Author: Kaori, BlockBeats
With the approval of the Ethereum spot ETF and EigenLayer announcing the upcoming launch of a governance token, the two most important narratives of the Ethereum ecosystem have made breakthrough progress this summer. In this storm of financial revolution, Kelp DAO is one of the best, rising rapidly with its unique liquidity staking solution.
According to official website data, Kelp DAO's current TVL has exceeded US$1 billion, and the total TVL reached US$1.06 billion at the time of writing. Kelp DAO, which has just completed US$9 million in private financing, is currently preparing a broader ecosystem construction plan.
In this interview, Amitej details the unique advantages of Kelp DAO and its future development strategy. By continuously expanding its cooperation with Layer 2 solutions and actively promoting its integration in the traditional financial field, Kelp DAO is steadily advancing its path in the DeFi world.
Kelp DAO’s DeFi journey
Amitej Gajjala studied at a top business school in India. After graduation, he worked in management consulting. Soon after, he joined Swiggy, India's largest food technology company, as the head of strategy and transformation. At the end of 2019, Amitej began to take an interest in DeFi. During the DeFi Summer period, Amitej began to study the staking track in the crypto field.
In June 2021, Amitej co-founded the liquidity staking protocol Stader Labs, and since then, it has started its work in the Ethereum ecosystem. Amitej mentioned in the interview that it began to pay attention to re-staking in early 2023, realizing that it would attract a large influx of funds and was an area that could not be ignored.
When asked about the background of the establishment of Kelp DAO, Amitej Gajjala replied, “In late 2022 and early 2023, we were very actively looking at the re-staking space and found that re-staking attracted a large number of users and capital, and DeFi protocols would lose a lot of capital as a result. Therefore, a lot of incentives must be provided to re-attract this capital, which will form a negative cycle where everyone is at a disadvantage. Therefore, we realized that there is a potential opportunity to build a liquidity layer that complements re-staking and DeFi.”
Kelp DAO accepts LST including st ETH, sfr ETH and native ETH. Users can obtain points and tokens rs ETH after staking, which can be used in multiple DeFi projects. Currently, Kelp DAO has been launched on the mainnet and multiple second-layer networks, and users can stake their ETH natively on networks such as Arbitrum and Blast.
Kelp DAO is somewhat similar to protocols like Lido, but focuses on re-staking rather than pure ETH staking. Kelp DAO supports LST and native tokens, covers multiple L2s, and acts as an abstraction layer on top of Eigenlayer. Users can invest without worrying about underlying technical interactions, which not only simplifies the user process, but also reduces friction and cost.
How does Kelp DAO differ from projects like Ether.fi and Renzo, and what are its unique advantages?
Amitej Gajjala: Kelp DAO has two key differentiators. One, we are a full-service LRT re-staking platform, meaning we accept LST from exchanges like Lido, Stader Labs, Frax, etc. as well as native ETH. This gives us about $30 billion or $40 billion of ETH to work with, and all of these users can participate in Kelp DAO without unstaking.
Kelp DAO runs live on 10 L2s, which means that users of these L2s including Arbitrum, Optimism, Blast, and Scroll can re-stake natively on Kelp DAO, not only Ethereum, but will soon be able to re-stake stETH directly from these L2s without any slippage and gas fees, which is the second biggest advantage.
Kelp DAO has established partnerships with many Layer 2 solutions. How do these collaborations promote the integration of Kelp in the Ethereum ecosystem?
Amitej Gajjala: Currently, we have helped implement re-staking functionality on 10 different blockchains, and the advantages here are that first of all, users can stake their native Ethereum directly on these L2s.
We work with foundations to raise awareness among L2 users, making them eligible for benefits such as re-staking rewards, Eigen Layer Points, and Kelp Miles. For example, on zkSync we are the only LRT, and on Scroll we are one of two LRTs included in the MARTS program.
As Kelp DAO prepares to launch its token, understanding its governance structure and user growth strategy is critical. Can you provide some insights into Kelp DAO’s governance structure and user attraction and retention strategies?
Amitej Gajjala: The governance token of Kelp DAO will be a very important part of Kelp's roadmap, and it has multiple uses. As we all know, one of the biggest risks in the restaking ecosystem is the potential slashing risk caused by EigenLayer, and we have designed a mechanism so that the Kelp governance token can serve as insurance for any slashing events.
For example, any KELP holder can stake KELP, and these staked KELP will serve as insurance for any future slashing events. The benefit of users staking KELP tokens is that part of the Kelp DAO's revenue will be distributed to users as staking rewards, which is the first and largest use of Kelp tokens.
The second major use is governance, any Kelp token holder can participate in proposals such as validator exits, selection criteria, AVS selection criteria, fee changes, and any important protocol decisions will be decided by Kelp governance token holders.
