What restaking is and how Karak approaches it

Transcript

GM good morning welcome to the milk Road show The Daily crypto show that's as gratifying as hitting All Greens when you're running late I'm your host Jay Hamilton and today we're talking all about staking and raking and why it's about to become the next trillion dollar industry best part it's still fresh and misunderstood by many even in the crypto world and we love nothing more than something with massive potential that isn't yet well understood so here to give us the Inside Edge on reaking is KARK Network co-founder Drew Patel previously engineer at coinbase portfolio manager at a decimal capital and CTO of Ono coin Drew welcome to the

show thanks for having me Jay super excited to have you my man I'm gonna ask you the hardest but yet simplest question to begin what is raking um okay so I think there's a lot of like terminology that's sort of been invented to explain or to explain reaking is sort of make it like so complex that people really don't ask questions but for the most part reaking is just staking again what is staking well people are going to say oh it's actually supposed to be proof of stake or whatever but for the most part we boil down staking to First principles it's you're giving an asset in exchange your potenti you're getting rewards for providing the asset and

locking it up and then if something goes wrong you you know depending on the task you're sort of staking to you can potentially get slashed the current craze around reaking is a lot around farming and points programs and opportunities uh is that what looking at stats of car you guys have achieved uh you've bumped up you're around a billion in tvl I think you bumped above you're slightly below today but you're you're hovering on that billion number in less than three months truly incredible shout out to you and the team it's and you have 885 ,000 users or just below 85,000 users around that number how have you achieved that so I think what we did we came at the right time I think we came

with a a different approach to reaking initially it was just I right and and the people were saying this is like this is going to be the thing that's going to be embedded in ethereum itself just like November December right and they were thinking it's the next big thing when we looked at it we're like there's a lot better way to do this whole reaking thing for background we were working on staking and a lot of staking risks so we were trying to model out staking risk we on ethereum we were looking at slashing risk seeing if maybe there's a way we can model it out so that we can help provide uh protection against slashing events and then we looked at reaking and we're like you know this is sort of the same thing like again you slashing events and you're trying to model the

slashing risk so we looked and we're like I think there's a better way to do this that makes a lot more sense for everyone and so when we went to the drawing table what we looked at was like like okay let's make a very simple reaking like what is restak let's just ask ourselves that question what truly is reaking again it's providing assets that can be slashed and arbitrary task that you want people to do in a distributed way right I actually think that's a better way of me explaining it than I did in the beginning how do we make this super simple and super unopinionated I think in effort to appease signal eth alignment I think decisions were made to say hey look this is only going to be on ethereum mean that eth is the best and

and their opinion is eth is the most pristine asset for reaking but our view is hey why can't you use any asset to restake right why can't governance tokens be used to restake against things that are very specific to this protocol let's take for example like GMX right onchain perpetuals exchange on arbitrum right if GMX decided and I think in the GMX 2.1 version they allow for custom oracles right now say they wanted to make an their own Oracle that is like if they want to make their own Oracle as a DSS on car right what would they want what aspect would they want you to restake with right they could do eth but then like yes and and you can make the

argument oh eth is most pristine collateral but why can't they use GMX token why can't they use the glp token which is like the the basic the market maker why can't they use usdc why can't they use arbitrum I mean it lives on arbitrum and a few other chains but primarily on arbitrum why can't it use arbitrum and this s allows you to build staking into tokens that may not otherwise have staking right so our whole idea is why can't any token like Economic Security is literally is dollars as long as there's liquidity and there's dollars of course you can't create a billion of a token and have one1 dollar of liquidity like hey it's a billion dollar taking but as long as a sufficient liquidity for the token um why can't you use it for like reaking like what's what's actually a proper reason versus hey we're trying to Signal

something and so we asked ourselves a question and and the answer was there is no reason you can't use any token here second question we asked it was why does it have to be on ethereum right we have a lot of evm chains we have a lot of nonm chains salana the thing that we want done and reaking can be done felt not only on ethereum but felt everywhere on all these chains right we're trying to create these tasks and we want to decentralize the execution of the tasks so why make it only work on ethereum why deploy the contracts on ethereum why only like why make it so you have to restake natively stake and build components that are very married to ethereum main so asking these two questions why only e and why only on eth Main net we're like we can build a way

