The market for staking protocols is rapidly developing, and the Reverie team predicts that in the next few years, there will be new projects, market structure adjustments, exclusive AVS competition, subsidy competition, and the rise of one-stop encrypted services.
At Reverie, we have spent a lot of time researching staking protocols. For us, it is an exciting investment category because everything is still unclear (opportunities exist in uncertain markets), and there are many things happening (dozens of projects will launch in the staking field in the next 12 months).
In our research on staking mechanisms, we have formed some viewpoints, so we would like to make some predictions about how the staking market will develop in the next few years.
Many things are new, so what applies today may not apply tomorrow. Nevertheless, we still want to share some preliminary observations on the business dynamics of the staking market.
LRT as a leverage point
Currently, LRTs like Etherfi and Renzo have a strong position in the staking supply chain: they are in a privileged position as they are close to both the supply side (stakers) and the demand side (AVS). By operating in this way, LRTs can determine their commissions and influence the commissions of underlying markets (such as EigenLayer and Symbiotic). Given their strong position, you can expect to see staking markets launching first-party LRTs to control third-party LRTs.
AVS and stakers as leverage points
The best markets in the world have two characteristics: a decentralized supply side and a decentralized demand side. So what happens when there is an imbalance in the market, with one side more concentrated than the other or both sides concentrated?
Imagine a simple apple trading market where the largest apple seller controls over 50% of the apple supply. In this case, if the market operator decides to increase the market commission from 5% to 10%, the largest apple supplier has the ability to threaten to stop trading on the platform.
Similarly, on the demand side, if the largest apple buyer controls over 50% of the apple demand, then if the market operator increases the market commission, the buyer also has the ability to threaten to stop trading on the platform (or possibly directly contact the apple supplier).
In the context of the staking market, if the final market structure is concentrated on the AVS side (with the top 10% of AVS accounting for over 50% of revenue) or the staker side (with the top 10% of stakers accounting for over 50% of deposits), the natural result will be that such trading platforms will be restricted in extracting their service fees (commission), and therefore their value pricing should be relatively low.
Although there is not enough data to prove this, it is intuitive to say that there may be some important players monopolizing the industry: large AVS accounts are likely to dominate the majority of trading volume, thus gaining a certain negotiation advantage in the future market service fee rates.
Competition for exclusive AVS
From the perspective of each staking market platform, anything that can be done that competitors cannot do is worth doing. As the most feasible differentiation strategy for staking market platforms, providing exclusive AVS access to users, whether through in-house developed first-party AVS like EigenDA or through exclusive partnerships with third-party AVS. In concept, this is similar to Sony launching exclusive games only available on the PlayStation platform, all aimed at driving user growth on the platform.
Based on this information, we expect that staking markets will take measures such as launching more first-party AVS or reaching exclusive agreements with third-party AVS. In short, in the coming months, we expect platforms to compete for more AVS resources, and we may see AVS become the focus of competition among platforms.
AVS subsidies
AVS needs to pay service fees to operators and stakers, which essentially means that AVS needs to pay with their own ether and stablecoins, or possibly with points and future airdrops. However, considering that most AVS are still in the early stages and lack tokens, have a small balance sheet, and have imperfect points systems and airdrop designs, it is difficult to attract operators and stakers to sign contracts (most of EigenLayer’s collaborations are customized contracts negotiated privately). In simple terms, this is a situation where a customer wants to purchase a service but currently lacks the funds to do so.
To facilitate the operation of this market, staking markets are likely to “front the payment” to operators and stakers during the initial period, either through their native tokens, assets on the balance sheet, or possibly through the issuance of “cloud credits” for AVS to consume with operators and stakers. As a return for the prepaid funds, we expect AVS to promise airdrops and token distributions to the staking market. Alternatively, the staking market can prepay this money to AVS to incentivize AVS to choose to work with them rather than other competitors.
In short, we expect that in the next 12-24 months, staking markets will compete through subsidies to AVS. Similar to the dynamics of Uber and Lyft, staking markets that have the most dollars and tokens to spend are likely to be the ultimate winners.
White-glove user onboarding
Going from “I want to deploy an AVS” to actually getting it up and running is more challenging than it seems, especially for small teams with limited development capabilities. There are no standard answers to questions such as security configurations, deadlines, operator rewards, penalty items, and standards.
Best practices will eventually emerge, but for now, staking markets need to help AVS teams address these issues (it is worth noting that EigenLayer does not yet offer payment or slashing functionality).
Therefore, we expect successful staking markets to have a certain enterprise sales business color, similar to enterprise sales that provide “white-glove” integration and service support to new customers, helping them onboard users quickly.
“Graduating” from the market
The most successful AVS projects may “graduate” from the staking market.
Currently, staking is most associated with small-scale projects that do not have the time, funds, brand, and network to recruit validators or have a high-value token to secure the network. But as projects scale, they will naturally choose to leave the staking market and recruit their own validators and use their own tokens to secure the network.
Conceptually similar to dating apps, successful users leaving the platform (e.g., Hinge, Tinder). However, for market operators, this churn is bad news because you are losing a customer.
