DeFi & Staking - Shaping the New Era of Investments // Blockchain Futurist Conference 2024

Staking involves locking up 32 ETH to run a validator node on the Ethereum network, earning rewards in exchange for securing the blockchain

Current staking yields come primarily from token inflation and network fees, with a shift needed toward more sustainable revenue models based on real economic activity

Restaking allows validators to use their staked ETH to secure multiple networks simultaneously through protocols like Eigenlayer, potentially increasing yields but introducing new risks

Key risks in staking include:

• Smart contract vulnerabilities
• Slashing penalties for validator misbehavior
• Key security management
• Lockup periods limiting liquidity
• Counterparty risk with certain staking providers

The “risk-free rate” comparison for staking yields is considered problematic, as staking inherently carries various technical and operational risks

Industry evolution expected to bring:

• More institutional involvement
• Increased regulatory oversight
• Better infrastructure
• Shift from speculation to sustainable business models
• New staking use cases beyond network security

Investors should:

• Thoroughly research protocols and understand associated risks
• Consider their risk tolerance when choosing staking options
• Focus on projects with clear paths to revenue
• Not risk more than they can afford to lose

Future sustainability of staking and restaking yields will depend on:

• Actual network usage and fee generation
• Success of AVS (Actively Validated Services) in attracting customers
• Development of real economic activity beyond token inflation