Interpersonal trust is the main form of social capital. Trust enables collaboration (mainly economic transactions) and is the cornerstone of human civilization.
When billions of people around the world have access to the Internet, the physical limitations of collaboration have been eliminated, but traditional interpersonal trust is still limited to family, long-term accumulated reputation, and personal relationships formed over a long period of time, and cannot be expanded at the scale of the Internet.
Trust has become a bottleneck for the development of civilization in the Internet era.
For years, blockchain has been called a trust machine. But we have never explored what kind of trust blockchain produces and what raw materials are used to produce trust. Some researchers have proposed that the product of blockchain is block space. This is a very intuitive view: the blockchain produces block space, and users of applications on the chain pay gas to consume block space. Although the virtual machine makes the block space programmable, the block space is still bound to a specific virtual machine, and only the applications of this chain can use the block space and cannot extend beyond the boundaries of the consensus protocol.
In my opinion, block space is the standardized packaging of more general products, similar to the standardized packaging of bottled water for water. This more general product can be called decentralized trust.
Compared with traditional interpersonal trust, decentralized trust is actually closer to belief. Belief is metaphysical trust and recognition of an abstract concept. With reasonable guidance, it can be transformed into trust between people who hold the same belief, thus promoting collaboration. Maybe one day we will find a more accurate term than decentralized trust.
Decentralized trust is much like electricity. It is produced in the form of a stream, has a wide range of uses, and is difficult to store. The relationship between block space and decentralized trust is similar to the relationship between direct current and electric energy. Direct current is an easy-to-use form of electrical energy, and many consumer appliances are powered by direct current.
Now that we’re talking about the analogy between decentralized trust and electricity, let’s take a look back at the early history of electricity. Just a few years after inventing the electric light, the great Thomas Edison built historys first direct current power station on Pearl Street in the southeast corner of Manhattan. Due to the limited transmission distance of DC power, power stations can only supply power to customers within a radius of less than one mile. For users, the service they used was not electricity, but lighting, which was the only use of electricity at that time.
I believe every technology practitioner is familiar with what happened next. Nikola Tesla, who was unknown at the time, invented the alternator. Alternating current can be transmitted over long distances. In addition to lighting lamps, alternating current can drive electric motors efficiently, opening up endless possibilities for the application of electrical energy. Due to these advantages, alternating current has become the main form of electrical energy and has accelerated human society into the electrical age. Today, electricity is everywhere in our lives.
The emergence of Restaking brings decentralized trust to its alternating current moment. Restaking will accelerate human society into the era of decentralized trust just like alternating current promotes the advent of the electrical age.
If you don’t know about Restaking yet, you are at risk of missing out on the most significant innovation in Web3. Please learn about Restaking through articles and interviews with Eigenlayer project founder Sreeram Kannan before continuing reading this article.
Why is restaking so important for decentralized trust? First, through Restaking, decentralized trust can easily cross the boundaries of consensus protocols. It should be pointed out that sharing decentralized trust does not originate from the innovation of Restaking, but the exploration results of shared security.
As we all know, the core technical theme in the blockchain field in the past few years has been expansion. A very straightforward expansion idea is a multi-chain network, that is, allocating applications to run on dedicated blockchains, thus mutating the capacity limit of a single chain, and at the same time connecting multiple chains into a network through cross-chain protocols, allowing applications to Assets and data can be exchanged. But if a single chain is simply divided into multiple chains, security will decrease linearly. Therefore, researchers in multi-chain networks have been exploring shared security: multiple chains share a decentralized trust source.
The first multi-chain network to propose shared security and put it into practice was Polkadot. The network is based on the Polkadot relay chain and achieves shared security by dispatching a relay chain validator group to the application chain (called a parachain). In order to take advantage of shared security, parachains must use a unified virtual machine (Substrate Runtime). Parallel chains produce blocks individually, and the relay chain finalizes them. It can be seen that Polkadot achieves blockchain sharing security under a unified consensus protocol.
Currently, Cosmos is launching the first replication-safe consumer chain - Neutron. Replication security is the first version of the shared security solution that the Cosmos community has long explored: all validators of the shared security provider chain become validators of the consumer chain and run the nodes of the consumer chain. Changes in the validator set are synchronized from the supplier chain to the consumer chain through the cross-chain protocol IBC. Validators will receive incentives provided by the consumer chain. If the validator of the consumer chain has bad behavior (such as double-signing blocks), the proof of its bad behavior will be submitted to the supplier chain through the cross-chain protocol IBC, and trigger a penalty on its pledged assets on the supplier chain. A great improvement in Cosmos shared security is that it crosses the boundary of the consensus protocol. The supplier chain and the consumer chain each execute independent consensus protocols.
