Bell Curve - How Jito is Unlocking Restaking for Solana

In this episode of Bell Curve which took place on July 30, 2024, Michael Ippolito and Myles O’Neil hosted Lucas Bruder from Jito Labs to discuss the new Jito restaking platform, the benefits of Solana’s MEV infrastructure, and the potential of liquid staking in the DeFi ecosystem, and more. Read our notes below to learn more.

Background

Michael Ippolito (Host) – Host of Bell Curve

Myles O’Neil (Host) – Contributor at Reverie

Lucas Bruder (Guest) – Contributor at Jito Labs

Jito Labs – a high performance Solana MEV infrastructure

Jito’s Evolution: Introducing the Restaking Platform to Enhance Decentralization and Security in Solana Ecosystem

Mike welcomes Lucas Bruder, from Jito to discuss the newly unveiled Jito restaking platform, which adds to Jito’s existing MEV and liquid staking products. He asks Lucas to provide a history of Jito and explain how the new restaking platform fits into their suite of offerings.
Lucas recounts that Jito initially focused on MEV and then moved into liquid staking. They developed StakeNet to decentralize stake pools on Solana, addressing concerns about security issues from centralized control via hot wallets. This led them to consider further decentralization, inspired by EigenLayer‘s success with liquid staking tokens.
Lucas explains that they began seriously considering a restaking solution in late 2023, recognizing the potential for using liquid staking tokens and governance tokens to secure various aspects of the ecosystem. They designed the system to be flexible, allowing for different types of tokens and security needs, and aimed to make it adaptable for various protocols.
Myles asks about the design iterations and any significant changes in their approach. Lucas describes their initial isolated security model, where each Actively Validated Services (AVS) was separate, minimizing risks like cascading slashing events. However, feedback suggested that a pooled model could be more practical, especially for larger security requirements or significant TVL in Solana. This led them to reconsider their design, aiming for a more unified approach that could better serve diverse security needs and use cases.

Navigating Security Challenges and Token Integration in Solana’s Multi-L2 Ecosystem

Mike asks Lucas for a concrete example of challenges that might arise from an isolated security model in a world with multiple L2s on Solana. Lucas explains that if two L2s require significant security, an isolated model could lead to one L2 potentially undermining the other by drawing away necessary security, creating instability.
Myles adds that the availability and cost of tokens for staking can vary, with isolated tokens being more expensive to secure compared to widely held tokens. Lucas acknowledges that while their initial design favored isolation, they realized that a pooled model might be more practical if it included proper restrictions and controls, which could also mitigate risks like slashing.
Lucas describes the evolution of their design, mentioning that the final version of their system allows for flexibility in supporting different types of tokens, including liquid staking tokens (LSTs) and governance tokens. They built the protocol to use Liquid Restaking Tokens (LRTs) as the staking mechanism, offering transparency and control over the risk involved.
Myles seeks clarification on the nature of LRTs and how they represent the staked assets. Lucas explains that each vault supports a single type of token, and the LRT minted from a vault represents only that specific token, not a mix of different tokens. He also mentions the possibility of creating a mixed asset vault through a separate token wrapper if needed.
Lucas notes that the protocol’s design should allow market forces to determine the best practices, with different vaults potentially offering various reward distribution methods.
Myles asks about the integration of native stake into the system. Lucas confirms they have considered it, but since Solana stake accounts aren’t token mints, it would involve creating a wrapped stake pool, which might not be necessary if LSTs are already in use. He highlights that the SPL stake pool has undergone multiple audits and securely holds substantial assets, indicating that such a feature could be developed if there was demand.

Jito’s Evolution and Solana’s Restaking Potential: Insights from Lucas on MEV, Oracles, and L2s

Mike summarizes Lucas’s discussion, noting Jito’s progression from working on MEV to exploring liquid staking and identifying points of centralization, which led to the development of their restaking platform. He compares Jito’s journey to EigenLayer’s, which also started with a specific problem and expanded into broader solutions.
Lucas explains that restaking is being considered for various applications, including MEV and Oracle components in StakeNet. He mentions that Solana doesn’t have a separate beacon chain, making data more accessible on-chain, but there are still areas requiring off-chain data, which they aim to decentralize using restaking.
Myles asks about the range of use cases, particularly those unique to Solana. Lucas points out that Oracles and keepers are clear candidates for restaking, especially since congestion and stale data issues have been problematic in Solana. He suggests that incentives can drive better performance, either through rewards or penalties.
Lucas also discusses the emergence of Solana-based L2s (SVM L2s) and the potential for restaking to support their security models. He notes the mixed reception of L2s in the community but acknowledges their relevance.
Mike inquires about the potential impact of restaking on scaling strategies, suggesting that it could simplify the launch of new L2s by providing an established security and staking infrastructure. Lucas confirms that protocols interested in Solana are exploring these options.
Myles asks whether Oracle and keeper operators need to be Solana validators, which Lucas clarifies is not a requirement. He notes that while most current operators aren’t validators, the skillset overlap suggests many validators might be interested in these roles. He also touches on the absence of slashing in Solana, which changes the dynamics compared to Ethereum’s staking ecosystem.

