Introduction to Base Ecological Rehypothecation Project Overload: Unmitigated Risks in Rehypothecation Ecosystem
Base Ecology Emerges: Introduction of Overload, a Re-staking Protocol Similar to EigenLayer
Background: Introduction to Re-staking
Introduction to Overload, a Re-staking Protocol
Ability to Stake Any ERC-20 Token
On-chain Consensus
No Slashing Mechanism
Enhanced Staker Permissions
New Point Competition
Restaking Facilities Emerging in Various Ecosystems
Is the Security Sufficient?
Is it Necessary to Construct a Re-staking Ecology?
Re-staking refers to the process of re-staking liquidity tokens (LST) to protect not only the main network but also external networks. For example, users can choose to stake ETH in the Lido protocol to secure the Ethereum network and stake the proof-of-stake token stETH in EigenLayer to protect other networks and earn higher returns.
EigenLayer is the pioneering re-staking protocol that allows node operators to manage stakers’ tokens and assist in securing external network projects. The latter is also known as actively validated services (AVS).
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Recommended Reading:
How will the Re-staking Project EigenLayer Change the Web3 Infrastructure?
Reason for Recommendation: This article comprehensively explains the design principles, problem-solving, and current development status of EigenLayer, helping readers quickly understand the roles of various stakeholders in the ecosystem, including token stakers, node operators, and AVS. It provides a better understanding of the following content.
The current Total Value Locked (TVL) of this protocol has exceeded $16 billion, and there are already nine AVS waiting to cooperate.
In the Base ecosystem, a similar re-staking project called Overload has emerged. According to the team, this project has three notable differences:
Ability to Stake Any ERC-20 Token
On-chain Consensus
No Slashing Mechanism
Enhanced Staker Permissions
Each of these changes the re-staking mechanism, explained below.
Compared to EigenLayer, which only accepts ETH and its corresponding liquidity staking tokens, Overload can accept any ERC-20 token, providing stakers with more flexibility and motivation.
Overload can accept any ERC-20 token for staking
This is done to compensate for the lack of asset volume in the Base ecosystem. On the other hand, it is still necessary to further discuss whether this design by Overload compromises the network security of its AVS in the future.
Overload introduces the concept of on-chain consensus, allowing AVS to directly execute verification on the blockchain. According to the team, this can prevent malicious behavior by node operators and greatly simplify the development of AVS.
On the Ethereum network, there are four possible actions that can lead to penalties for validators:
Proposing a different block
Surround voting
Double signing
Inactivity leaks
Validators who are slashed will lose a portion of their staked ETH. In the re-staking ecosystem, this means that node operators cause stakers’ assets to be at risk, which is considered a risk and cost that stakers have to bear for potentially higher returns.
However, Overload does not have a slashing mechanism. Since AVS uses on-chain consensus, it only applies the “inactivity leaks” penalty. It imprisons the validator, temporarily removing them from the validator set and causing them to miss out on proof rewards. This penalty does not result in losses for stakers’ assets.
The Overload team believes that this can increase stakers’ willingness to stake their assets.
Compared to EigenLayer’s design, where stakers delegate tokens to node operators who can choose which AVS to operate, the actual authority and operational difficulty for token stakers are not high.
Overload reduces the role of node operators, allowing stakers to choose which AVS to operate their tokens and stake them to the corresponding validators. Stakers can choose more than one validator, enhancing their asset autonomy.
Overload allows stakers to choose which AVS to operate
The Overload team stated that they will soon launch a re-staking-related point competition, following EigenLayer’s marketing strategy. It is expected to attract some users to try it out in advance.
The Overload team’s first step is moderate and reasonable. Allowing diverse ERC-20 assets as collateral can compensate for the insufficient funding volume in the Base ecosystem. On the other hand, the absence of a penalty mechanism can reduce users’ concerns about Layer2 and new projects. Lastly, because Layer2 users are relatively more advanced in their operations, granting more permissions to stakers may meet their needs.
However, whether the market will bear this remains to be seen.
In addition to the Base network, there have been several re-staking projects on Solana since the beginning of this year, such as Cambrian, Solayer Labs, and Picasso, all aiming to create a Solana-style EigenLayer to strengthen the existing ecosystem.
(The Solana Version of EigenLayer? Re-staking Fever Reaches the Solana Ecosystem)
However, the core of re-staking is to share security with external decentralized networks, which needs to be built on a solid foundation of the original mainnet.
Compared to the market capitalization of ETH ($370 billion) or SOL ($71 billion), Base currently has a TVL of only $5.4 billion. Does it have the ability to operate a powerful re-staking ecosystem? It seems that there is still a long way to go.
Another key issue that all re-staking teams need to clarify is whether “the network proposing the protocol really needs a re-staking ecosystem.” For example, some users in the Solana community believe that Solana’s future development will mainly focus on a single-chain approach, so the benefits of dispersing security to other external networks may not be necessary.
The Overload team also needs to consider (or rationalize) whether the Base ecosystem needs a re-staking ecosystem, and whether it will overlap with the existing Ethereum infrastructure.
Base
EigenLayer
Overload
Restaking
Solana
Re-staking
Further Reading
The Solana Version of EigenLayer? Re-staking Fever Reaches the Solana Ecosystem
Solana’s Moment with MEV: It’s Time to Seriously Address the MEV Problem
