Why Restake on Solana?
Over the last year, restaking has emerged as one of the leading trends in crypto, gaining traction from investors, developers, and users across the globe. EigenLayer was a first-mover, garnering significant mindshare and TVL in the ecosystem. In the past month, we have seen an expansion with both emerging and established teams embracing restaking on various L1s with diverse concept choices.
At Renzo, our mission is to make restaking easy and accessible for everyone. This extends to the restaking of all assets on multiple L1 ecosystems, not just of ERC-20s on Ethereum. Our thesis is that this will unlock broader restaking use cases and allow for a more expansive design space, accelerating innovation and advancing the ethos of crypto worldwide. This article aims to provide a high-level overview of the thought process behind our decision to expand to Solana, with ezSOL being built on top of Jito’s (Re)staking product.
Jito’s Architecture
Jito’s (Re)staking program is built on a multi-layered architecture configured for flexibility, scalability, and enhanced economic security. This architecture is composed of three essential layers:
Vault Layer: Manages asset custody and the creation and operation of Vault Receipt Tokens (VRTs) — what Jito calls LRTs.
Operator Layer: Handles validator operations and network participation.
NCN (Node Consensus Networks) Layer: Implements additional network functions economically secured by restaked assets.
The integration between the three layers enables the development of flexible and scalable infrastructure without increasing the complexities of the system.
The separation between the Vault, Operator, and NCN layers facilitates bidirectional agreements between parties in a controlled and risk-adjusted manner. Roles and responsibilities are clearly defined and enforced by slashing.
NCNs can opt for a maximum amount of economic security, which results in greater rewards for restakers and the NCN not overpaying for security.
Users can opt into (Re)staking by leveraging any SPL token, adding utility for these native tokens, and creating possibilities for intersubjective tokens.
NCNs can leverage VRT platforms to provide a minimum amount of economic security, thus not putting them at risk of economic attacks.
One of the most significant differences between Jito’s (Re)staking and other restaking protocols is that, by default, Jito uses a dual opt-in model for operators and stakers. In other protocols, anyone can delegate to any operator. Jito requires both the operator and the staker to agree, preventing issues where an operator may receive unwanted delegations.
For a more in-depth explanation, please refer to this article.
Solana’s Strengths
Built on Solana’s high-performance blockchain, Jito (Re)staking offers fast transactions and low fees, making it accessible to many protocols and users. Below are a few strengths of Solana and how those strengths are a massive advantage when building products related to/ on top of (Re)staking:
Sub-second Finality
Solana achieves fast finality through its Proof of History consensus mechanism and Tower BFT. This rapid finality ensures that restaking operations can be completed almost instantaneously. This allows for rapid updates to restaked positions and restaking strategies, leading to optimal risk-reward ratios for end users with frequent and active rebalancing.
Low Fees
The cost of transactions on Solana is a fraction of what it typically is on Ethereum. Solana’s low fees result from the SVM, which minimizes computational overhead and can process transactions in parallel. Low fees democratize access to restaking, permitting more participants to engage without costs being a barrier, thereby promoting decentralization. Low fees also enable innovation in payment structures, allowing features such as micropayments from NCNs or other fine-tuned strategies.
Cheap Storage
Solana’s architecture supports more affordable on-chain storage. This is achieved by the accounts model and Solana’s rent economy. Solana’s rent economy charges a small fee for storing data on the blockchain to incentivize the pruning of unused accounts to maintain the network’s efficiency.
Services like Helius or the Light Protocol protocol empower developers to optimize storage costs by leveraging ZK Compression. These solutions involve storing proofs that allow for the verification of data integrity without storing the entire dataset on-chain. While the full data might not be stored on-chain, proofs ensure data integrity.
The ability to store proofs and essential data promotes the availability of extensive amounts of data and various metrics to analyze risk and performance in a more decentralized manner. This capability enables advanced features such as algorithmic rebalancing, on-chain risk management, and other exciting use cases for LRTs.
High throughput
Solana is built to handle many transactions with innovations such as Gulf Stream and Turbine. High throughput allows Solana to support large-scale dApps and complex smart contracts without experiencing congestion. This opens up new possibilities for innovation that are infeasible elsewhere. It also enables LRTs to monitor real-time metrics for actively managing restaked positions. Further, high throughput supports complex computations for NCN networks by creating more intensive rules and slashing conditions, thus enabling innovative design approaches.
Cost of Payments and Proofs
Low gas costs and high throughput will be a game changer for restaking products and services. Renzo was among the first to claim and process a payment on Eigenlayer. However, submitting proof on Eigenlayer is done fairly often and uses a lot of gas. At the time of writing, the Renzo on-chain proof submitter contract has spent roughly $2 million in gas fees since April 2024. This gas cost can reduce the APR earned by the protocol on Ethereum, especially at times of high network congestion. The equivalent transactions on Solana will cost pennies and have a negligible impact on rewards paid out by NCNs.
