In two years, the Ethereum ecosystem will look completely different. The reason: Restaking.

Restaking is not a new idea - its theoretical implementation and possibility has been discussed for years at this point.

But it wasn’t until December 2023 that EigenLayer removed its deposit cap and exploded onto the scene, thereby, for the first time, making it technically possible for a chain (Ethereum) to rent out its security layer to other services. Those services can in turn benefit from the most secure validator set in web3 history - at a fraction of the cost of building their own.

The system consists of two sides: The actively validated services (AVSs) - which innovate and build on Ethereum security - and the liquidity-providing restakers - who put at stake their assets and earn additional rewards for it.

AVS innovation is fundamentally limited by the amount of restaked liquidity available. Therefore, an increase in restaked liquidity implies an increase in cryptoeconomic security for these AVSs to hire, and thus an increase in possible innovation.

In that context, our mission consists of three parts:

• Develop restaking as a feasible investment primitive for institutions & web3 platforms, not just degens.
• Aggregate liquidity for restaking to boost the potential for open innovation on multiple chains.
• Ensure infrastructure security, ease-of-access, and scalability through diversification & service aggregation.

What's all this about service aggregation?

Our goal is to make restaking a feasible investment primitive for institutions & web3 platforms, not just degens. We achieve this by enabling diversification through service aggregation. 

Protocol structure & value proposition

Byzantine Finance is the restaking aggregation protocol that connects wallets, exchanges, and custodians (we group them as "investment platforms") with restaking protocols in the most favourable way for both sides:

• Investment platforms like exchanges benefit from the ability to access a wide variety of restaking protocols and their operators in a single integration, providing huge security advantages over working with any individual protocol. Byzantine abstracts away much of the technical complexity and hugely boosts go-to-market speed.

• Restaking protocols benefit from an aggregated source of TVL - Byzantine is the bridge to the investment platforms and thus liquidity-providing end users.

So, how will we get there?

Growth in this space so far has been driven by early-adopters that can be characterised as web3 native, highly risk-prone, and technically experienced. This audience is well served by existing protocols in the market. 

However, after over 140 client interviews, we realised that a restaking megatrend is already underway - the second wave of restaking is developing. This movement is driven by a very different client type: Amateur investors as well as corporate early-adopters are showing great interest in restaking. Interestingly, even institutional investors are curious to learn more and in the medium-term, they even expressed curiosity for restaking-based structured products.

Our unique market advantage is having gained two key insights about this group:

#1: They primarily invest through platforms - like exchanges, wallets, and custodians.

This means that there will soon be enormous demand for white-label restaking infrastructure. Most platforms already outsource staking services, and given that restaking is even more technically complicated, it is likely that it will be outsourced as well.

So, what kind of infrastructure is required? Is it as simple as for regular staking? In short, no.

Restaking, unlike staking, is not a specific investment, but rather an investment class. Any actual restaking investment, even just something as basic as an LRT, involves a lot of choices - like which protocol to use, which AVSs to validate, which operators to go for, etc. - and that’s before asking questions around what asset to invest and through which protocol / provider to complete the transaction.

Therefore, restaking investment can best be understood as a set of structured products. Every investment platform or provider will soon offer its own pre-packaged product based on proprietary risk analysis of the underlying AVSs, protocols, and markets.

As a result, unlike staking where the integration with one or a few professional staking provider fully satisfies the need (since the only differentiator between them is minor differences in reputation and performance), a reassessment of restaking risk could lead to an investment decision that requires radically different implementation - for example, completely different AVSs, other restaking protocols, etc. In short, restaking infrastructure must be flexible enough to accommodate this.

#2: They seek security and ease of access over yield.

A new, less experienced client group is pouring into restaking. They invest through platforms, as described above, because they do not have the technical awareness and risk tolerance of early-adopter degens to work with first-generation B2C protocols directly. Investment platforms provide them with assurances and a feeling of security. We can break down the “security drivers” into three points:

• Amateurs require security - a crypto on-boarding platform or even a CEX needs to be secure for reputation reasons. New investors will go where they feel safest.
• Abstraction requires security - when working with amateur investors, platforms often abstract a lot of the technical complexity. When doing that, it is essential to maintain extreme levels of security: Otherwise, if anything goes wrong, the platform will be on the hook both legally and reputationally. We’ve all seen what happened to Celsius. Don’t be like Celsius.
• Regulation requires security - it is no secret that the restaking market will at some point be regulated. At that point, regulation will be inspired by (1) tradfi regulation and (2) the safest available market standard. Therefore, platforms save costs tomorrow by already building in the greatest amount of safety mechanisms today.

We can conclude that any investment platform looking to offer restaking will and must prioritise security in their infrastructure selection.

Security provision in this context requires a precise understanding of the potential risks (more on that in a future blog post). The by far best way of securing a restaking investment is to remove any single point of failure - restaking security can only be achieved via diversification.

Conclusion

The next generation of restaking investors will invest through platforms, and those platforms need infrastructure - restaking is technologically more complicated than staking, and it is thus unlikely that platforms build their own solutions. So, what should that infrastructure be like?

• Client need #1: Since restaking investments will always be some kind of structured products, infrastructure needs to be flexible enough to accommodate varied investment choices and even investment changes.
• Client need #2: Platforms, in particular those catering to amateur investors and corporate investors, need to work with regulatorily compliant partners.
• Client need #3: This infrastructure needs to provide security far beyond what is currently available, which requires the ability to invest in diversified restaking protocols, AVSs, and operators.

Most web3 investment platforms already outsource staking. They are now turning to the market to provide them with a restaking solution. Unfortunately, there is no protocol that can meet their needs, especially regarding security (more on that in the next section).

That is why Byzantine Finance is a white-label protocol built around aggregation. We are uniquely able to offer quick access to secure restaking in a diversified manner - clients integrate our smart contracts once and are immediately able to use any AVS operator, and build on EigenLayer itself or any of its upcoming competitors.

Our unique advantage is the fact that we are the first to gain the insight of how deeply crucial service aggregation and diversification is for any kind of risk-optimised restaking offer.