The third important use is that users who provide liquidity to the AMM secondary market will be eligible for additional KELP rewards or incentives. Therefore, Kelp tokens will become an important part of the Kelp ecosystem.
Kelp DAO is one step ahead in entering traditional finance
On May 22, Kelp DAO announced that it had completed a $9 million private financing, marking an important milestone in its growth. The round was led by Bahamian proprietary trading company SCB Limited and Nomura Group's digital asset subsidiary Laser Digital with $3.5 million, and other investors included Bankless Ventures, Hypersphere, Draper Dragon, GSR, DWF Ventures, etc.
As mentioned above, Kelp DAO is actively promoting cooperation with the Ethereum Layer2 ecosystem to advance its path in the on-chain world. At the same time, Kelp DAO is also expanding its territory in the traditional financial world. In the interview, Amitej said that Kelp DAO will make breakthrough progress in the fields of traditional finance, traditional asset management and family offices.
With the approval of the Ethereum spot ETF going smoothly, the relationship between the crypto market and traditional finance will become more inseparable. Kelp DAO took the lead at this point in time to reach a good cooperative relationship with traditional financial institutions, laying a solid foundation for the future expansion of the ecological map.
Kelp DAO recently announced a funding round led by Laser Digital. Previously, Kelp DAO also partnered with Laser Digital to launch a digital fund re-pledge solution for current and future purposes. Can you discuss the impact of this partnership on Kelp DAO and its place in the traditional financial industry?
Amitej Gajjala: Laser Digital was one of the co-lead investors in the round we recently closed. Laser Digital has many traditional customers who want to hold ETH or earn additional staking and re-staking rewards on their ETH. We therefore have a significant advantage in this regard as we will be the preferred rehypothecation partner in future fund launches from Laser Digital.
From a macro perspective, whenever Laser Digital launches its ETH staking and re-staking funds, they will be working with a number of financial institutions that have a large number of traditional investors participating in these funds. As the primary administrator of these funds, Laser Digital will select Kelp DAO as one of its preferred re-staking partners to deploy its users’ funds with us.
This means that in the future Kelp DAO will have a very good prospect in the traditional finance, traditional asset management and family office sectors, who want exposure to Ethereum and staking or re-staking. Kelp DAO will be selected as one of the main re-staking partners, and through Laser Digital, a large amount of ETH will flow organically into re-staking.
On the other hand, the addition of Laser Digital also brings us legitimacy, which means that our industry is very serious and we have big players like Laser Digital, who have the support of Nomura Securities, to do great things in this field. So I think this is a very important development for us and also gives us legitimacy in the traditional financial field, and people will understand that this is an important asset class that is emerging and there is a lot of interest in it.
Re-staking core players, Kelp DAO's liquidity + security double guarantee
As a pioneer in the field of re-staking, Eigenlayer has demonstrated its strong ability to provide economic security and programmable penalty conditions. As market demand increases and technology continues to mature, it is expected that more re-staking solutions will emerge on major blockchains in the future, such as Bitcoin, Solana, and BNB chains.
In this blue ocean, Kelp DAO, with its unique liquidity layer advantages, is actively promoting the development of the ecosystem and significantly improving the overall performance of the DeFi field by providing users with higher benefits and utility. At the same time, the rapid growth of the AVS ecosystem also shows the profound impact of re-staking on the entire blockchain industry.
Let’s talk about the entire re-staking space, how do you foresee its competitive landscape evolving?
Amitej Gajjala: First, we have to realize that this space is only about six to eight months old, it's very, very young. We just saw a large restaking player emerge, Eigenlayer. I believe there will be a large number of restaking solutions emerging on multiple blockchains, including Bitcoin, Solana, other chains like BNB, etc. Therefore, this space may grow 10 times or 100 times from now.
On top of these staking layers, there will be a lot of ecosystems built, like the LRTFi ecosystem, the AVS ecosystem, and there will probably be a lot of different types of sub-sectors within the staking space over the next two to three years. So my expectation for the future is that we're going to see rapid expansion and innovation in this space.
What role will Kelp DAO play in this?
Amitej Gajjala: Built on Eigenlayer, Kelp DAO serves as a liquidity layer, further enhancing this ecosystem by providing users with higher yields and utility. These liquidity re-staking tokens can be leveraged in the DeFi space for activities such as lending or participating in protocols such as Uniswap, Balancer or Gearbox. This will further the ability to leverage assets within DeFi, significantly driving the development of the entire ecosystem.
What are your thoughts on the AVS narrative?
Amitej Gajjala: I think the AVS space is growing, and there are probably over 60 to 70 AVS running on EigenLayer right now, which is a very positive result for the entire ecosystem.
Clearly restaking has several advantages for the AVS ecosystem. The first major advantage is that anyone can launch AVS without significant financial security, as they can borrow financial security from EigenDA while they do not need to issue millions in rewards as inflationary tokens.
