Original author: Biteye core contributor Viee
Original editor: Biteye core contributor Crush
Karak, which moved quickly and emerged from nowhere, went from announcing a financing round with a valuation of 1 billion toLaunch of early access staking program, and now it only takes about two months to support various assets.
Who is Karak, who is regarded as a rising star in restaking, and how much of a splash can he make on the restaking track? How to participate in Karak in the early stage of the project to obtain a greater probability of airdrops? In this research report, Biteye will give you an in-depth understanding of Karak Network.
Karak was born with a valuation of 1 billion
Karak Network is a restaking network. Similar to restaking projects such as Eigenlayer, it also uses a points model to encourage users to restake, thereby obtaining multiple benefits.
In December 2023, Karak announced that it had received $48 million in Series A financing, led by Lightspeed Venture Partners, with participation from Mubadala Capital, Coinbase and other institutions. Mubadala Capital is the second largest fund in Abu Dhabi. This round of financing Karak estimates Valued over $1 billion.
Figure: Details of Karak’s Series A financing
In February 2024, Karak announced the launch of an early access program, allowing users to earn XP points by re-staking on Karak. In addition to receiving rewards from cooperative projects, they can also earn Karak XP. XP is distributed through the protocol and may eventually be airdropped by converting points into tokens.
Private access was launched on April 8, 2024. As of April 12, the total TVL of different chains supported by Karak was US$140 million, of which Karak Network accounted for the highest proportion of 48.5%, Ethereum ranked second at 45.7%, and Arbitrum accounted for 5.8%.
Karak TVL on different chains, https://defillama.com/protocol/karak#tvl-charts
The emergence of Karak has attracted a lot of market attention. Although the total amount of TVL is far less than that of EigenLayer, it has unique highlights at the technical level and may challenge EigenLayers dominant position in the re-pledge field.
Karak’s technical path
Karak Network: A re-staking layer with the advantage of multi-chain support
As a re-staking platform, Karak is different from EigenLayer, which focuses on Ethereum. Karak provides a diversified platform that supports multiple assets, including ETH, Solana, and various Layer 2 tokens, allowing it to be used in multiple blocks. Provide security solutions within the chain ecosystem, resulting in greater diversity and inclusion. Currently, Karak supports Ethereum mainnet, Karak, Arbitrum and other networks.
Here’s a simplified breakdown of how Karak works:
For validators, staked assets are assigned to a Distributed Security Service validator (DSS) on the Karak network and granted additional execution rights over their staked assets.
For developers, Karak can attract validators through simple, non-dilutive incentives. This significantly reduces costs compared to building a new trust network from scratch.
Karak acts as a bridge between developers and validators. Developers can attract validators by offering incentives in non-dilutive tokens.
The reason is that Karak eliminates the highly diluted reward mechanism that new protocols must use in order to attract and incentivize validators. This can avoid issuing a large number of tokens in the early stages to ensure network security, prevent token value dilution and the interests of long-term holders. damage. This setup significantly reduces cost and complexity.
Image source: https://docs.karak.network/karak
Karak’s technology path has three highlights:
1. Multiasset restaking: Karak introduces the multi-asset restaking function, which is a new security mechanism. Under this mechanism, users can re-stake various assets, such as Ethereum, liquidity pledged tokens, stablecoins, etc., to earn rewards. This multi-asset re-staking not only increases potential earnings for users, but also greatly enhances the security of various Dapps, protocols, and DSS.
2. Restake anywhere: Karak has internalized the concept of universal re-staking, making the secure re-staking infrastructure accessible to anyone on any chain. This convenience allows developers to focus more on innovation and product development, rather than spending a lot of time and resources on initial security measures.
3. Plug-and-play development environment (Turnkey development): Karak allows new systems to be connected to a strong and secure trust network from the beginning, which significantly lowers the threshold for new protocols to ensure their own security, allowing these protocols to Run without complex security settings.
