Key takeaways

• EigenLayer introduced the concept of restaking, allowing for the reuse of Liquid Staking Tokens (LST) or native ETH to secure other applications, known as Actively Validated Services (AVSs)

• Actively Validated Services (AVSs) are systems that require their own distributed validation semantics for verification. 

• Aiming to introduce a unified liquidity layer across all delegates, Solayer leverages sSOL, a liquid token that unlocks a range of DeFi use cases such as liquidity provisioning, collateral, and spot trading.

• Solayer leverages AVSs to enhance the economic security of external (exogenous) systems and the bandwidth of those natively built on Solana.

• With a better product-market fit (PMF) than EigenLayer for natively built dApps, Solayer effectively functions as a marketplace for blockspace.

History of Restaking

Bootstrapping liquidity and onboarding capital is one of the most crucial parts of establishing the security of Proof-of-Stake (PoS) networks. This task can be particularly challenging for new layer 2s and networks that require a certain level of economic security to operate smoothly in a decentralized manner. However, with a total value locked (TVL) of $64 billion as of Q2, 2024, Ethereum stands out as the most secure PoS asset. 

While smart contracts benefit from Ethereum's security, additional infrastructure components like oracles, bridges, and sequencers require their own economic security. Moreover, Layer 2 (L2) solutions often struggle with initial security challenges, which can be alleviated by leveraging Ethereum’s security. 

Addressing these issues, EigenLayer introduced the concept of restaking. This innovative mechanism allows for the reuse of Liquid Staking Tokens (LST) or native ETH to secure other applications, known as Actively Validated Services (AVSs), benefiting from the underlying crypto economic security of the base chain.

The key benefits of this approach include:

1. Increased Yield for ETH Holders: they can amplify the yield of their ETH by restaking it.

2. Enabling validators to secure multiple AVSs.

3. Distributing the costs of enhancing Ethereum’s security across multiple AVS.

4. Raising the costs for potential attackers as the trust system expands globally.

5. Security bootstrapping mechanism for developers.

For a period of one year, EigenLayer managed to accumulate approximately $16 billion in restaked native ETH and LST. The inflow of capital was further amplified by liquid restaking protocols like Ether.fi, Puffer, and Renzo.

Token Breakdown 

Bootstrapping liquidity and onboarding capital is one of the most crucial parts of establishing the security of Proof-of-Stake (PoS) networks. This task can be particularly challenging for new layer 2s and networks that require a certain level of economic security to operate smoothly in a decentralized manner. However, with a total value locked (TVL) of $64 billion as of Q2, 2024, Ethereum stands out as the most secure PoS asset. 

Initially, the protocol supported three pools for liquid re-staking, specifically for users of Lido Finance (stETH), Rocket Pool (rETH), and Coinbase (cbETH) platforms. Following a vote at the end of 2023, additional pools with relevant Liquid Staking Tokens (LSTs) were incorporated, including:

• wBETH (Binance)

• osETH (Stakewise)

• swETH (Swell)

• AnkrETH (Ankr)

• EthX (Stader)

• oETH (Origin ETH)

Reintroducing Solayer 

Solayer’s restaking infrastructure is designed to secure network bandwidth and transaction throughput for decentralized applications built on Solana, effectively functioning as a marketplace for blockspace. Users can stake assets to decentralize Solana, earn native yields through MEV-boost and APY from delegates. 

Additionally, they can delegate restaked assets towards their favorite Solana dApps, termed as endogenous Actively Validated Services (AVSs). This serves a fundamentally different function from EigenLayer, which services applications and blockchains external to Ethereum, by securing them through economic security derived from the slashing conditions imposed on stake At Solayer, no additional slashing conditions are imposed as endogenous AVSs are on Solana L1 itself, so the slashing conditions are simply those applied to Solana validators. 

In just under 60 days since launching Phase 1, Solayer has risen to become the 13th largest protocol on Solana. The platform has amassed over $150 million in Total Value Locked (TVL) and attracted more than 75,000 unique deposit addresses.

Unified Liquidity Layer 

While native re-staking of SOL has been prioritized since launch, Solayer aims to introduce a unified liquidity layer across all delegates. This will be achieved through sSOL, a liquid token that unlocks  a range of DeFi use cases such as liquidity provisioning, collateral, and spot trading.

As the protocol progresses towards upcoming Epochs, new Liquid Staking Tokens (LSTs) will be added. Currently, the following tokens are listed: 

• SOL (Solana Native Staking)

• mSOL (Marinade Staked SOL)

• INF (Infinity)

• JitoSOL (JitoSOL)

• bSOL (BlazeStake Staked SOL)

Given the ongoing LST wars on Solana, liquidity is a scarce resource, leading to slippage. For this reason, we believe that Solayer will not only serve as a universal yield layer but also unify liquidity for long-tail LSTs through a pooled liquidity design.

Deep dive on Actively Validated Services (AVSs)

Actively Validated Services (AVSs) are systems that require their own distributed validation semantics for verification. 

These can include sidechains, data availability layers, new virtual machines, keeper networks, oracle networks, bridges, threshold cryptography schemes, and trusted execution environment networks. 

Each AVS has its own set of contracts that manage the state relevant to the service’s functionality, such as operator roles and the amount of stake securing the service.

AVSs on EigenLayer

EigenLayer utilizes AVSs to enhance the Ethereum ecosystem by providing additional layers of security and utility. The example illustrates the incremental improvements in increasing trust in an external system when a majority of ETH is restaked.