Does the Kelp DAO team have any plans regarding AVS?
Amitej Gajjala: We are evaluating and doing some internal research and R&D to determine if there are opportunities in the AVS ecosystem for us to build AVS. Right now, our expansion plans mainly consist of expanding our products into different ecosystems.
Regarding AVS, we are delegating LSTs to all AVSs, or at least the majority of AVSs, to leverage our existing capital.
How does Kelp DAO ensure the safety and security of its project?
Amitej Gajjala：I think the systemic risk of re-hypothecation is very limited, and we have to understand that slashing events are very insignificant and almost negligible from a statistical point of view. But I still remain cautious because we have not seen these situations actually happen in practice or in reality. So, I am optimistic, but at the same time I remain cautious.
Kelp DAO takes security very seriously, we have completed three comprehensive audits and are currently working on a fourth audit. We have selected some of the top audit partners such as Sigma Prime, MixBytes, and CodeFarina to review our smart contracts.
In addition, we have internal monitoring and alarm systems to monitor suspicious behavior of smart contracts in the entire system. Security is the most important thing, and it is also the most important thing we focus on every day.
Macro and future, how does Kelp DAO plan?
All currently approved Ethereum spot ETFs do not use any collateralization mechanism. What do you think about this? How will this affect the ETH ecosystem?
Amitej Gajjala: Yes, I think the most important thing we need to understand is that it will take some time before the SEC or any government starts forming opinions and developing policies regarding staking. The approval of the spot ETF itself is the most important and positive outlook for the entire ecosystem. As the spot ETF ecosystem matures, staking will gradually be implemented in the future. I do have hope, but I think it will take some time.
Given the recent discussion regarding the U.S. election and cryptocurrency regulation, what do you think of the current regulatory environment?
Amitej Gajjala: This is a very complex question. Without getting too hung up on the political environment in the United States, I firmly believe that regulation through policy rather than through enforcement is the right approach.
Governments should provide clear guidance on how cryptocurrencies should be treated as an asset class (not just Bitcoin and Ethereum, but other tokens as well). They should provide a strong policy framework that guides developers and industry players down the right path, which is the right thing to do, regardless of which party is in power in the U.S. or any other country. Because it gives developers more clarity, allowing them to make informed choices, rather than being enforced and penalized for past behavior.
What strategies does Kelp DAO have to address regulatory developments and ensure compliance with changing regulations?
Amitej Gajjala: On the regulatory side, we consult lawyers and consultants in multiple countries to get their professional guidance to help us think about product development and marketing. Based on these guidelines, we follow them throughout the process and incorporate them into our work.
In terms of monitoring the evolving regulatory environment, we always keep a close eye on any policies or frameworks that may have an impact on staking and re-staking, and promptly adjust our strategies and operations to ensure that Kelp DAO always complies with the latest regulatory requirements.
In summary, we ensure our compliance through collaboration with legal experts and ongoing regulatory monitoring to remain flexible and proactive in an ever-changing regulatory environment.
In the financing announcement, we learned that Kelp DAO is building a multi-chain re-staking service. Can you talk about this plan?
Amitej Gajjala: We will share more about our plans after the product development work for these L1 ecosystems is completed. Currently, these works are still in progress, and what is worth looking forward to is that we will do some interesting explorations in multiple ecosystems.
We are currently in the process of multiple phases of testing and auditing. Once we have completed product development and initial testing, we will officially release more details and a specific timeline. We look forward to sharing more information with you in the coming weeks.
Is there anything else you would like to add?
Amitej Gajjala: We became an L2 company, focusing on products for retail and institutions, such as corporate cash, liquidity, etc. We don’t know what Puffer and Renzo are doing specifically, but they don’t seem to have the ambition to become the entire re-staking layer.
I think one of the most important things we've always wanted to do is build an ecosystem around our product. Obviously, as an LRT, it's just one application and it doesn't generate an ecosystem. And what we've seen develop on EigenLayer is that EigenLayer has created a whole ecosystem around them, including AVS, LRT Fi, etc., which is exactly what we want to build. So thinking about how to build a re-staking layer on these elements is our motivation.
Technically, this means that we will build a platform that enables not just our own products, but a whole ecosystem to run and interact on it. This will include deep integration with other chains and platforms, ensuring that users can re-stake seamlessly and get the most out of it.
The reason for this decision is that we see the potential and success of development on EigenLayer and realize that creating a similar ecosystem will bring great value to our users and partners. We believe that by building such a re-staking layer, we can bring more innovation and opportunities to the entire industry and occupy an important position in the market.
Therefore, our goal is not only to provide a single solution, but to create an ecosystem that can support broad applications and collaboration, bringing more vitality and development to the re-staking field.