better solution so we looked at it from first principles and we're like look let's make it super simple like two contracts Max super simple right make it super extendable we don't know the use cases that people want in two years let's not take an opinion on how it should be designed let's make it super unopinionated super extensible so people it can dynamically change based on Market needs so there'll be native reaking right if it's deployed on ethereum mayet you'll have native reaking if it's deployed on arbitrum it can accept ARB token and and you know arbitrum has a proposal right now for for staking maybe you can build on top of that so you could stake on arbit and then you can restake it on a car DSS um so make it Deployable on any evm chain the the contracts um let them use any

asset whether they want you know natively staked just rc20 if they want to use some custodian you know infinite possibilities ultimately it's up to the AVS or DSS to be like hey this is the asset I want I'll take eth I'll take usdc I'll take the governance token it's up to them to to to Really to to really decide so to answer your original question I think we took a very obvious like stance that many people were asking like silently and we took at the right time and I think that's what allowed us to grow that fast to a billion dollars in TV and I think it's become sort of the widely like after we launched I think everyone started like everyone started saying hey this makes sense like why can't any token be used like what's

actually the reason like and don't try to nerd snipe like it's not you you don't need to write a whole academic paper trying to prove why this this is the only asset like why can't any like we built defi so we can build money like leg money Legos but we're gatekeeping it to only one asset like why um and and then that's the philosophy of the company like as a whole it's we we look at things from first principles we're trying to make it super simple super developer friendly so that we can really achieve the goal we're looking to do and as you said it make things like make tasks that are currently centralized and make them more decentralized um and I think that's why we grew so fast everyone's like yeah

this makes sense let me let me let me hop in yeah it feels like uh even the Milkman was like duh obviously come on uh okay so um I want to talk a little bit about the players and the competition here you've already brought it up a few times uh and this is a good segue because you've clearly explained car's View and car's value proposition um can you give us sort of a overview of you've mentioned Igan Lair a few times and symbiotic is getting a lot of hype right now which is sort of like Lido's back door entry into reaking uh what do you see when you look at the competition in terms of the differences but also I think one of the

keys here is time how far along are each of these players when we're really talking about an industry that's only been around for you know a year like on the reaking side uh you how far along is each and how does that play into the way you think about the landscape of competition it's not as black and white as you think I think there's a lot of politics I think that are being played right everything's public it sort of like synthesizing everything right because originally when I think Ian did their round there was some threat or something and Paradigm funded a symbiosis you had like the origin of some of the conflict between these two and then we're like the third person in the middle of like two parents fighting right because if you think about it right Ian let you natively restake meaning that you would put you put raw

eth into a validator and you stake it with Ian right and then you have people building lrts on top basically rappers on top of native re staking what that means is okay if you want to participate here in in in Native reaking you need to take your you need raw e to participate yeah they accepted a little bit of lsts but the Caps were met so fast it was negligible so basically you need raw e to participate in in their points in in in the igen points farming and in the lrts right and so what that meant was who is the largest onchain holder of eth like not a person like contract it's gonna be the LI of contract right so that's Ste so a lot of the Ste started coming out of of of of well not a lot like if you look at the charts it wasn't

like a huge amount but they were losing some some amount of of eth to Anan right and so you sort of needed a response because if Ian's whole thing is yeah we want eth pristine collateral natively restake or natively staked to our igen pods that can't really coexist with steth because you need to unstake S you need to sell it and get eth and and deposit it right so it became I feel it became an existential crisis for Lio because like your business is keeping the eth locked in right you need to keep and grow SD eth and if there's something that's taken away then you need to respond right I think symbiosis sort of was that response to that and then our Viewpoint is we don't really have a

horse in the LST race right we don't we don't run our own LST we accept you sth we accept um the lrts right because our position is hey this is a this is a massive problem if you're sitting here thinking about the LST part of the stack and you're trying to and you're trying to vertically integrate you're going to lose focus on the reaking part and so again our position is any asset and we're not really an asset issue we don't issue all these tokens that you can accept on carak we're not an l is sure we don't run our own LST infrastructure um we're providing the re like really really good reaking infrastructure that people can build on um and you can use any token right if you want to use the