One-stop encrypted SaaS store
To illustrate this observation, let’s take a closer look at history: cloud service providers like AWS provide developers with efficient access to all the resources they need (such as hosting, storage, and computing power) to develop apps or web services. It significantly reduces the cost and time of software development. This has created a new highly specialized category of web services. Cloud service providers have become “one-stop” service providers for developers to access all non-core business logic they need through their own cloud services and a large number of third-party “microservices.”
Similar to staking markets like EigenLayer, their goal is to create a set of similar microservices for the blockchain field. For example, before EigenLayer, encrypted microservices could either centralize their off-chain components (and transfer the risk to their customers) or bear the cost of initializing a group of operators and incentive mechanisms, “purchasing” a certain level of security.
For microservices, staking markets have the potential to solve this phenomenon. If it works as expected, microservices can prioritize security without compromising on cost and time to market.
Let’s say you are developing a cost-effective zk-rollup. If you enter a staking market like EigenLayer, you will have multiple options for core services, such as DA and bridging, to easily get started. Through this process, you will see dozens of other AVS microservices that can be integrated.
The more microservices staking markets provide, the better the user experience. Users no longer need to choose services from multiple independent vendors but can purchase all the necessary services from one staking market. Users can come for service X and stay for services Y and Z.
Some AVS will have network effects (e.g., pre-configured)
So far, staking scenarios have mainly focused on outputting validators and economic incentives from Ethereum. However, there is another type of “inward” staking scenario that may add new functionality to its consensus mechanism without the need to change the Ethereum protocol.
The idea is simple – allow validators to choose to add some additional content to the blocks they propose in exchange for rewards. If they fail to meet these commitments, they will be held accountable. We expect that only a few types of commitments may be sufficient to attract a large number of participants. Although there are only a few types, the potential value flow that these commitments can bring is enormous.
Unlike “external” staking use cases, the effectiveness of such use cases is directly related to the participation of validators. In other words, even if you are willing to pay to join a block, if only 1 out of 10 validators chooses to comply with this commitment, it will not be very useful.
But if every validator chooses a certain type of commitment, then the guarantee provided by this commitment will be equivalent to the guarantee provided by the Ethereum protocol itself (i.e., valid blocks). Based on this logic, we can expect that such scenarios will have strong network effects: as more validators join a certain commitment market, AVS users will benefit from it.
Given that these AVS scenarios are still in their infancy, the logical channel to promote their application seems to be through sidecar software and plugins for Ethereum clients (such as Reth). Similar to the separation of proposers and builders, proposers are likely to outsource this work to professional organizations and receive returns through revenue sharing.
It is currently unclear what form these AVS will take. Although it is possible for a single entity to establish a general market that can be used by any type of commitment, we expect that several players focusing on different demand sources may emerge (e.g., those focusing on L2 interoperability and those focusing on decentralized finance on L1).
In summary
The business dynamics of the staking market are a treasure trove worth delving into for students of business strategy. From the above content, you may have already seen that we have gained a lot of enjoyment from in-depth research on these projects.
Furthermore, we believe that it is more meaningful to build first-party infrastructure that allows third parties to build LRTs within the protocol than to build authoritative first-party LRTs.
We have found a helpful analogy to view L1s like Ethereum as physical clouds and protocols like EigenLayer as the virtualization of these physical data centers. Similar to building data centers around the world, it is almost impossible to replicate the number of operators and economic interests that protect Ethereum. Some people try to do this on a smaller scale (e.g., Cosmos), but as with the cloud versus on-premises, renting security from an existing network always wins in terms of cost and time to market. Staking markets like EigenLayer aim to drive the emergence of similar categories of encrypted microservices to accelerate development, just as the cloud did for Web 2.
We have already seen the effect of this unlocking, as there are approximately 40 microservices in development on EigenLayer alone. For example, if you are a Rollup developer, you can integrate an oracle to support your DeFi ecosystem, choose to join a privacy service to protect user transactions, integrate an off-chain co-processor to provide superpowers to my application, integrate a policy engine to ensure compliance, and integrate security services to protect users. As a result, your Rollup can offer a more feature-rich development platform than any product on the market today. Importantly, everything works as expected, and you will be able to obtain these features at a fraction of the cost and time of internal development.
Examples could include L2s wanting to pre-confirm packages to speed up their finalization time, DEXs auctioning the right to the first transaction in the next block, lending protocols auctioning liquidation rights (i.e., placing trades directly after the next oracle update), or seekers and builders wanting to purchase the entire block from future proposers.
Tags
EigenLayer
Rollup
Ethereum
payment
Source link:
https://www.theblockbeats.info/news/53630
Note: The opinions expressed in this article do not represent investment advice.
Original article link:
https://www.bitpush.news/articles/6802641
Related news
How to view the future market impact of Ethereum ETF: Compliance brings about “copycat frenzy”?
[BitPush Daily Market Dynamics] Market Digests ETF Good News, $3,800 may be a key level for ETH
EF has no dreams
Taiko airdrop controversy: a project that claims to be completely decentralized and a founder who claims to have no transparent rules
The potential of Ethereum goes beyond the approval of spot ETFs