Another avenue where Solana’s costs will be a significant advantage is when rebalancing a portfolio. Lower block times and cheaper gas fees positively impact various sectors, such as MEV or liquidity provisioning, enabling markets to be more efficient. When gas costs are not a barrier, liquidity providers can rebalance their positions actively to protect against impermanent loss and redeploy capital to new, more lucrative opportunities. Similarly, the lower cost of rebalancing a portfolio will allow Renzo to make more granular and optimal decisions about optimizing risk-adjusted rewards.
Fully On-chain NCNs
Jito (Re)staking on Solana has dramatically broadened the creative landscape by fostering the development of Fully On-chain NCNs with programmatic slashing and complete decentralization. Stakenet exemplifies how Solana’s infrastructure enables advanced and decentralized staking mechanisms, providing a blueprint for future projects to build similarly robust and decentralized systems.
Instead of relying on centralized entities or off-chain solutions for validation and enforcement, Fully On-chain NCNs will leverage Solana’s architecture to ensure that all processes, including slashing, are executed on-chain. With programmatic slashing directly on-chain, these networks can operate autonomously, ensuring that participants are subject to the rules of the network without the risk of human intervention or error, further decentralizing the control and governance of restaking protocols.
Use Cases Unlocked
A critical aspect of restaking protocols is their alignment with the underlying blockchain ecosystem. Projects built on Solana would have a preference towards restaking assets native to Solana for various technical and non-technical reasons. Use cases such as co-processors and data availability solutions servicing Solana can now derive economic security from Solana and not look for it externally. Solana’s programming model, particularly CPIs (Cross-Program Invocations), allows for seamless integrations between protocols, enhancing composability. Solana-based incentives for security and restaking activity are better handled and distributed on the Solana network alone. Further, this also implies that Solana’s shared security is not impacted by external events on Ethereum or other blockchains, creating a sort of silo and reducing risk. Over the next few months, multiple projects and market leaders will adopt restaking on Solana to secure various parts of their tech stack. Some prominent use cases that are likely to emerge include:
MEV Protection
Some forms of MEV disproportionately benefit value extractive bots over the rest of the ecosystem and could be considered exploitative. To combat this, NCNs can be created to align validator incentives and minimize predatory MEV practices. These networks can implement programmatic slashing and tokenized collateral to discourage harmful activities like frontrunning and sandwich attacks. There will also be NCNs that capture and redistribute “good” MEV. By capturing beneficial MEV and redistributing it in a way that supports network health, these NCNs can ensure that the value extracted from transactions benefits the broader ecosystem rather than just a few participants.
These networks will leverage restaked assets to enforce rules and behaviors that protect against harmful MEV, providing additional layers of security and incentives for validators to act in the network’s best interest.
Solana L2s
We anticipate that multiple NCNs will try to service the up-and-coming L2 ecosystem on Solana in the following verticals:
NCNs that operate sequencers and are secured by the L2’s native token
NCNs that enable services such as data availability, verification, co-processors, and other essential use cases for L2 and L1 ecosystems
Notably, Sonic is an SVM Layer 2 designed for gaming on Solana that will utilize Jito (Re)staking to bolster economic security on the L2.
Cross-chain communication
NCNs can be a great way to secure cross-rollup and cross-chain communication on L2s built on top of Solana. Legacy bridging between chains is relatively slow due to the slow finality and high associated costs of the chain. Solana can function as a fast finality layer, with the NCNs being secured by various restaked assets.
Native yield on Solana
Today, roughly 65% of Solana is staked. Jito’s (Re)staking platform unlocks the possibility of using this collateral as economic security for NCNs, earning users both restaking rewards and the Solana staking yield.
Oracles and Keeper Networks
NCNs will also be crucial in supporting oracles and keeper networks within the Solana ecosystem. NCNs designed for oracles will ensure data accuracy, reliability, and decentralization by leveraging restaked assets to incentivize honest reporting and penalize malicious actors through slashing.
Keeper networks, which automate the execution of tasks within smart contracts (such as liquidations, rebalancing, etc.), will also benefit from NCNs. These networks will ensure that critical tasks are performed reliably and on time, backed by the security and economic incentives provided by restaking infrastructure.
This is a non-exhaustive list of possibilities. Jito (Re)staking will enable the >$50 billion Solana staking market to be used as economic security and lead to a Cambrian explosion of new developments. If you’re working on something exciting and would like to contact Renzo, you can do so here.
Solana’s capabilities uniquely address the challenges in the restaking space related to high costs, risk management, and efficient reward distribution for restaked assets. Its high throughput, low fees, and advanced token management allow for better risk-adjusted returns, precise reward allocation, and seamless handling of assets. This infrastructure allows platforms like Renzo to optimize the restaking experience, providing users with enhanced security, better economic incentives, and reduced complexity, making Solana an ideal foundation for the next generation of restaking protocols.
Why Restake on Solana? was originally published in Renzo Protocol on Medium, where people are continuing the conversation by highlighting and responding to this story.
