The Optimist Twitter Spaces with Kelp DAO

In The Optimist’s Twitter Spaces which took place on January 29, 2024, Subli hosted Amit from Kelp DAO to discuss liquid staking and EigenLayer’s role, Kelp DAO’s market impact, restaking strategies, the evolving landscape of decentralized finance across multiple chains, and more! Read our notes below to learn more.

Background

Subli (Host) – Founder of The Optimist

Amit (Guest) – Co-Founder of Stader Labs and Kelp DAO

Kelp DAO – a Liquid restaking platform for $ETHx, $sfrxETH, and $stETH

Evolution: Kelp DAO and Eigen Layer Innovations

Amit shares his crypto journey, beginning in 2020, inspired by his co-founder who was deeply involved in Bitcoin mining and altcoins. He explains their experience with DeFi protocols, liquid staking solutions, and their success and survival through the Terra crisis.
Amit explains that they identified staking as a huge market opportunity in 2020, leading to the development of liquid staking solutions. He highlights their success with Terra 1.0 and their ability to adapt and grow across multiple chains, culminating in the creation of Kelp DAO.
Subli provides metrics on Kelp and Stader, noting Stader’s $350 million TVL across six chains and Kelp‘s rapid growth with over $240 million deposited in a short time.
Amit talks about the concept of restaking, explaining it as using Ethereum‘s decentralized security to secure other protocols, a concept popularized by Eigen Layer.
Amit says that users have the choice to select the protocols for restaking on the Eigen Layer.
Amit says that the long-term benefit for users is extra yields from new applications borrowing security on the Eigen Layer. He mentions that currently, the primary motivation for users depositing on the Eigen Layer is to earn EigenLayer points, which may lead to future airdrops, although nothing has been announced yet.
Subli notes the high speculation about the Eigen Layer’s market cap potentially reaching billions of dollars. He explains that farming points on the Eigen Layer through deposits can lead to eligibility for speculative airdrops. He asks how Kelp DAO supports this narrative and what it offers users.
Amit explains the advantages of staking with Kelp DAO, beginning with an explanation of liquid restaking. He mentions the problems users face when restaking Ethereum on the Eigen Layer, such as the need for risk assessment, loss of liquidity, and inability to use staked Ethereum in DeFi protocols.
Amit describes how Kelp DAO addresses these issues. The DAO performs risk assessments of new services on the Eigen Layer, creates liquidity solutions, and works on DeFi integrations allowing the use of $rsETH in various DeFi protocols.
Amit mentions three areas of risk: smart contract risk, requiring audit report assessments; slashing conditions of new services, which are complex for average users to understand; and the variability of yields or rewards from these new protocols, necessitating constant rebalancing.

Kelp DAO: Rapid TVL Growth and Unique Restaking Features

Subli compares Kelp DAO and Convex Finance, implying that Kelp DAO is a Convex-style protocol built on the Eigen Layer, providing users with a liquid asset as proof of deposit while handling the yield maximization process.
Amit agrees with this comparison and also compares Kelp DAO to Lido, but on top of the Eigen Layer.
Subli notes the unexpected rapid inflow and traction of their protocol, highlighting its position as the ninth category in terms of TVL, close to $2 billion. He mentions that liquid staking is leading with a TVL of approximately $33 billion.
Amit says he believes that restaking TVL has the potential to equal or surpass liquid staking TVL. He expresses bullishness on the restaking ecosystem and predicts that it might take half the time it took for liquid staking to reach its current level, estimating around one and a half to two years to reach a TVL of about $30 billion.
Subli speculates that the growth rate might be even quicker, recalling that liquid staking’s TVL grew from $100 million to $33 billion in just two years. He says that this rapid growth could be replicated or exceeded in restaking, especially with more projects building on the Eigen Layer, attracting more inflows.
Amit explains that currently, they accept three types of liquid staking derivatives (LSDs): $ETHx, $sfrxETH, and $stETH. He reveals plans to soon accept Ethereum as an asset for staking on their platform.
Amit highlights the importance of understanding smart contract risks when interacting with any protocol. He explains that Kelp DAO has undergone audits by top auditors like Sigma Prime, and Code4rena, and is undergoing a third audit with MixBytes. He stresses the necessity of evaluating the project team’s expertise in building similar solutions.
Subli expresses increased trust in Kelp DAO, drawing confidence from the fact that the team behind Kelp is the same as that of Stader Labs, with whom he had a positive experience. He recognizes the reassurance he feels knowing the team’s background, especially when depositing substantial funds.
Amit highlights the advantages of depositing on Kelp DAO compared to other protocols. He mentions that users who restake their LSDs with Kelp DAO can earn Kelp Miles, which will be converted into proportional tokens and airdropped to users in the future.
Amit says that the airdrop will be proportional to the amount and duration of the Ethereum deposit, with the Kelp Miles earned being a function of both these factors.

