Original Title: The bullish case for Solana (Re)staking
Original Author: tradetheflow_, Crypto Researcher
Original Translation: Ashley, BlockBeats
Editor's Note: Currently, Ethereum is the main battleground for restaking, but with Solana's rapid development in this bull market, its low cost, high throughput, and strong network effects make it a potential hot track for restaking. The author explores the market opportunities for Solana restaking, including its ecological maturity, innovative potential, network scalability, and optimization of capital efficiency in DeFi.
The following is the original content (reorganized for readability):
Restaking is a simple yet impactful concept: it allows staked assets to be reused across multiple decentralized services, or as Jito refers to them, Node Consensus Networks (NCNs).
This approach brings multiple advantages. The most significant is that it enhances the security and integrity of decentralized services, allowing them to leverage the economic security of L1 without expending vast resources to design their own security models (which are often more fragile). For stakers, it also improves capital efficiency, as a single asset can simultaneously provide security for multiple decentralized services, potentially yielding higher capital returns.
In fact, many top industry figures believe that restaking is a disruptive innovation capable of building a more secure, flexible, and scalable blockchain environment, accelerating industry development. This has also sparked significant market interest, making restaking one of the largest tracks by TVL on Ethereum.
However, to date, restaking has primarily focused on Ethereum, as it is considered the PoS blockchain with the highest economic security and the widest adoption. But with Solana's strong growth since this bull market—especially against the backdrop of relatively stagnant activity on the Ethereum mainnet and a significant migration of liquidity to L2s (like Base)—a new question arises: Does Solana have sufficient reasons to support restaking?
In this article, we will explore the potential for restaking on Solana from multiple angles and analyze the feasibility of this market opportunity. Let’s dive in.
Solana's maturity is sufficient to support restaking
For restaking, the underlying public chain must possess strong economic security. This has always been Ethereum's advantage: currently, the Ethereum mainnet has 34.3 million ETH staked (worth about $124 billion), 4,701 block validators, six consensus clients, and as one of the oldest and most reliable public chains for application development, it has a very high industry reputation. Therefore, Ethereum has become the preferred platform for restaking.
However, humans often tend to extrapolate the status quo into the future, assuming that Ethereum will always maintain its dominance. But history tells us that technological change is often driven by creative destruction. For example, Yahoo was once considered the dominant player in the search engine space, only to be surpassed by Google. Similarly, IBM was once seen as the ultimate winner in personal computing, but eventually, Apple took its place.
So, are we witnessing a similar moment in Ethereum's history? Is it still necessary for the entire restaking stack to rely entirely on Ethereum? Especially in light of the trend of new asset issuance on the Ethereum mainnet shifting towards L1s like Solana or L2s like Base, and the increasing uncertainty in Ethereum's development direction, we need to rethink this question.
If we believe that restaking is indeed a game-changing technology, then we should consider expanding it to other L1s, not just limited to Ethereum. This would allow developers to freely choose from which consensus layer to derive trust.
In this context, Solana is undoubtedly a strong candidate for restaking. Since this bull market, Solana has become the fastest-growing L1, and its economic security and ecological maturity have significantly improved. As of now, about 65% of the circulating supply of SOL is staked, with a total value of approximately $73 billion (up from just $24 billion a year ago). Additionally, Solana has nearly 1,400 block validator nodes and supports two existing client validators, with plans to add new clients like Firedancer, Sig, and Agave in the future.
More importantly, Solana is known for its extremely low transaction costs and very fast transaction speeds, and its adoption rate among users and developers continues to rise. Solana is currently the fastest public chain for application development in the crypto industry, achieving genuine organic growth and successfully overcoming the cold start problem, establishing strong network effects. All of this indicates that Solana's ecosystem is mature enough for restaking to be practically feasible.
Restaking on Solana has greater potential than Ethereum
Ethereum is the pioneer of smart contracts, but its high Gas fees limit the scope of on-chain application development. In contrast, Solana's architecture allows developers to create richer application forms at the L1 level. Therefore, we can argue that the design space for restaking on Solana is larger than that on Ethereum.
First, Solana's low transaction and computation costs lower the entry barriers for Node Consensus Networks (NCNs). Unlike Ethereum, where high fixed costs limit participation, Solana supports smaller-scale, more cost-effective, and more efficient NCN deployments, allowing for optimization for specific use cases. This not only allows for more services to be outsourced, reducing reliance on direct on-chain applications, but also expands the interoperability of the entire ecosystem.
Second, NCNs on Solana can handle more complex operations, and code can be deployed at a higher density without affecting on-chain computational capacity—this differs from the design of EigenLayer on Ethereum. This makes on-chain verifiability, on-chain reward distribution, and on-chain data publishing possible, enhancing the overall flexibility and robustness of restaking. While Ethereum serves as a testing ground for restaking, in the long run, Solana's restaking seems to have greater potential in real-world application scenarios.
Additionally, in terms of liquidity restaking tokens (VRTs), Solana has significant advantages over Ethereum. On one hand, Solana's low costs can greatly reduce the operational costs for liquidity restaking token providers. In a business model where every basis point is crucial, this cost optimization not only improves profitability but also fosters market competition, creating a more vibrant ecosystem where different VRTs can offer diversified restaking strategies and more flexible slashing conditions.