Although Octopus Network is far less well-known than Polkadot and Cosmos, we are also one of the multi-chain networks exploring shared security. The core of Octopus Network is Octopus Relay. Octopus Relay is not a chain, but a set of smart contracts on the NEAR blockchain. All PoS operations of the application chain occur on Octopus Relay, and are then synchronized to the application chain through the cross-chain protocol. The rewards and penalties of the application chain are transferred to the Octopus Relay through the cross-chain protocol and executed on the NEAR Protocol blockchain. From the time of mainnet launch in October 2021, Octopus has implemented shared security across consensus boundaries.
Although blockchain shared security appeared before Restaking, Restaking has greatly expanded the sources of shared security, turning PoS into huge shared security pools, or decentralized trust generators. Ethereum, in particular, is capable of providing $35 billion worth of decentralized trust at current staking rates and ETH prices, as if the Niagara Falls hydroelectric power station was connected to the grid. Inspired by Eigenlayer, Octopus Network decided to use $NEAR Restaking instead of $OCT Staking as the security source of its application chain, thus significantly expanding the supply of the shared security market.
More importantly, Restaking can empower any system that requires decentralized trust, not limited to blockchain. For example, in order to avoid the high cost of verifying the root of trust (usually the block header) on the chain, existing optimistic verification cross-chain bridges need to wait for the challenge period to pass before using the root of trust to verify cross-chain messages. In order to prevent possible DDoS superimposed block blocking attacks, the challenge period is usually as long as ten hours or more, which significantly increases the delay of cross-chain transactions. If a group of witnesses based on Restaking are used to provide signature endorsement for the root of trust, when the economic value of the endorsement accumulated by the root of trust (the amount of Restaking assets that can be forfeited) exceeds the economic value of cross-chain transactions, the root of trust can be used. This witness mechanism can reduce cross-chain transaction delays from more than ten hours to a few seconds.
It can be seen that compared with block space, Restaking is a more general form of decentralized trust. As a result, the use of decentralized trust has unlimited possibilities. In the Web 2.0 era, the platform on which a company operates is central to enabling collaboration. In the Web3.0 era, decentralized trust-driven encrypted networks will replace the role of centralized platforms. There is no need for trust between collaborative participants, nor for the operators of the cryptographic network. They just need to be confident that the encrypted network is based on sufficient decentralized trust. When a collaboration is successfully completed, the crypto network will capture a small portion of the economic value added generated by the collaboration and distribute it to its operators. Providers of decentralized trust voluntarily and permissionlessly participate in encrypted network operations to obtain operational benefits. They must behave in a manner agreed upon by the cryptographic network or suffer severe financial penalties. In my opinion, the vast majority of economic collaboration based on the Internet can be achieved through the above methods, which breaks through the traditional trust bottleneck and avoids the monopoly of centralized platforms. With the support of Restaking, decentralized trust will eventually be everywhere.
After discussing the output of the trust machine, lets look at the input of the trust machine. The input of the PoW blockchain is computing power, that is, chips + electricity. The PoW blockchain uses physical capital as raw materials to produce social capital, that is, converting chips + electricity into decentralized trust.
From the perspective of raw materials and products, the PoS blockchain is a magical existence. Staking assets are the input and output of the blockchain, and there must be some kind of self-reference. Take Ethereum as an example. When Ethereum carries more and more transactions with higher and higher values, and obtains growing protocol revenue, the intrinsic value of Ether continues to increase with the embedded cash flow (future discounted cash flow method valuation). The higher price of Ether allows Ethereum to generate a greater amount of decentralized trust and improves its ability to capture more protocol revenue.
Although the economic cycle of Ethereum is self-referential, every link in the chain is based on logic and rational expectations.
In essence, blockchain, like the narratives of other human communities: religious, international, monetary, etc., all come from the common imagination of Homo sapiens. Yuval Harari pointed out in his masterpiece A Brief History of Humankind: Shared imagination allows Homo sapiens to stand out from the evolutionary competition. As a rationalist, I would be happy to see rational common imagination gradually replace irrational common imagination and play an increasing role in the development of civilization.
The PoS blockchain looks like a perpetual motion machine, continuously producing social capital without consuming physical capital. But in the long term, if the PoS blockchain cannot effectively capture protocol revenue (note: Staking revenue is not protocol revenue, but protocol cost!), then the common imagination will inevitably collapse. When protocol revenue cannot support the valuation of native assets, asset prices fall, and the security of the blockchain decreases, which in turn weakens the value capture capability of the blockchain, forming a vicious cycle.
Restaking will be a multiplier for Ethereum protocol revenue, helping Ether gain protocol revenue from hundreds of decentralized systems outside of the Ethereum blockchain. For other PoS blockchain communities, ignoring Restaking is equivalent to ignoring the opportunity to enter a positive feedback economic cycle, thereby ignoring the opportunity to survive.
Disclaimer: This article is for informational purposes only and may not be relied upon as legal, tax, investment, financial, or any other advice.