Efficient Ethereum Restaking and DeFi Opportunities on Layer-2 Networks

Subli says that despite high fees on the mainnet, the cost of buying and depositing on Kelp DAO can be less than $50 if done on a low-activity day like Sunday. Subli says that even with only one Ethereum, the yield from various DeFi protocols makes it worthwhile, though acknowledging the risks involved.
Amit says that users restaking $ETH will help secure other protocols, highlighting the experimental nature of Kelp. He mentions they are working with a partner to enable restaking on Layer-2 networks and expect to launch this solution soon.
Amit explains that their partner will batch deposits from Layer-2 networks like Optimism, bridge them to Ethereum for restaking with Kelp, and then bridge them back, making the process efficient and reducing fees.
Amit mentions their plans to deploy on primary Layer-2 networks like Optimism and Arbitrum, as well as on zkEVM, due to their connection with the Polygon ecosystem. He mentions other Layer-2 networks in their pipeline.
Subli asks about the benefits for users staking on their partner’s protocol, specifically regarding eligibility for Kelp points, EigenLayer points, and DeFi opportunities on Layer-2 networks. Amit says that users will indeed be eligible for these rewards and opportunities.
Amit shares that the deployment on Optimism is expected within weeks, providing a timeline for interested users.
Amit lists existing opportunities on the mainnet, including liquidity pools and a unique opportunity with Pendle. He mentions upcoming launches in several CDP and lending markets, where users can collateralize their $rsETH tokens.
Subli questions how they plan to incentivize users for new DeFi possibilities. Amit says that they currently use Kelp miles as incentives and are working with partners like Frax to provide additional incentives.
Amit says that from February 5th, 2024, restaked assets can be deposited on EigenLayer, enabling the earning of EigenLayer points. He says that EigenLayer had previously closed their caps, preventing LSD deposits.

Kelp’s Upcoming Launches, DeFi Integrations, and Safety Strategies

Amit mentions the roadmap, highlighting the launch of native restaking, accepting Ethereum as collateral, upcoming DeFi integrations across mainnet and L2s, and in-wallet restaking with partners like Ledger. Amit says they are working with exchanges, specifically mentioning close work with OKX.
Subli asks about plans and timelines for the $KELP token, with Amit indicating a probable launch in late Q1 or early Q2 of 2024.
Subli asks about deploying on Base, the Layer-2 of Coinbase. Amit confirms plans to deploy there, citing it as a matter of priority.
When asked about strategies to attract liquidity on Optimism, Amit mentions the benefits of earning EigenLayer points and participating in the liquid restaking ecosystem, partnering with DEXs, yield platforms, and money markets to enhance the usage of $rsETH in the ecosystem.
Amit says that currently, users must use a DEX to redeem their stakes, as Kelp does not yet have a direct redeem option. He mentions that a redeem function will soon be available on Kelp.
Subli asks Amit to confirm if users will receive the same amount of staked tokens upon redemption. Amit says that users will receive a slightly higher amount due to staking rewards and future restaking rewards.
Amit explains that once redemptions are live, users can select the asset they wish to redeem. This means users can choose either 100% staked tokens or a combination of percentages from different sources like $ETH.
Subli highlights the importance of having a redemption function at the protocol level to maintain the peg of derivative tokens. He expresses concern about derivative tokens losing their peg if they rely solely on liquidity pool balances on DEXs.
Amit highlights the need for due diligence before interacting with any protocol. He mentions three key factors: the team’s expertise, thorough audits by reputable partners, and whether the protocol’s code is open-sourced.
Subli warns about the risks in crypto, including phishing attacks and copycat accounts. He advises everyone to follow authentic accounts and be cautious of false announcements and phishing schemes.

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Show Information

Medium: Twitter (Audio)
Show: The Optimist Twitter space
Show Title: Kelp DAO <> The Optimist
Show Date: January 29, 2024