1. How does AVSs function on EigenLayer?
   

   Here’s a high-level overview of EigenLayer core contracts and how AVSs are integrated and utilized:

   1. StrategyManager: Handles asset deposits from stakers.

   2. DelegationManager: Manages operator delegation by stakers.

   3. ServiceManager: Implements interfaces for AVS developers.

      
      

   

   
   

2. Who are the stakeholders on EigenLayer?

   • Stakers

     Stakers interact with EigenLayer by depositing assets into the StrategyManager and choosing operators to delegate to via the DelegationManager.

   • Operators

     Operators run offchain client software for specific AVSs and must register or deregister with the DelegationManager to serve AVSs. Their client software operates independently of the core EigenLayer protocol. 

   • AVS Developers

     AVS developers can design and implement contracts as needed, provided they follow the EigenLayer protocol interface (ServiceManager).

AVSs on Solayer

Solayer adds an additional layer to first-level staking: restaking. After securing Solana L1, you can restake your SOL to secure dApps. The restaked SOL is delegated to a dApp that natively interacts with the Solana blockchain, securing network bandwidth (or blockspace) for the transactions routed through the dApp. It is important to note that the stake should be delegated at the application level, not the validator level. 

Why? 

Because users are the most important part of this technology. Users interact with dApps, not validators. Developers serve the users, not the validators. Solayer is creating a decentralized marketplace for suppliers (stake-weight) and demanders of blockspace.

As a restaking marketplace, Solayer leverages AVSs to enhance the economic security of external (exogenous) systems and the bandwidth of those natively built on Solana. Let’s focus on the latter, as they are a key differentiating factor.

1. What are Delegates (endogenous AVSs)?

   
   Instead of focusing solely on exogenous AVSs (such as oracles and bridges), Solayer aims to support on-chain decentralized applications (dApps) initially. 

   
   

   The goal is to provide dApps on Solana with a greater likelihood of securing block space and prioritizing transaction inclusion. These are referred to as Delegates (endogenous AVSs). 

   
   

   In simpler terms, Solayer allows dApps on Solana to reserve their own space and processing power on the blockchain .

   

   
   

   This makes the network more efficient and reliable for everyone using these applications. One of the technical features that make this possible is called stake-weighted quality of service (swQoS). 

   
   

2. What is swQoS? 

   Stake-weighted quality of service (QoS) allocates network resources, like block space and transaction processing, based on the stake committed by validators or stakers. 

   
   

   A validator with 1% stake can transmit up to 1% of the packets to the epoch leader, effectively resisting Sybil attacks. 

   
   

   This model benefits commercial RPC infrastructure operators and entities hosting their own validator and RPC nodes, as RPC nodes can include more transactions by partnering with validators, who in turn can sell additional capacity to RPC nodes.

   
   

3. How does swQoS work?

   For example, if there are two validators—one holding 2% of the stake and the other holding 0.2%—the former will be able to submit up to 2% of the packets to the block producer, taking priority over the latter. This provides the higher-quality validator with better performance and increased Sybil resistance.

   

   
   

   In simple terms, each transaction comes with weight. The heavier it is, the more likely your transactions get through. Consequently, the more stake you have allocated for your dApp’s RPC, the higher the quality of service you will receive, and the less likely it is that lower-quality transactions from other untrusted sources will affect your users’ transactions.

   
   

4. How does delegation work? 

   Solayer provides any dApp on Solana with a simple method to become a Delegate (endogenous AVS), unlocking new possibilities for projects to engage their user bases. 

   
   

   To get started, projects can use our Delegation contract to create their own Solayer AVS LST. From there, Delegates can change their AVS’s metadata where they see fit, and start receiving delegations of sSOL that is stored in a vault.

   
   

   The Solayer AVS Token is a delegated representation of sSOL, which is the Solayer-managed LST token on Solana. These tokens come with Solana’s native staking yield as their base rewards, along with additional MEV yield. Solayer optimizes the staking yield by delegating it to the highest yield-bearing validators. 

   
   

   Additionally, Solayer runs its own validator implementation that supports app-level stake-weighted quality of service provisioning. dApps can receive a portion of the staking commission and will be able to configure the underlying operators for stake delegation in the future. 

   
   

   The Solayer stake delegation process is straightforward:

   1. Conversion: Users restake native SOL into sSOL.

   2. Delegation: Staked SOL is delegated to Solayer-recommended validators, which then delegate it to a Delegates (dApps) on Solayer, converting sSOL to a delegated form.

   3. Minting Tokens: Delegates mint delegated sSOL tokens, which serve as stake proof to retrieve staked SOL and claim rewards.

      
      

      

      
      

   
   

Pointing Out the Structural Differences Between EigenLayer and Solayer

Solayer has a better product-market fit (PMF) than EigenLayer when it comes to natively built dApps on Solana. It provides applications with access to blockspace, a resource of the Solana protocol, which can improve their bandwidth. In contrast, EigenLayer offers external applications computational resources but involves a potential penalty in case of malfunction.

But what are the advantages of building on Solayer?

Our infrastructure offers the following benefits for developers and dApps:

• Enhanced Security: By utilizing Solana’s economic security, dApps can achieve higher levels of trust and reliability.

• Improved Performance: leveraging swQoS provides better bandwidth to dApps 

• Pooled Liquidity Design: sSOL unifies liquidity for long-tail LSTs, minimizing slippage and securing instant conversion.