Image source: https://docs.karak.network/karak
In short, Karaks innovation not only provides users with re-hypothecation opportunities for multiple assets, but also greatly simplifies the security assurance process of new protocols. Together, these features make the Karak more competitive and attractive on the same track.
Karak vs. EigenLayer
Karak, like EigenLayer, is a re-staking protocol, which means that it enables staked assets such as ETH to be staked again by validators across multiple networks, while enabling validators to receive additional rewards. At first glance, Karak seems to be an imitation disk of Eigenlayer, but comparing the technical paths of the two, you can find some differences.
So why is it said that karak is not an imitation disk of Eigenlayer? What is the difference?
Reason one: The dApp on Eigenlayer is called Active Verification Service (AVS), while the dApp on Karak is called Distributed Security Service (DSS). This is explained in detail in the next section.
Reason two: The execution layer of Eigenlayer is on the Ethereum main network, but Karak has its own Layer 2 (called K 2 ) for sandbox testing for DSS development and testing before launching on Layer 1.
The first question needs to be discussed here: What are AVS and DSS? Whats the difference?
AVS, the full name of Actively Validated Services, is a concept in the EigenLayer protocol. AVS can be simply analogized to middleware, providing services similar to data and verification capabilities for end products. For example, the oracle is not an end product, but it can provide data services for DeFi, wallets, etc. It is a kind of AVS.
Understanding EigenLayers AVS (Active Verification Service) can be understood through a simple and vivid metaphor:
Imagine Ethereum is a huge shopping mall, and the various Rollup L2 (second-layer solutions) are like stores in the shopping mall. To operate in the shopping mall, these stores need to pay rent, which in the Ethereum world is equivalent to paying GAS fees so that their transactions and status data can be packaged and verified, and stored in the shopping mall of Ethereum. on the ledger.
In this metaphor, Ethereum not only provides the physical space (block space) of the store, but is also responsible for security (verifying the legality and consistency of transactions) to ensure that all transactions in the store are safe and valid.
EigenLayers AVS is like an affordable similar service for small vendors (projects) who want to set up stalls outside shopping malls. These small traders cannot or do not want to operate in shopping malls, such as mobile shops (requiring mobility) and street shops (good location), but these merchants also want to use some services of large shopping malls, then AVS can provide services for them . Although it may not be as comprehensive as the security inside the shopping mall, it is lower in consensus security and at a lower cost. But this can provide a data or trust mechanism solution outside of Ethereum for dapps that cannot be verified in the Ethereum EVM network, so that even small-scale projects can find a foothold in the vast Ethereum ecosystem.
This method is particularly suitable for application scenarios that do not require particularly high consensus security, such as some Dapp rollups, cross-chain bridges, oracles, etc. These projects may not require the highest level of security provided by the Ethereum mainnet, so by choosing AVS, they can obtain the necessary security verification services at a lower cost while maintaining a relatively secure environment. The emergence of AVS is actually expanding the boundaries of the Ethereum ecosystem, allowing more diverse projects to join, especially those small but innovative projects with limited resources.
Similar to EigenLayer, Karak also has its own version of AVS called Distributed Secure Services. Unlike EigenLayer, which is limited to the Ethereum ecosystem, Karak introduces a new concept - providing re-pledge services for multiple assets, allowing anyone to use any asset on any chain.
In an Ethereum-only environment, AVS needs to compete with every opportunity to provide Ethereum yields, and without the speculative anticipation of airdrops, this competition is unsustainable. DDS can absorb more assets on the chain and use re-pledged assets to enhance security while reducing operating expenses. Compared to ETH, many assets have lower opportunity costs, meaning DSS has a simpler and more feasible path to sustainable income.
It is worth noting that the first AVS was launched on the EigenLayer mainnet on April 10, and 6 more AVS were released successively. Karak plans to launch the first DSS in the coming weeks.
Next, let’s discuss the second question: What is Karak’s Layer 2 K 2? How is it different from Eigenlayer?
K 2 is a Layer 2 built on the Karak network.
