Direct Liquid Restaking is a new framework building on top of EigenLayer that enables you to directly restake your assets into specific Autonomous Verifiable Services (AVSs).

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Challenges with Traditional Restaking

Current restaking protocols, including EigenLayer, require users to delegate their assets to operators who then choose AVSs to support. This indirect model introduces significant limitations:
  1. Indirect AVS Selection: You cannot directly stake into an AVS; instead, you must delegate through an operator.
  2. Limited Control: Operators typically allocate your stake across multiple AVSs and can alter this delegation without your input, resulting in passive and uncontrolled diversification.
  3. Ambiguous Risk/Reward: It becomes difficult for you to clearly assess risk, rewards, and overall return profiles due to the complexity introduced by operator-controlled AVS delegation.

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Challenges with Liquid Restaking Token (LRT)

Liquid Restaking Tokens (LRTs) attempt to simplify the complexity of traditional restaking by outsourcing AVS and operator selection to a centralized team. However, this approach introduces several drawbacks:
  1. Black-Boxed Operation: Similar to traditional restaking, users have even less control over which AVS or operator their assets are restaked into.
  2. Non-Standardized Practices: Fee structures, reward distribution, and the process for AVS and operator selection are often opaque and inconsistent across providers.

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Key Advantages of Direct Liquid Restaking

Area’s Direct Liquid Restaking mechanism offers significant improvements:
  1. Direct AVS Selection: Similar to picking stocks, you directly choose the AVS into which your assets are restaked, ensuring targeted exposure.
  2. Operator Diversification: Your stake is automatically delegated to a set of operators that service your choosen AVS and maximizes your AVS-based APY.
  3. Automatic Yield Compounding: Rewards generated by your restaked assets are automatically compounded, boosting your long-term yield.
  4. Liquid Token Representation: You receive a liquid token that represents your restaked position in the selected AVS. This token can be traded or utilized within various DeFi applications, such as lending markets or managed investment strategies.
This streamlined approach simplifies restaking, enhances control over your asset allocation, optimizes security and yield distribution, and provides greater flexibility in asset management.