Coinspeaker Uncovering Ins and Outs of Restaking: Deep Dive into Solana, BNB, and Ethereum for Crypto Investors
In an interview with Amadeo Brands, Co-founder & CEO of YieldNest, we’re discussing the practice of restaking in Solana, BNB, and Ethereum blockchain networks and highlight the benefits, risks, and differences in staking rewards, governance, and infrastructure.
Can you explain what restaking is, and why it is important for crypto holders and validators?
Restaking is the practice of redeploying (or restaking) staked assets to earn additional rewards. This is important for the crypto ecosystem because it allows one to earn extra yield.
How do Solana and BNB’s staking and restaking mechanisms compare to Ethereum’s in terms of rewards, governance, and validator incentives?
While Ethereum offers a robust reward rate of around 3.43% with a staking ratio close to 30%, Solana doubles the numbers – its reward rate is 6.9% and staking ratio of 65.97%. BNB Chain’s delegated Proof of Stake model boosts validator performance and centralizes governance. It supports the overall decentralization of the network. The staking rate is below 1% (i.e. 0.12%).
In terms of security and decentralization, what are the strengths and weaknesses of restaking in Solana and BNB compared to Ethereum?
Ethereum has a higher reward rate than BNB but lower than Solana’s. This means that the potential for restaking on BNB is lower, and on Solana, it is higher (because there is more additional yield to “restake”). Ethereum has more validators (1M+) than Solana (1380), who both have a much higher validator set than BNB’s 45. The difficulty of colluding with each validator makes Ethereum the most secure network.
What are the key advantages of restaking in Solana and BNB compared to Ethereum, particularly in terms of performance, efficiency, and infrastructure?
Low transaction costs and high throughput are the primary advantages of restaking in Solana and BNB Chain. Solana’s L1 architecture allows for thousands of transactions per second, which is essential for applications requiring rapid execution, such as decentralized finance (DeFi). BNB Chain offers similar benefits thanks to its more “no frills” architecture.
How do issues like Solana’s past network outages or BNB’s centralization affect restaking compared to Ethereum?
Solana may offer higher yields but comes with higher operational risk because of possible network outages. In the past, these directly halted all network activities, including transaction processing and restaking operations. This can delay the accumulation and reinvestment of staking rewards, affecting compounding strategies. It is especially risky when restaked assets are borrowed against and price fluctuations occur with the network down – which can require liquidations on a chain unable to process them.
BNB Chain offers potentially lucrative staking rewards influenced by centralized decisions but carries risks associated with centralization, including regulatory scrutiny, which could decrease yields.
Ethereum, while potentially offering lower yields than Solana and BNB Chain, provides a more stable and predictable environment for restaking, suitable for those prioritizing security and long-term reliability.
How do staking yields, slashing penalties, and risks compare across Solana, BNB, and Ethereum for restakers?
Solana provides for slashing penalties, primarily for validator downtime or consensus failures, but these have not been implemented yet. Given the network’s architecture, these penalties will be crucial for maintaining its integrity but shall be structured not to be overly punitive unless in cases of clear malicious intent.
Slashing on BSC is rare. Validators’ penalties are mainly for double-signing or security breaches. The network focuses more on rewarding validators for participation than penalizing them, except in clear misconduct cases.
With the growing DeFi and NFT ecosystems, does restaking on Solana and BNB offer different opportunities or risks compared to Ethereum?
Risks on both networks are higher. That will likely need to be adjusted with attractive yield opportunities to attract capital to these networks – especially an EVM-compatible network such as BNB Chain. Users may perceive the rewards to be worth the risk.
How do you see the future of restaking evolving in Ethereum compared to Solana and BNB, especially with innovations and upgrades on each platform?
Restaking on all networks is unproven in terms of economic sustainability. With that being said, Ethereum’s EigenLayer has already activated rewards powered by the AVSs themselves, whereas competitor networks’ incentive structures rely on more speculative points systems. This makes restaking less reliable as a source of income on these other networks. Restaking architecture is complex, and it may take at least a year for other networks to catch up with advances made towards economic sustainability.
For a crypto investor choosing between Solana, BNB, and Ethereum, what key factors should they consider when deciding where to stake or restake?
The main factor users should consider is safety. If they cannot rely on their investments being safe, they will lose yield and the asset they initially staked. This could be catastrophic for a user’s portfolio.
About the speaker:
Amadeo Brands, co-founder & CEO of YieldNest. An entrepreneur, investor, and technologist deeply involved in the crypto space since 2012. He has extensive experience in writing, development, research, and market analysis. Amadeo was also a co-founder of the Curve Llama Risk Team and a Fund Manager/partner supervising technical strategies at Cyber Capital and DeFi Capital.
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Uncovering Ins and Outs of Restaking: Deep Dive into Solana, BNB, and Ethereum for Crypto Investors
