Heavy Cream #1 — Restaking and the Future of Crypto
The Birth of Cryptocurrency
Throughout human history, new ideas and concepts have often emerged in response to specific needs or problems, shaped by natural phenomena or societal issues. The origin of cryptocurrency, particularly the introduction of Bitcoin, follows a similar trajectory. Satoshi Nakamoto didn’t propose Bitcoin merely as a technological breakthrough; it was an ideological and social innovation aimed at addressing the limitations of centralized financial systems and the over-reliance on trust.
This visionary innovation captivated many, inspiring them to carry its spirit into practical applications within society. Some sought to change public perception through education and lectures, others focused on shaping institutional and legal frameworks, while some dedicated themselves to technical development or exploring new business ventures. As public discourse around cryptocurrency began to form, both practical implementations and critical evaluations naturally emerged.
However, Bitcoin faced criticism due to the enormous social costs associated with maintaining its network. Mining required specialized hardware and vast amounts of electricity, raising significant environmental concerns. As global emphasis on ESG principles grew, worries over Bitcoin’s environmental impact intensified, prompting the search for alternatives. One of the most promising solutions was the Proof-of-Stake (PoS) consensus algorithm.
PoS and new challenges
PoS is a consensus mechanism where validators participate by staking their tokens, rather than relying on computational power. The network gives greater influence to those who stake more tokens, aligning economic incentives with the network’s success — much like decision-making in a corporation’s board of directors. Validators in PoS receive rewards for honestly verifying transactions but face penalties for misconduct.
Eliminating the need for intensive computational resources meant PoS blockchains no longer depended on fossil fuels. This shift led to more efficient and scalable networks. Improvements in energy consumption, speed, and efficiency fostered the growth of new markets like DeFi and NFTs. Consequently, more developers entered the space, diving deeper into the technology to achieve their goals. However, this evolution also revealed new challenges inherent to PoS.
General-purpose blockchains like Ethereum were designed to support a wide array of applications but still faced limitations in meeting the unique needs of every dApp. Developers realized they needed independent blockchains capable of controlling not just smart contracts but also the network’s performance, security structure, and consensus mechanism. This led to the emergence of numerous new blockchains, each requiring its own validators and staked assets, thereby fragmenting the security landscape.
Smaller or early-stage projects struggled to attract enough validators or offer appealing rewards, leading to security vulnerabilities. As the number of blockchains continued to grow, the costs and complexities of maintaining individual security systems increased, presenting new challenges for the ecosystem.
Emergence of Restaking
To address these challenges, the concept of restaking was introduced. Restaking allows users to stake their previously staked assets again on a restaking platform, using these re-staked assets to secure other projects. The process is straightforward: the value of the re-staked assets is assessed and incorporated into the consensus process, similar to how voting power functions in PoS. By leveraging restaking, individual blockchains or protocols no longer need to build their own security infrastructure from scratch. Assets staked in one network can be shared across multiple protocols, creating a shared security model. This approach enables the same validators and staked assets to provide security to several projects simultaneously. As a result, the ecosystem avoids the inefficiency of requiring every project to expend excessive resources to achieve adequate economic security.
The Future of the Crypto Ecosystem
Looking ahead, initial security concerns are likely to become less burdensome. Blockchain founders won’t need to cold-call acquaintances to recruit high-quality validators or mortgage their project’s future value due to small scale. They won’t have to manage nodes or design consensus algorithms themselves. Creating a blockchain could become as simple as building a website. Just as platforms like Wix or Shopify handle the backend for online stores, founders won’t need to prepare every technical aspect of their blockchain.
What founders will need is a core idea for their project and the ability to translate this logic into code. Imagine creating a sports betting app: if you need an oracle to bring relevant data on-chain, you can simply subscribe to a data feed. For secure storage of users’ betting information or assets, you can connect to a data DA service via API. If you want to keep sensitive betting data confidential even at the mempool stage, you can utilize a MPC service. Founders can focus on decisions like calculating odds, setting user fees, or defining benefits for different user tiers. Even these tasks could be handled by AI tools that rapidly transform ideas into code.
The emergence of new markets will create opportunities for everyone. In a subscription-based, modular ecosystem, not only blockchain founders but also developers of tools and infrastructure services will find boundless possibilities. Developers can create modules focused on specific functions and offer them to various projects. Traditionally, the success of blockchain projects depended on how well they engaged end users, requiring developers to be tied to specific ventures. However, this is changing. Even the smallest service or module can find users in the future infrastructure market, generating revenue through usage fees.
As individual teams no longer need to develop everything in-house, the ecosystem will grow faster. The blockchain landscape will evolve into a massive collaborative network, where developers and founders focus on their strengths, achieving efficient division of labor. This growth will foster more creative projects and innovations, opening up limitless possibilities through collaboration between teams and networks. Ultimately, the crypto ecosystem will transcend the boundaries of existing industries and become the cornerstone of a new digital economy. Just as the advent of Bitcoin marked a social innovation, this transformation will be seen as a profound societal shift.
MilkyWay: Futuristic Designed Restaking Protocol for the modular ecosystem
The current blockchain ecosystem suffers from fragmented security, with numerous projects and chains operating independently, each maintaining separate validators and staking networks. This disperses assets, weakening overall security and causing inefficiencies, as multiple chains replicate similar functionalities. MilkyWay addresses these issues through restaking, allowing staked assets to secure multiple chains simultaneously, enabling shared security across the ecosystem. By optimizing validator networks and consolidating resources, MilkyWay strengthens blockchain security frameworks and enhances operational efficiency.
MilkyWay also serves as a foundation for modular ecosystems, empowering projects to focus on their core functions without building unnecessary infrastructure. Rather than managing everything in-house, blockchain projects can subscribe to external modules for required features, leveraging shared infrastructure. Restaking plays a key role in this model by handling consensus operations, making decentralized systems more lightweight and efficient.
A standout feature of MilkyWay is its programmable rules, providing the flexibility to meet the dynamic demands of AVSs. With multiple slashing rules, the protocol ensures that malicious behavior or negligence is penalized according to the specific needs of each project. Customizable reward distribution rules give projects granular control over incentives, attracting and retaining operators by tailoring rewards to align with their goals. These programmable elements make MilkyWay adaptable to diverse use cases and evolving market conditions.
MilkyWay also supports multi-asset restaking to enhance network stability. Depending on a single asset exposes networks to market volatility, which can weaken economic security and lead to the withdrawal of stakes, destabilizing the ecosystem. To mitigate this risk, MilkyWay employs a portfolio diversification approach, similar to stock investment strategies, spreading stakes across multiple assets to minimize risk. This multi-asset model encourages greater operator participation, promotes decentralization, and ensures long-term network stability by supporting various assets across multiple networks.
About MilkyWay
MilkyWay is the first modular staking portal that serves both liquid staking and restaking solutions to unlock the potential of modularity. We are on a mission to bring values that makes staking experience for modular ecosystem as seamless as possible by abstracting away complexities and providing more values to the MilkyWay community, also known as Milkers.
