Restaking on Solana: The New Chapter Of A Long History

Introduction

Since the advent of Bitcoin, blockchains have morphed to solve scaling, security and throughput challenges as either general-purpose networks or application-specific chains. Restaking marks the latest evolution, bypassing these factors and allowing developers to dedicate more time and resources towards building applications and less on kickstarting the underlying network infrastructure.

Restaking has become a rapidly-growing area of interest and value accrual layer, representing a significant step in the ability to create new on-chain programs and applications by bootstrapping network security from existing on-chain economies. This new mechanism is a critical development for powering Proof-of-Stake blockchains, like Solana, by enhancing the extensibility of liquid staking tokens and native governance tokens, which previously had no economic function. 

This article covers the history of the restaking landscape and introduces the Jito (Re)staking platform - the first of its kind on the Solana blockchain - and a new step forward for the field.

The Evolution of Staking

Staking is the core mechanism behind the Proof-of-Stake (PoS) consensus model, which has been adopted by most leading blockchains today. Typically, this mechanism involves users staking their assets to participate in securing the network and earning rewards for doing so. When staking assets, users deposit their funds into a smart contract and receive rewards from other users in the form of transaction fees or inflationary native token rewards distributed on behalf of the network.

However, the high barrier to traditional staking, such as hardware requirements, prevents many participants in various ecosystems from staking on their own to earn rewards. Setting up and managing your own validator can be a full-time job. For instance, on Ethereum you need 32 ETH to start participating and on Solana approximately 1.1 SOL per day is required to participate in voting, which is costly for most users. Moreover, your tokens become illiquid and not as capital-efficient as they could be if they weren't locked.

Delegating, therefore, allows users to assign their staking responsibilities to validators, who, in turn, benefit from an increased network stake. 

Liquid Staking

Once users stake assets, they generally become unavailable for further use as they are delegated to secure the chain. These limitations led to the development of Liquid Staking, which allows users to access their capital while earning rewards from staking. This process is made possible through receipt tokens called liquid staking tokens or LSTs. 

For example, JitoSOL, which holds value at or very near to SOL at all times, can be used throughout the Solana DeFi ecosystem to earn additional yields through liquidity provision, lending markets and more. One of JitoSOL's value propositions is to make staking accessible for all users, ensuring everyone can participate and earn rewards without the high costs and technical challenges traditionally associated with staking. Deposits into liquid staking protocols have continued to grow over time, exceeding $55B at the time of writing - making it the largest sector in crypto today. 

Jito Staking on Solana

The JitoSOL liquid staking protocol went live in November 2022, allowing anyone to deposit their SOL tokens in exchange for JitoSOL, a liquid staking token that can be used throughout the Solana DeFi ecosystem while earning yield for staking. SOL staked with Jito is delegated to validators running the Jito-Solana client, who earn additional rewards from bids placed by MEV searchers participating in an auction to execute a bundle of submitted user transactions. These rewards are redistributed among JitoSOL stakers, making JitoSOL the first LST on Solana to earn MEV rewards. As such, JitoSOL holders earn MEV rewards on top of staking rewards while helping to secure the network.

Learn more about Jito staking here

State of Restaking 

Before restaking, developers seeking to launch a new chain or application had to bootstrap their own validator sets and launch tokens to secure their protocols. Restaking leverages the economic security of existing networks to help deploy new applications and services, providing early-stage teams with stronger security assurances while enhancing stakers’ capital efficiency and returns.

At its core, restaking applies the principles of staking to additional applications, middleware, and chains. Today the concept primarily involves users staking their Liquid Staking Tokens (LSTs) to earn higher rewards by securing more services, hence the term “restaking”.

In the past 18 months, it has emerged as one of the hottest categories in crypto. The current Total Value Locked (TVL) of the largest restaking protocol outside the Solana ecosystem, EigenLayer, exceeds $16B today.

Other restaking solutions, such as Symbiotic and Karak, exceed 1 billion USD in TVL, already marking significant ecosystem growth milestones. Considering that the total TVL of Ethereum is around 60 billion USD, restaking represents approximately one-third of the total funds locked in Ethereum.

With Liquid Restaking, the dynamics get even more interesting.  Liquid Restaking simply applies the mechanisms of liquid staking to restaking protocols - upon depositing into a restaking contract, users get a receipt token known as a liquid-restaking-token (LRT) that can be used throughout the DeFi ecosystem to earn additional yield on top of the underlying accruing rewards they earn. There are currently 20 protocols with significant TVL, totaling around 14 billion USD with a consistent rise in the past months.

With the launch of the Jito (Re)staking platform, users and teams can now participate in restaking using virtually any SPL token or any combination of SPL tokens, not only LSTs, to help secure new onchain products and services.

Introducing Jito (Re)staking

Overview

Jito (Re)staking is a multi-asset staking protocol for Node Consensus Networks (NCNs). The protocol tokenizes staked assets as Vault Receipt Tokens (VRTs) for enhanced liquidity and composability. Node consensus networks can use Jito (Re)staking to easily customize staking parameters, slashing conditions, and economic incentives to tailor their security and tokenomics.

The unique benefits offered by this restaking module position it as the go-to protocol for bootstrapping new networks by utilizing shared security.

Unique Features of Jito Restaking

Jito introduces a novel approach to restaking on Solana with the Jito Vault and Restaking programs. Through an extremely customizable interface built with NCNs in mind, Jito (Re)staking allows teams to add new utility for tokens, create new security mechanisms for networks, deploy an insurance fund, scale at the base layer and more. The main unique features of Jito (Re)staking include:

• A Marketplace for Launching VRTs: Anyone can launch Vault Receipt Tokens with any Solana SPL token through the Vault program. This marketplace also enables the development and launch of various security applications for infrastructure providers and restaking applications through the Restaking Program.
• Modular restaking: Vaults, operators and Node Consensus Networks can choose who they work with based on risk tolerance. Vaults decide which operators and NCNs to delegate to, while operators and NCNs choose which vaults and assets they want to support.
• Granular Control Over Slashing Exposure: Vaults have granular control over their exposure to slashing events. They can select the specific slashing conditions determined by NCN slashing admins, allowing them to manage the amount of assets at risk.
• Priority on Asset Safety: We prioritize the safety of users' assets. All program funds are held securely within the vault program and can only be withdrawn through user actions or slashing incidents.

Driving value back to the Solana Ecosystem

With a modular design, we bring flexibility and customization for participants in the Solana Ecosystem, benefiting both users and developers.

Jito (Re)staking supports any SPL token, the native token standard on Solana. This opens the door for projects to seamlessly integrate staking functionality for their own tokens, providing utility and value to their holders. 

In addition, we offer customizable parameters for VRTs, NCNs, and operator settings. This empowers projects to tailor the restaking experience to their specific needs and incentivize desired behaviors within their communities. 

Wrapping Up

Restaking represents the next frontier, building upon the foundations of staking and liquid staking to create more efficient and secure networks. By allowing developers to leverage existing on-chain economies for security, restaking eliminates the need to bootstrap new validator sets and tokens, thereby accelerating the development of new applications and services. Developers, projects and users alike are invited to join us as we accelerate development in the Solana ecosystem.

Next Steps 

Jito (Re)staking is entering audit and formal verification. The source code can be reviewed here.

Projects interested in building on the Jito (Re)staking platform are encouraged to contact us through this form. This includes NCNs, VRTs and node operators.