IG lrts you can use the IG LR if you want to use igen governance token on Cor technically it's possible I'm not here to tell you you can't right that's that's decentralization like that's the point of decentralized permission list you could do what you want um I'm not here to tell you you can't and so again our whole focus is is creating a really really really good developer infrastructure for reaking right because this this is a massive vertical if you're doing the if you're focusing on the entire stack you're gonna suck at everything that's our opinion um and so yeah now where is everything at um on on the car side our V2 is steaming ahead got Audits and everything coming in and we're really making sure hey we're onboarding good

partners that can build nice sustainable DSS's and we can give them really a nice white glove service and and that that's my sales pitch to anyone listening that's interested it's we give you nice white glove service if you're building on car you're you're talking with me you're talking with the other core Engineers that built a protocol right you're not talking with an Integrations engineer that's three levels down from the guys designing the protocol right we're we're deep in the mud so if something sucks I will have to deal with it because I need to continually respond and fix it right and so that's that just us being good developers building good sdks building um building the liquidity building the the infrastructure so that people can easily build DSS's and and scale them to to their needs um the

other thing that's I think one of the differences one of the things we recognize because we were a second player the second player is that we were able to see hey there's 22 billion doll or 1520 billion nigen how are you going to produce yield on that amount of capital that's a lot again you need to produce a competitive yield too because again the risks are a little bit more um are a little different than than the staking risk right so you need to produce a pretty sustainable yield here and you need to do it for a long period of time else the capital is going to go rush out once the farming is done and so we just took one important measure which is we started capping deposits at a billion first you like let's not put the the car in front of the horse right you

need to build all the infrastructure you need get the everyone lined up and deployed before you start really scaling the capital else the chart sort of looks like this you don't want the chart to look like this you want the try look like this right so we're like hey let's get uh let's cap it out a billion and then let's really like make sure we have our ducks in a row let's get all the uh DSS uh teams aligned Wormhole being one of them that we announced today let's get them aligned let's get them building let's make sure everything's Rock Solid sdks are Rock Solid contracts are very secure and audited multiple times let's get them putting their proof of Concepts out there and then we can sort of ra those limits and really let the capital

come in as it's needed versus for hype um but yeah that's where we're at right now I think for the most part all three are are are in the same place it's really a question about how much stuff they're managing we've TR to minimize some of the stuff we're managing because we really want to focus on is creating a really good product for our end users which are you know developers that are trying to extend what they've built and make it more decentralized and so we're really focusing on making sure we can serve them instead of playing like politics yeah and and and it's it's fascinating to bring up the point that you have the benefit of being second and if we look back in history it's very often not the first that ends up winning in the long term the first is the they

deserve all the credit for the being first but they make a lot of mistakes because they're first because you didn't have any hindsight you didn't know and you guys have that benefit I want to talk a little bit um I want to talk about points and car's points program so we're going to come to that in a second second because I think our listeners are going to be really excited to learn about that but um I just want to talk a little bit about um the demand side which you've brought up is the the main question about reaking is around the demand side of the protocols who want to use reaking to secure their networks because there's there's so much value locked in reaking but then is there enough demand to actually use it all what are your thoughts there yeah

you you have to really considered demand because I don't know many situations where you need five or 10 billion Economic Security I really don't people Cosmos chains that are secured with a lot less okay so I don't know how many like how much like if you really need to go into the the multi-billions of Economic Security um at that point people will make the argument you just build the L1 right um so our view is hey you need to create to create a sustainable yield you need to be able to um you need to be able to limit create limits and create lock inss and that and I'll explain more in a second but that will sort of enable a sustainable economy by limits if you have a successful AVS or

DSS that's actually producing a decently sustainable yield the capital come flowing in pretty obvious right okay once the capital comes flowing in now if it's double the capital the yields half right but you don't even not you be utilizing this additional Capital our view is a lot of these systems will have caps or deposit limits where they' be like hey I only need a million dollar of Economic Security or I'm building something small I only need $100,000 Economic Security once you have a cap then you can then pay a sustainable yield because you know exactly how much like you're basically saying hey this is what I need and this how much I want to pay and the market will be like if it makes sense it'll fill up your cap if it doesn't make sense then you can readjust right second is duration right if I'm

building a DSS I don't want to be woke up in the middle of the night because half my stake was out right and if for example if you're a bridge and you're using Economic Security it's not a great situation where you like you have a bunch of transactions being bridged because something new launched on new chain and then half the this like Economic Security half to stake or half to restake is it taken um out so if you can create a mechanism where they can set the limit for how much they want to take in which is super simple as one line and you create some fixed income mechanism where people can basically lock in for a duration of time and they're guaranteed some set amount of reward you can actually create like you can create a sustainable Market with that um for the the avss for DSS's they

