Restaking is Cryptoeconomic Security as a Service

One way to think of restaking and services like EigenLayer is as cryptoeconomic security as a service (CeSaaS). Cryptoeconomic security doesn’t have a fixed definition, but for our purposes can be simplified to “trustworthy outcomes secured by a combination of cryptography and economic incentives.” The alternative is security provided by a central authority.

Bitcoin was the first solution to achieve this type of security at scale, but only for transactions in its own coin. Newer chains like Ethereum extended this functionality to other assets (via tokens) and expanded its surface area to more sophisticated activity using smart contracts. But the cryptoeconomic security provided by any blockchain only applies to activities inside its virtual machine.

That means that Ethereum is great at securing a DeFi trade, but has nothing to say about any off-chain activity that led to that trade, like an external data feed, or some kind of AI calculation. These tasks are left to services like oracles that have to bootstrap their own security.

Most do so by issuing their own token, but app-specific tokens are problematic. For founders, they can be hard to design, even harder to distribute, and exist in a regulatory gray zone. For users, they are a source of friction. App-specific tokens also fluctuate in value — more so than a blockchain token — making the resulting security unpredictable.

Enter restaking, a new form of cryptoeconomic security that’s arguably the best of both worlds: the size, maturity and stability of an L1 token, with the customizability of a dApp token. Cryptoeconomic security, provided as a service.

Once restaking is fully built out, Web3 founders will be able to build entire solutions on CeSaaS, enjoying similar benefits to what Web2 founders get from SaaS.

Traditional SaaS services — think data analysis, cloud storage, or HR — have been a boon to modern entrepreneurship. They let founders bootstrap quickly and experiment with different providers without committing too much capital upfront. SaaS costs can scale with growth, providing much-needed breathing room for cash-strapped startups.

CeSaaS can eventually offer similar benefits, enabling a new kind of decentralized service: one that is secure but doesn’t have a token — at least at the outset. All tokens are a form of liability. Projects that issue one will eventually have to offer some form of value capture — lest their token tanks and their security unravels. But it’s hard to know what that will be at the outset. Restaking let’s founders get a little bit of security now and more if their solution grows without issuing a token.

The counter to this argument is that projects that forgo issuing a token miss out on the money they can raise against one and the ability to bootstrap adoption via aridrops. But this counter is based on the unproven assumption that this (admittedly popular) approach to building dApps actually works.

Raising a lot of VC money makes it hard to decentralize a project later, and airdrops mostly get gamed by industrial farmers. My suspicion is that the token-centric model for launching dApps has mostly persisted for the wrong reasons, but persisted nevertheless because there was no other option.

Soon there will be, thanks to restaking. CeSaaS offers a more sustainable middle path. Bootstrap with actual users today, sort out the token model later, or possibly never. The other benefit of restaking is that — like SaaS — founders will eventually be able to purchase different kinds of CeSaaS from one marketplace. Think: a DeFi solution that needs both off-chain price feeds and computation. Securing both with a dApp token is a lot more complicated than plugging into a couple of AVS’.

All of this is going to take time to develop as solutions like EigenLayer go through their own staged rollout, but I’m excited about the possibilities for Web3 entrepreneurs. If my thesis is correct then the availability of CeSaaS will eventually attract a higher caliber of founder to crypto, people who care more about building solutions that solve important problems than making a quick buck.