardless of the intensity of the demand, our first argument can understand that demand is real.If the value and market positioning of App Chain can be more widely understood, or if a new type of AVS can be designed and released, the security rental market can be made more stable and prosperous.
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Regarding “whether demanders can provide sustainable real benefits”, we believe that it is certain to some extent.For example, the DA layer can charge through storage, Oracle can charge through data, and PoS can share MEV income and handling fees in the ecosystem, and these benefits are real and sustainable.
From the supply side, Babylon needs to convince the Bitcoin community that it can ensure the security of its assets, while Eigenlayer needs to convince the Ethereum community that they do not overuse Ethereum.From the perspective of fund stability, the current pledged funds can be retrieved at any time. Perhaps we can consider providing higher rewards for funds willing to pledge for a long time.In addition, if you want to establish a high-quality supply side, the pragmatic method is to first make the concept of “safety as a service” practical, then make it easy to use, and finally make it bigger and stronger.For example, Sreeram Kannan tells the story of building Eigenlayer into a cloud service for cryptocurrency: through economies of scale, security providers can effectively dilute the cost of security, and also allow security users to have instant scalability as their business developsability.In addition, AVS built on Eigenlayer can also take the route of modular services to provide SAAS-like experiences for other projects and ecology, so that they can build a security provider Eigenlayer and AVS.A strong and resilient ecosystem.
N ways to use Restaking
As an important narrative and improvement of industry infrastructure this year and even in the future, different project parties will inevitably need to think about how to organically combine their business with Restaking.We believe that roughly can be divided into two major directions:
Integrate Restaking related assets
For DeFi-related applications, it can usually intuitively consider how to integrate Restaking assets into its own business scenarios, such as collateral loans based on pledged assets, providing liquidity, etc., thereby increasing the effectiveness of pledged assets.
Taking Bedrock as an example, as a specialized liquidity restaking agreement, it has launched uniBTC, providing a solution to implement restaking for wBTC holders on Ethereum.Compared to directly pledging Babylon, holding uniBTC is more liquid. In addition to receiving Babylon’s own income reward, you can also receive Bedrock’s diamond points reward, thereby increasing the overall income.
https://medium.com/@bedrock_defi/how-bitcoin-liquid-restaking-unibtc-works-54a7be02a248
In addition, you can also refer to the income platform Solv Protecl, which integrates Babylon’s resolution income into its delta-neutral income strategy.
https://solvprotocol.medium.com/solvbtc-will-integrate-restaking-yield-from-babylon-1dba0c5a5193
The above use cases are relatively simple and direct, and I believe that some more complex and sophisticated derivative designs will appear later.
As Infra Rental Security
Rental security is a more universal application scenario.Infra, which has high requirements for decentralization and has less initial pledge capital, can be considered for rent.Some potential AVS directions such as: Rollup-related services (sorters, bridges, MEV-related services, etc.), coprocessors (verifiable databases, AI interfaces, etc., representative cases: Ritual), some encryption applications (TEE Network,Secret Sharing, FHE, etc. Representative cases: Inco, Fhenix), some proof applications (identity, proof of address, etc.).Here are some AVSs that have developed new on-chain scenarios that have never been seen before, especially the coprocessor field can have many innovations, and the encryption application field is just beginning.
Take Cyber, which has recently announced the L2 project, as an example, based on Eigenlayer’s AVS to build a decentralized Infra including sorters, validators, and CyberDB.Although it cooperates with Eigenlayer rather than Babylon, the two are essentially the same in terms of rental security.Cyber adopts a dual pledge model, where users can pledge Cyber or LRT assets (currently support ezETH, pufETH, weETH) to obtain multiple returns, including pledge income from ETH, re-pled income and points of Eigenlayer, LRT points, Cyber re-pled points, etc.The security equivalent to AVS is guaranteed by Cyber+ LRT token.
The dual staking model has an advantage: it can help the network cold start by renting ETH and reduce the impact of the death spiral.For example, when the price of native tokens falls, although the security of the PoS network will be affected, the consequences are relatively controllable. After all, there are economic security guarantees provided by LRT assets to provide.
Conclusion
Security is the core lifeblood of blockchain. Opening the security of the two tokens with the largest market value to other applications and developers will undoubtedly have a lasting and far-reaching impact.Restaking is therefore well deserved to be a narrative on the main channel of the evolution of the blockchain world.In this process, we see top entrepreneurs in the industry facing key issues, using the latest technological feasibility, constantly exploring the optimal solutions, and breaking through the original restrictions of Bitcoin and Ethereum.
If we look at the sharing of security between PoW and the PoS world in a limited way, using the first principle can divide it into four types: [PoW, PoS] x [PoW, PoS]:
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PoW → PoW: A common method is merged mining, such as Rootstock.
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PoS → PoS: For example, “Resolution of Eigenlayer” and “Hub and Zone on the Cosmos ecosystem” both belong to this.
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PoW → PoS: For example, Babylon takes PoW’s assets as pledged assets for PoS.
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PoS → PoW: This area is rarely explored, but an intuitive idea can be that the tokenized computing power can be used on PoW through the conversion of RWA assets.
If we look at security leasing in a broader sense, the key lies in how to reach an underlying consensus, how to formulate, productize, and scale this consensus, and build a prosperous cloud service ecosystem on this basis.All AVS services are not isolated islands. Efficient collaboration between each other, better resource utilization and data sharing, can be more in line with the original spirit of Cypherpunk and also the source of true value.
There are still many possibilities that have not been unfolded, such as the reasonable distribution paradigm of AVS revenue, the emergence of new AVS, and the LEGO combination of various services.We believe that the exploration of Restaking has just begun and it is worth continuing to pay attention to the evolution, iteration and the opportunities that accompanies this direction.
Reference:
https://docs.babylonchain.io/docs/introduction/overview
https://docs.bouncebit.io/?gad_source=1
https://docs.eigenlayer.xyz/
https://medium.com/@VitalikButerin/minimal-slashing-conditions-20f0b500fc6c