have a set amount of Economics they they know their needs and those needs are met for a duration of time so they can and after that duration they can you know plan to increase decrease change their rewards however they see fit um they can plan ahead and then they can focus on making their DSS or ABS better and improving it and offer improving their offerings versus sitting there trying to court uh more and more TBL over and over T tvl games are almost zero some like okay you're going to play tvl games the entire time but it's not going to it's not going to make the thing that reaking is trying to achieve better if everyone's just trying to take TV off from each other um but that's the way we look at the sustainable maral it's like you need to you need to allow DSS to

have two features lock get users to lock in for a certain amount of time and for a fixed amount of yield and then you can it's Off to the Races I think it sounds so obvious when you say it but this is why it's so new like what you're saying is like I think 5 years from now it'll be oh yeah that is the exact Playbook that will be used but because it's so new we're still figuring this stuff out and it's wild to be in the space where yeah it's it's so funny when when something so obvious is so right um I want to talk a little bit about the opportunity for investors and for listeners uh and you can talk what any opportunity you want but I'm I'm I'm

leaning towards car points being the opportunity that I'd like you to discuss but feel free if you see other opportunities to share that as well so car right now we have deposits open so users can deposit not only eth um steth they can deposit Stables um things like Athena usdc Etc they can even deposit BNB R Bitcoin we offer quite a few assets again is because we believe even allowing people to restake any asset right so if you have those you could deposit it into carak and and and the points will crew um the other opportunities I think are if you're building right if you're building

something if you're building an AVS and you're compelled by what I've the positions uh I've stated and how we approach this whole restating environment you can reach out if you're a protocol that hasn't explored reach out because we can help you we can walk through parts of your model where we can potentially introduce some decentralization Wormhole was a great example of that um and yeah if you're just a regular consumer like look into re like come read our docs read some of the stuff we post um we're not going to publish research papers we don't even have a white paper because we're like the concept is so simple there's no need to

add jargon there's no need to there's no need to stress out what it really is right um this is in the end creating great developer infrastructure creating great document Creations creating great sdks and adding SL and creating a Marketplace for slash security but your developers are customers so we're you know that's our Focus we're not we don't care about writing papers we don't care about writing massive white papers that few people read we're creating things that a bunch of Engineers will look at we're creating very simple straightforward guides that retail can look at and and even the institutional guys can look at and have a clear understanding of exactly what's happening what are the risks and how do I participate um but yeah that's sort of

my little Spiel any timeline on your points program I can't say any end or anything like that but you could see from our philos like look at our our our philosophy here we came out two three months ago we were able to achieve a billion within a few weeks we're moving we're fast moving team we're not getting deep into the politics we don't really care for that delivering the product super fast and glean what you want from that we're we're we're we're Hustlers we're here to deliver a great product for for users and and we move fast so you know glean whatever you want from that man I'd love to hear it anybody who comes on the show and tells me they're a hustler I mean right on all the power you to you that's exactly what we need more of in this world okay final

question uh for those who uh are on the Builder side and would like to get in touch with you or your team uh how do they get involved uh where how can they reach out to you or to the rest of your team yeah so I mean we're we're super accessible like you can you can reach me if you really want um you can DM us on Twitter you can DM the car Twitter account you can um we like if you're an operator basically if you run validators and you want to become a validator uh and run uh be an operator on K we have an operator form on our site you can reach out um reach out to team members yeah like reach out in whatever Avenue you have we'll put you in in touch with the right people on the team um and

you'll go right to the top basically right so we'll give you right we'll bring you right to to the top and and we'll help you out coming up with solution um figureing out what your needs are Etc right on well I won't put your uh personal Telegram in the show notes but I will put car's Twitter uh and we'll have some other links in the show notes for those that are interested we'll also have a link to car's website and where you guys can go if you want to deposit some of the tokens that they accept right now and get involved in their points program it's a great opportunity which we have been pushing to everybody listening for a while now if you're not staking you should definitely be staking and if you're not raking I think after listening to this episode you're going

to want to be doing that because there's just so much potential here and so much opportunity and we're just getting started Drew shout out to you and your team thanks for all your hard work excited to see where you guys go in the future thanks for having me thanks for listening in everybody thank you for listening to milk Road radio the e eest path to get smarter about crypto if you like this episode share it and hit subscribe or follow so you don't miss out on the next one there's also a link in the description to our free 5minute daily newsletter where we simplify crypto for you while making you laugh and if you're willing to step up your crypto investing game then we'll leave a link to milk Road Pro as well your number one resource to help you invest successfully in crypto one final note

this podcast is for educational purposes only and nothing we say is financial advice crypto is risky so you should never invest more than you're willing to lose thank you friends and we'll see you in the next one