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Byzantine Finance empowers users to optimise their restaking portfolios by combining the ability to create custom restaking strategies with a decentralised application (dApp) that integrates comprehensive, real-time risk data. Our platform is designed to help you navigate the complexities of restaking, enabling you to maximise returns while managing risks effectively.
Restaking is an innovative investment primitive that allows stakers to use their staked tokens as collateral to secure other decentralised networks. By participating in restaking, users have the potential to increase their rewards and earn additional yield on their staked assets. Byzantine Finance is at the forefront of this rapidly growing market, building the tools and infrastructure needed to optimise participation and unlock the full potential of restaking.
Introduction to Restaking
For a detailed introduction to restaking, we recommend reading our blog post “Intro to Restaking”.
From a financial perspective, restaking involves lending assets to be used as collateral for the correctness of a decentralised network. This can be thought of as a form of perpetual internet bond, with assets being used to support the security of blockchain services and networks. In return for providing this collateral, the network(s) compensates the restaker with regularly accrued yield, typically paid in the network’s native token.
By leveraging restaking to build their collateral base, networks can access existing capital (stake already held on trust marketplaces like EigenLayer, Symbiotic, or Babylon) while reducing the technical risks associated with collateral provision. This makes restaking an attractive option for both networks and stakers.
Key Participants in Restaking
- Restakers
- Delegate their native ETH or Liquid Staking Tokens (LSTs) to back the work of operators.
- Receive rewards, similar to proof-of-stake (PoS) systems, for contributing their liquidity to network security.
- Operators
- Perform the validation work for the validated services, including uptime, node operation, and protocol adherence.
- Validated Services (AVSs, Networks, etc.)
- Decentralised systems seeking secure computation.
- Remunerate operators and restakers for their participation with restaking rewards, either in ETH or in their own native token.
Determining Restaking Yield
Restaking, in essence, is the practice of lending assets to networks to use as security for their systems. The yield from restaking can be thought of as the "rent" that networks pay to use these assets. Unlike traditional investments, restaking yields are not fixed. Instead, they are determined by the interplay between the network’s security budget and the total amount of assets restaked.
Calculating Restaking Yield
Consider the following example:A network sets an annual security budget of 10 ETH to be paid out to restakers. Over the course of a year, 100 ETH are restaked into the service. Assuming these numbers remain constant, the annual percentage rate (APR) for restaking can be calculated as follows:
$$APR_{restaking}= \frac {rewards_{total}} {stake_{total}}= \frac {10ETH} {100ETH}=10\%$$
This straightforward calculation shows that the yield is determined by two key factors:
- Rewards: The total annual security budget, which is fixed by the network.
- Total Stake: The amount of assets restaked, which is dynamic and determined by market participants.
Market Dynamics and Yield Equilibrium
The yield in restaking is entirely dynamic. If the yield is too low, restakers may exit, reducing the total stake and increasing the yield for remaining participants. Conversely, if the yield is too high, more restakers may enter, increasing the total stake and driving the yield down. This self-balancing mechanism ensures that the yield reaches an equilibrium point based on market demand.
The Role of Risk Data in Restaking
Determining the true equilibrium point for restaking yields requires a deep understanding of the underlying risks. If the yield exceeds the risk of asset loss plus transaction costs, the opportunity is profitable. If not, it may be wiser to explore alternative investments.In the restaking market, where data is often limited, retail investors frequently rely on market sentiment to make decisions. However, this approach can lead to suboptimal outcomes. Accurate risk pricing changes the game by enabling investors to identify mispriced network yields faster than others. By acting on this information, investors can capitalise on profitable opportunities before the market reaches equilibrium.
Why Risk Data Matters
- Spotting Opportunities: Fast access to accurate risk data allows investors to identify undervalued yields and act quickly.
- Avoiding Risks: Risk data helps investors exit or avoid investments that are deemed too risky.
- Competitive Advantage: In a nascent industry like restaking, having real-time risk data provides a significant edge over competitors.
Byzantine Finance integrates comprehensive risk data into its platform, enabling you to make informed decisions and achieve better results for yourself or your clients. Our tools are designed to help you navigate the complexities of restaking with confidence.
How Byzantine Finance Helps You Optimise Restaking
Byzantine Finance is building the infrastructure to simplify and optimise participation in the restaking market. Our platform allows users to:
- Create Custom Restaking Strategies: Tailor your investment approach to align with your risk tolerance and yield objectives.
- Access Real-Time Risk Data: Make informed decisions with up-to-date information on network performance and risk factors.
- Deploy Capital Efficiently: Use our dApp to deploy and manage your restaking portfolio seamlessly onchain.
Conclusion
Restaking represents a transformative opportunity for investors to maximise the utility of their staked assets and earn additional yield. However, navigating this emerging market requires a sophisticated understanding of risks and rewards. Byzantine Finance is here to provide the tools and insights you need to optimise your restaking portfolio and stay ahead in this dynamic landscape.By leveraging our platform, you can unlock the full potential of restaking, offering your clients innovative investment strategies that capitalise on the growth of decentralised finance. To learn more about how Byzantine Finance can help you achieve your goals, don’t hesitate to explore our platform or get in touch.
