Written by: shaofaye123, Foresight News
As a rising star in the re-staking track, Karak has been controversial since its launch. It has a luxurious financing background but the project team is caught in a public relations crisis, has a valuation of $1 billion but its TVL performance is mediocre, and has multiple hot labels such as modularization + AI + re-staking but its product technology innovation is slightly inferior.
Is Karak a rising star in re-staking or a bubble that will soon fade into silence? Can it compete with EigenLayer? This article will give you an in-depth understanding of Karak Network.
About Karak
What is Karak
Karak Network is a re-staking network, similar to re-staking projects such as EigenLayer. It adopts a points model to incentivize users to re-stake, thereby obtaining multiple benefits. Karak enables users to reuse their staked assets and supports more diverse asset pledges, including ETH, LST, LRT, PT, etc. In addition to the Ethereum mainnet, it also supports Arbitrum, Mantle, BSC, K2 and other chains. Pledgers can assign their assets to the Distributed Security Service (DSS) on the Karak network and agree to grant additional execution rights to their staked assets.
How Karak works
Karak's operating mechanism is not much different from Eigenlayer, and it acts as a bridge between developers and validators. In terms of the execution layer, it is different from EigenLayer in that it has developed its own Layer2 (K2) for sandbox testing, which is used for DSS development and testing before it is launched on Layer1.
Karak is currently in the V2 stage. In terms of technology, the V1 stage provides SDK + K2 sandbox similar to Turnkey, which simplifies the development process. On July 23, Karak Network released the V2 Phase 1 Keystone testnet, which introduced a contract-based slashing mechanism and allowed developers to deploy distributed security services (DSS) and custom re-staking mechanisms. Operators can also configure validators and native staking modules in the testnet.
Karak Keystone's design uses four deployed contracts: Core, Vault, SlashingHandler, and DSS. The Vault contract manages deposits and withdrawals, and honors slashing requests. The SlashingHandler contract simply defines how a specific asset should be slashed, whether it should be destroyed, sent to a zero address, or a custom action. The DSS contract is written by an external team and contains tasks to be performed by operators and slashing conditions to penalize those who fail to perform their tasks. The Core contract manages other contracts, adjudicates slashing requests, and adds new assets and vaults. With the Keystone testnet, developers can start building and deploying a Distributed Security Service (DSS) and a custom liquid re-collateralization strategy vault. Operators can start participating by registering as an operator in the testnet contract, running a sample DSS, and configuring their testnet validator to use the native re-collateralization module.
Can Karak and EigenLayer compete?
Whether from the perspective of asset risk diversification or the market demand for multi-chain staking, there will not be only one winner in the staking track. There are also many star projects such as Puffer, Swell, and Kelp in this track. Why is Karak so popular?
Luxurious financing background and team public relations turmoil
Since Karak announced that it had received $48 million in Series A funding in December 2023, its luxurious investment background has attracted much attention from the market. Karak was led by Lightspeed Venture Partners, with participation from Mubadala Capital (the second largest fund in Abu Dhabi), Coinbase and other institutions, with a valuation of over $1 billion. This strong investment lineup not only brought market attention to Karak, but also provided strong capital support for its competition in the re-staking track.
However, after the project was launched in February, TVL’s performance was not satisfactory, and it was not until April that it began to grow significantly. Karak’s project team also encountered doubts, mainly surrounding two aspects:
First, there is controversy over the background of the team members. It is speculated that the team members came from Risk Harbor in the previous Terra ecosystem. During the collapse of LUNA, Risk Harbor directly sold the UST in the insurance pool without a community vote to exchange for about 6 million US dollars. Fud voices in the market believe that this is Rug, while supporters believe that it is reasonable to save the funds instead of letting them go to zero in the face of emergencies.
Second, the technical progress of the project is not transparent. After the team received financing at the end of 2023, it "hastily" launched the product in February this year. As a re-staking project, there is currently less discussion around technology, and it is more about seizing the market through marketing methods such as "points activities". On the other hand, the specific progress of the project, technological development, and ecosystem construction are not disclosed enough, which leads to the community's lack of confidence in the transparency and future development of the project.
Technological innovation or hot concept
Karak's official website mentions almost all the hot narratives like modularity, Layer 2, AI, etc. Karak claims to be "the first modular Ethereum L2, providing the secure scalability required to support a variety of applications. It is committed to building an open infrastructure that prioritizes censorship resistance, privacy, and verifiability. With Karak, AI models can be seamlessly integrated into a variety of applications, enabling any developer to use encryption technology to perform model reasoning."
But today, there is no shortage of innovative L2, plug-and-play modularity, and lucrative re-staking on the market. These innovative technical solutions still tend to be homogeneous in nature, and are more of a hot-button pursuit of narratives. Although Karak's technical path is similar to that of EigenLayer, there are still significant differences that give it a place in the market competition.
Multi-asset re-pledge: Karak introduces a multi-asset re-pledge feature that allows users to re-pledge various assets, including Ethereum, liquid staking tokens, stablecoins, etc., to earn rewards, greatly improving the diversity of assets.
Optimization of the re-pledge process: Similar to EigenLayer, Karak also has its own version of AVS, called Distributed Secure Services, which internalizes the concept of re-pledge anywhere, making the secure re-pledge infrastructure accessible to anyone on any chain.
However, in terms of technology itself, its innovation is still relatively small. DSS can absorb more funds on the chain, and it takes advantage of market strategies and competitive landscape. Compared with Ethereum, other assets have lower opportunity costs, which makes DSS have more sustainable returns.
Short-term false prosperity or long-term real ecology
Karak’s marketing strategy has yielded huge gains in a short period of time. Since the launch of Karak V1 Private Access in April, all data have achieved growth:
TVL re-staked in 6 weeks has reached over $1 billion;
155,000+ unique users joined;
45+ asset integrations, including stablecoins, liquidity staking tokens, liquidity re-staking tokens, etc.
5+ chain integrations, including Ethereum mainnet, Arbitrum, etc.
Built 10+ distributed security services, 20+ distributed security service applications, and more.
Although Karak has shown strong competitiveness in technology and market strategy, it also faces some risks. EigenLayer's re-pledge mechanism and security have been verified by the market. Its ultra-high TVL and wide market recognition have made it firmly occupy the leading position in the re-pledge track. Karak's nesting dolls can certainly suck blood in the short term and make the data growth ecosystem prosperous, but behind the short-term growth of TVL, the risks cannot be ignored. How many networks or projects will actually use the re-pledged assets built by Karak, and can its security stand the test of the market? In addition to Ethereum, can other assets carry the narrative of re-pledge? Do users really have the willingness to continue to maintain ecological construction? The answer will be revealed after the spring breeze of the re-pledge track fades.
Conclusion
As a newcomer in the re-staking track, Karak has demonstrated strong market competitiveness with its multi-chain and multi-asset re-staking. Facing old re-staking projects such as EigenLayer, whether Karak can shake its dominant position depends not only on whether it can continue to exert efforts in user trust, security and market promotion, but also on whether its ecological construction is truly close to market demand. AVS that wants to provide security will choose to build on EigenLayer. In addition to users seeking multi-asset returns, who will choose to build on Karak is more worthy of attention.
