Understanding Liquid Restaking
Last updated
Last updated
Renzo is a liquid derivative platform built on EigenLayer. It serves as the interface to the EigenLayer ecosystem by securing Actively Validated Services (AVSs) and offering a higher yield than ETH staking.
For every LST or ETH deposited on Renzo, it mints an equivalent amount of $ezETH.
Find more info on $ezETH here
How it works:
Renzo is built to be primary on-ramp / off-ramp for Ethereum restaking, using a combination of smart contracts and operator nodes to secure the best risk / reward restaking strategy.
AVS in Eigenlayer are decentralized services that will inherit Ethereum's security via EigenLayer.
A restaking strategy is a unique position where the user decides to secure one of the many AVS or a combination of them.
The number of strategies possible for securing an activity increases with the number of AVSs. Each AVS presents a unique entry point for rewards and relevant slashing risks, and the more AVS you have, the more diverse strategies are possible to secure them effectively.
To quantify, the number of possible strategies is expressed with the equation:
This formula considers all possible combinations of securing AVS, from securing one to securing all AVS.
Consider a scenario with just 3 AVS - A, B, C. Number of strategies possible are
AVS A: Securing only AVS A
AVS B: Securing only AVS B
AVS C: Securing only AVS C
AVS A and AVS B: Securing both AVS A and AVS B together
AVS A and AVS C: Securing both AVS A and AVS C together
AVS B and AVS C: Securing both AVS B and AVS C together
AVS A, AVS B, and AVS C: Securing all three AVS simultaneously
In this scenario, there are 7 different strategies to secure the activity, based on whether you secure each individual AVS or their combinations.
We will also get 7 if we apply the above equation.
Now, as the number of AVS increases so will the number of strategies. In fact, this increases exponentially,
At 15 AVS we will have 32,767 strategies possible. As you can imagine, evaluating the right combination of AVS while optimizing for risk-reward and actively managing these positions gets more tenuous as more AVS join the network.