Exploring Restaking Dynamics and Infrastructure on Solana

Myles reflects on the potential synergies between StakeNet methodologies and tracking the effectiveness of AVS operators, even if they aren’t Solana validators. He asks Lucas about handling issues like downtime or incorrect price submissions, noting that EigenLayer uses a work token for such faults.
Lucas highlights a market-driven approach, allowing flexibility in how issues are managed, including slashing mechanisms for bad behavior. He prefers not to impose strict rules, contrasting with EigenLayer’s model, which integrates specific tokens and dual governance mechanisms.
Myles mentions EigenLayer’s initial supply-side focus, exporting Ethereum’s trust to other networks, whereas Lucas sees Jito and similar platforms as offering flexible infrastructure to meet various demands, learning from existing protocols while charting their own path.
Mike asks how restaking dynamics on Solana might differ from Ethereum, noting how liquid staking adoption differed due to unique architectural and user experience factors in each network.
Lucas explains that Solana’s architecture—being fast, low latency, and capable of handling more on-chain activity—could lead to more AVS and network activity directly on Solana. He contrasts this with Ethereum, where much of the restaking infrastructure operates off-chain. Lucas gives the example of Oracle systems on Solana, which could use on-chain staking and slashing mechanisms, thereby integrating more directly into the blockchain.
He also notes that Solana’s transaction costs are likely to trend towards zero, enabling more on-chain activity and potentially increasing validator and staker earnings through priority fees and other mechanisms.

Exploring Restaking and On-Chain Fault Detection in Solana’s Unique Architecture

Myles discusses the distinction between off-chain Oracles on Ethereum and the potential for more on-chain activities with Solana, noting the potential for locally observable faults on Solana due to its architecture.
Lucas agrees, mentioning that while StakeNet uses a signature verification method, many AVS might run fully on-chain, allowing for programmatic slashing and fault detection directly on Solana.
Mike shifts the conversation to the supply side of Solana staking, questioning whether the architectural differences and unique needs of Solana could affect the demand for restaking. Lucas acknowledges that while Solana might have fewer off-chain AVS needing security compared to Ethereum, the growth of Solana L2s and the unique capabilities of the SVM could drive demand for restaking solutions over time.
Myles inquires about the complexities of slashing within restaking contexts, comparing it to base layer slashing. Lucas highlights the flexibility of their protocol, allowing different AVS to decide how to handle slashing and whether to burn or redistribute slashed tokens. He highlights the importance of allowing market-driven patterns to emerge rather than enforcing rigid rules, acknowledging that the restaking space is still evolving.
Mike probes the future of restaking marketplaces, questioning whether they will be ecosystem-specific or cross-ecosystem. Lucas leans towards the likelihood of ecosystem-specific platforms, suggesting that while some protocols, like Magic Eden, have expanded across chains, most successful expansions are limited and ecosystem-centric. He indicates that a more flexible and generic approach could be advantageous for capturing diverse AVS needs within an ecosystem.

Exploring Staking and Restaking Dynamics on Solana and Ethereum

Myles discusses the difference in how Oracles operate on Ethereum and Solana, noting that Solana’s infrastructure allows for more on-chain observation of faults, unlike Ethereum, where results are posted to reduce costs.
Lucas explains that while Solana’s infrastructure supports on-chain slashing and detection, there is flexibility for AVS developers to choose their approach. He highlights letting the market decide how to handle issues like slashing and rewards, reflecting a philosophy of minimal prescriptive control in the protocol design.
Mike shifts the conversation to the supply side of staking on Solana and Ethereum, discussing whether there will be a preference for restaking platforms to remain within their native ecosystems. He notes that the current setup on Ethereum often leads to complex off-chain infrastructure needs, which might influence how economic security is managed.
Lucas acknowledges that Solana’s architecture, particularly the Solana Virtual Machine (SVM), offers performance advantages that may attract AVS developers. He suggests that as Solana develops, there will be growing interest in staking and restaking solutions tailored to its ecosystem, potentially outpacing Ethereum in certain aspects.
Mike and Myles discuss the potential for restaking to influence the development of the Solana and Ethereum networks, particularly in terms of enabling faster adoption of new features or protocol changes. Lucas cautions about the risks of certain features, such as MEV, and stresses the need for careful consideration of their implications.
Myles explores the challenges of managing slashing across different restaking platforms, questioning whether restaking platforms will remain isolated within ecosystems or become cross-ecosystem entities. Lucas suggests that while platforms like Jito aim for flexibility, it’s likely they will focus on specific ecosystems due to the unique needs and characteristics of each network.
Mike queries about the synergies between Jito’s various business lines, particularly in handling staking and liquid staking tokens. Lucas highlights that while there are natural synergies, especially with liquid staking tokens, the protocol’s design is agnostic to specific assets, allowing flexibility in use cases.
Lucas talks about Jito’s plans for participating in community events and how interested parties can learn more about their restaking platform. He encourages those interested to visit the Jito network blog and fill out a form to get in touch with the team.

Check Out These Important Links

Show Information

Medium: YouTube (Video)

Show: Bell Curve

Show Title: How Jito is Unlocking Restaking for Solana | S8 Finale | Lucas Bruder

Show Date: July 30, 2024