Operating on Layer 1 is relatively expensive for developers and users, so K 2 provides a new solution, which serves as a sandbox environment to allow Distributed Security Services (DSS) to be officially deployed on L1. , first develop and test on k 2 to ensure that they are stable and safe before actual application. In addition, by adding custom precompiles to allow more validators to verify DSS, K 2 not only improves efficiency and security, but also makes it more decentralized.
Compared with Eigenlayer, which uses the Ethereum main network as the execution layer, Karak has shaped its own execution layer (K 2) and is based on Layer 2, which can provide faster transaction speeds and lower transaction costs without Sacrifice security.
After understanding the above two issues, we can see that Karak and EigenLayer adopt differentiated technical paths, and this also brings about the most intuitive difference.
Karak supports more diverse assets besides ETH, and plans to cover Solana, Tia, Arbitrum, Optimism, etc. Layer 2, aiming to create a cross-chain diversified re-pledge layer. EigenLayer focuses on the Ethereum ecosystem, using ETH as the main asset for re-hypothecation, unlike Karak’s broader inclusivity.
We can use an analogy to help understand. Imagine Karak is like an international airport connecting multiple countries, welcoming passengers (assets) from all over the world, whether they are large passenger planes (public chain assets such as Solana) or small private planes (Layer 2 Assets such as Arbitrum). Karaks goal is to provide a convenient and safe transit point for these travelers. In comparison, EigenLayer is more like a subway system designed specifically for a metropolis (Ethereum ecosystem), focusing on serving residents and tourists in the Ethereum city, providing professional and efficient transportation services (trading and operate).
In other words, Karak has expanded the range of re-pledged assets on a similar basis to EigenLayer, including Ethereum, various liquid pledged Ethereum coins and stable coins, thereby expanding the range of user options.
Karak’s approach has proven to be effective. According to DefiLlama data, taking stablecoins as an example, stablecoins account for about 19% of Karak’s re-pledged crypto assets, and perhaps less than 0.27% of EigenLayer’s re-pledged crypto assets. More differences can be seen from the following pie chart.
Karak re-pledge details of crypto assets https://defillama.com/protocol/karak#tvl-charts
EigenLayer re-pledge details of crypto assets https://defillama.com/protocol/eigenlayer#tvl-charts
Is Karak a vampire attack on Eigenlayer?
Looking back at SushiSwap’s vampire attack on Uniswap, what would happen if Karak issued coins before Eigenlayer?
We first need to understand what exactly is a Vampire Attack? A vampire attack is a tactic in the crypto space where one project (in this case SushiSwap) attempts to preempt another similar project (such as Uniswap) by offering better incentives (e.g., higher liquidity provider LP rewards) users and liquidity share.
To put it simply, a vampire attack is to seize the liquidity share from the target object, thereby increasing its own liquidity and value, thus completing the blood sucking.
SushiSwap managed to attract a lot of liquidity in 2020 by forking Uniswap’s code and introducing SUSHI as the native token of its platform. As Karak and Eigenlayer have similar protocols, it is not ruled out that vampire attacks will occur. If Karak issues coins first, we can speculate on the following possible scenarios:
1. Karak supports multiple assets and may attract potential re-pledge users seeking asset diversity. This will pose a challenge to EigenLayer if a vampire attack is performed.
2. Once Karak and Eigenlayer are running on the mainnet with multiple AVS/DSS, Karak may perform a vampire attack and transfer the deposited Eigenlayer LRT assets from Eigenlayer to Karak. (Note: Karak allows the re-pledge of LRT that has been re-mortgaged with ETH on Eigenlayer. In fact, it allows LRT to be pledged again, which is a bit like a matryoshka doll.)
If Karak issues coins first, it will indeed attract LRT from the entire market. More importantly, Karak’s own chain is already available, and the speed and fees are acceptable. After all, one of Karaks outstanding advantages is its execution layer, which determines that it is not Eigenlayers younger brother, but a rival.