On the other hand, liquidity restaking on Solana is also more affordable for users, as low transaction costs lower the participation threshold, allowing them to more easily use liquidity restaking tokens across various DeFi applications without constantly worrying about high fees. This is crucial for driving long-term capital inflows.
Restaking can drive innovation in the Solana network
Solana's vision has always been to become a global computing interface where everyone can build applications. To achieve this goal, Solana has consistently focused on enhancing the throughput of the underlying chain and reducing latency.
This is a strong and reasonable vision. However, physical laws cannot be defied, and we cannot increase throughput tenfold or reduce latency tenfold in a short time. Achieving an order of magnitude improvement requires substantial resources and long-term effort. Therefore, while this may not be achievable in the short term, people are gradually realizing that not all computations need to occur on L1. This is also reflected in recent discussions about "network extensions."
From this perspective, restaking can bring new design possibilities for the expansion of the Solana network and the "network extension" plan. Its design space is vast, and although it is currently unclear how this mechanism will be specifically implemented, it is likely to evolve into a powerful infrastructure-level scaling tool. For example, the @SonicSVM project claims to be the first Layer 2 in the Solana ecosystem designed for sovereign gaming, built on HyperGrid, which is a horizontal scaling framework for the Solana virtual machine. This project plans to leverage Jito (Re)staking to enhance the security and operational efficiency of its SVM, supporting multifunctional applications within the Solana ecosystem, covering gaming, DeFi, and other use cases.
Additionally, the strong security guarantees provided by the restaking mechanism can effectively enhance the reliability of the Solana network. For example, the Jito TipRouter NCN is under development, aimed at decentralizing MEV tip distribution and enhancing its security. Another example is Nozomi, a protocol launched by @temporal_xyz, which will utilize Jito (Re)staking to reshape the microstructure of Solana's transactions and address issues such as sandwich attacks, slippage, and transaction timeouts. These innovations align with Solana's long-term vision and can significantly optimize the user experience, making Solana not only fast and low-cost but also more secure, stable, and user-friendly.
In addition to high performance and strong on-chain data metrics, Solana also embodies a spirit of innovation. Over the past few years, we have witnessed the rise of a series of successful projects such as Jito, Kamino, Jupiter, and Helium. But this is just the beginning; the number of projects choosing to build within the Solana ecosystem continues to grow.
If Solana is becoming the preferred public chain for developers, then restaking will undoubtedly occupy a place within it. It can extend Solana's economic security to a range of key services within the ecosystem, such as oracles, cross-chain bridges, and sequencers, even though these components typically do not run directly on L1, they remain critical parts of the ecosystem.
Although smart contracts and their interactions benefit from Solana's security, these peripheral components often still require independent economic security guarantees. This means they either need to raise substantial capital to incentivize validators or compromise on security. This could lead to a paradox: the smart contract layer may be secure, and the computational results correct, but if the oracle provides incorrect data, the entire system still faces risks. From a security perspective, the overall security of the system ultimately depends on its weakest link.
Therefore, some key services within the Solana ecosystem can leverage Solana's restaking to enhance their security. For example, @switchboardxyz, a permissionless oracle network on Solana, is collaborating with Jito (Re)staking to ensure the reliability of its data sources. If this model is successfully implemented, it will simultaneously enhance the security and stability of the Solana network.
Restaking optimizes capital efficiency for DeFi users
Restaking offers a higher annualized return compared to regular staking on Solana. Since one of the core goals for DeFi users is to optimize capital efficiency, restaking becomes an extremely attractive option. It allows DeFi users to unlock new yield opportunities on Solana without additional capital investment. For instance, instead of purchasing liquidity staking tokens to earn SOL staking rewards and using them in the DeFi ecosystem, users can opt to buy liquidity restaking tokens, which not only yield a higher APY but also allow continued free operation within the DeFi ecosystem.
Given the rapid growth of DeFi within the Solana ecosystem, we can assert that a mechanism capable of optimizing capital efficiency will help attract significant liquidity in the long term. In fact, DeFi activity on Solana is surging, with the total locked value of Solana DeFi increasing from $1 billion to $10 billion over the past year, and the growth momentum remains strong, further proving the market potential for Solana restaking.
Conclusion
Restaking on Solana is still in the early experimental stage, but it has already shown tremendous potential, with many interesting application scenarios gradually emerging. If we assume that, in the long term, Solana can capture a market share comparable to Ethereum's restaking market, then its market opportunities will be substantial.
Currently, the restaking infrastructure on Solana is primarily dominated by two core protocols: Solayer and Jito (Re)staking. As a pioneer, Solayer has built a complete restaking stack and achieved over $350 million in TVL. However, in the long run, Jito is more likely to become the dominant player in this narrative. With a strong technical foundation, the highest TVL in the Solana ecosystem, and a clear vision, Jito has established its leadership position within the Solana ecosystem. Additionally, Jito's restaking stack design is highly flexible and has integrated liquidity restaking tokens from the outset while supporting multiple assets, further enhancing its growth potential for the future.
Regardless, I would like to conclude with a quote from Freeman Dyson:
"When great innovations occur, they almost always appear in a chaotic, incomplete, and confusing form. Even their discoverers can understand only half of them; for others, they are even more of a mystery. If an idea does not seem crazy at first, then there is no hope for it."
This quote perfectly describes the current state of Solana restaking: early, full of potential, and nurturing new DeFi opportunities.
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