How to become an early participant in Karak
At present, the Karak project is still in a relatively early stage. You can obtain points and XP incentives by staking on the official website. Future airdrops of Karak will probably be conducted by converting points into tokens. The amount of XP earned may depend on how early you re-stake, how long you re-stake, and how many new users come in via invitation codes.
EnterKarak official website pledge interface
The staking networks currently supported by Karak: Ethereum mainnet, Arbitrum (L2), Karak (L2).
Pledge assets supported by Karak: various LST assets such as mETH, various LRT assets such as pufETH, and three stable coins such as USCT, USDC, and sDAI. Please note that the tokens supported by different networks are different, please confirm carefully.
To put it simply, you can get staking rewards + re-staking rewards + Eigenlayer points + pledged LRT points + Karak XP by staking on Karak.
At present, Karak is not like Eigenlayers one fish to eat more, but when Eigenlayer has been saturated, it obtains higher returns by betting on other protocols, but returns and risks coexist.
It is recommended that you stake directly on Karak (Karak’s L2 network mentioned above) to get double Karak points. The specific steps are as follows.
First, add the Karak network
EnterChainlist, select Karak Mainnet on the left
Next, cross the assets to the Karak chain. If you choose to stake through the Karak chain, three tokens are currently supported: rswETH, USDC, wETH
There are two situations for staking rswETH
1. With rswETH in hand, you can cross from the Karak official bridge to the Karak chain.
2. If you don’t have rswETH on hand, pledge eth on Swell to obtain rswETH (Swell can only pledge the ETH of the main network, you cannot first cross the ETH to the Karak chain and then pledge), and then cross to the Karak chain through the Karak official bridge.
There are two situations for staking wETH
1. With wETH in hand, you can cross from the Karak official bridge to the Karak chain.
2. If you don’t have wETH in hand, you can use the Karak official bridge or MiniBridge to transfer ETH from the main network to Karak. Just turn on Auto-Wrap ETH when staking.
Karak official bridgeandMiniBridge
Finally, complete the staking at Karak Pools.
Since none of the three supported tokens are ETH, this means that cross-chains used to require ETH as gas fees. Especially for WETH, if you cross over to ETH and select max to deposit, the first step of the contract is a Deposit function, which actually wraps ETH. This will cause the ETH in the wallet to disappear, causing the second step of deposit to fail.
Recommended actions are as follows:
1. To pledge rswETH and USDC, you can use the MiniBridge cross-chain tool to cross a little more ETH to pay for gas.
2. Stake wETH, leave some ETH, and don’t click max. But it doesn’t matter if max is fully pledged accidentally. You can use MiniBridge to cross a little more ETH.
risk warning
At present, the controversy surrounding Karak mainly focuses on two aspects.
First, after receiving financing at the end of 2023, the team hurriedly launched the product in February this year. As a re-pledge project, there is currently less discussion around technology and more marketing methods such as “points activities” to seize the market.
Second, the self-protection behavior of the Karak teams previous project has been criticized by the community, and some KOLs have pointed out that it is RUG. In response to this question, the team responded to DC on April 9.
In short, blockchain projects are always accompanied by contract risks and team risks, especially re-pledge agreements that frequently attract hundreds of millions of dollars. However, judging from the current market environment, new users prefer projects with good investment institutions and huge financing backgrounds, while old users pay more attention to the past history of the project team.
Summarize
How to balance risks and benefits has always been a concern for users.
As a newcomer in the re-staking field, Karak’s valuation of 1 billion and unique technical highlights have increased the possibility of challenging EigenLayer’s dominance in the re-staking field. At the same time, Karak supports re-pledge of a variety of LRT tokens, including but not limited to Swell, Puffer, Renzo, EtherFi, KelpDAO, etc., which also promotes the prosperity of the Ethereum staking ecosystem.
Perhaps sensing the crisis, EigenLayer announced that it would cancel all deposit limits and reopen the deposit window at 0:00 on April 17, Beijing time.
Should you follow the rules and choose EigenLayer, or bet on Karak for higher returns? This chess piece is in the users hands at the moment.
