11 min read

Nektar Network: Restaking Reimagined

Decentralizing with DVT!

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Published on

4 June, 2024

Nektar Network is a restaking network built on top of Ethereum. It utilizes Ethereum's security framework while helping the scalability of multiple applications. In short, Nektar repurposes staked ETH to perform various functions, such as securing other networks.

The Nektar Network is making significant strides toward providing the latest restaking ecosystem, and this article will explore its components, architecture, and how it accomplishes its goals.

Interoperability and Restaking

Experts have already discussed Ethereum's limitations at length and proposed various solutions. Most notable is how Ethereum's ecosystem has shifted towards performing computations off-chain rather than focusing solely on improving blockchain performance.

Rollups are prominent examples of off-chain computation. These Layer-2 solutions have successfully implemented faster and less expensive transactions by batching them together off-chain while maintaining the base layer's security.

Nektar Interoperability

Additionally, interoperability remains essential to blockchain evolution, yet it must be properly implemented. It involves enabling various distributed systems to communicate seamlessly without relying on a single orchestration layer. Traditionally, the standard operating procedure has been moving data and assets across networks to improve connectivity and UX.

Bridges have prevailed in this endeavor; however, achieving performance and compatibility across external chains has often led to compromised security. The billions of dollars lost transacting across blockchain bridges can attest to these issues. Thankfully, new interoperability models have emerged, promising better efficiency and safety.

What Is Restaking?

Restaking is one such alternative. This innovative model taps into Ethereum's security and node decentralization. With approximately $100 billion staked, Ethereum is more significant than any other Proof of Stake (PoS) network. The billions' worth of staked ETH is a monumental resource waiting to be put to use.

Restaking occurs when holders repurpose their staked ETH to secure other networks or functions. With restaking, Ethereum validators can bring economic security across different chains.

Nektar Network’s Restaking Model

The Nektar Network taps into Ethereum's pooled security by enabling the staked ETH to secure other modules. With Nektar's restaking model, restakers delegate their ETH to Operators in exchange for rewards. Nektar smart contracts deployed on Ethereum enable ETH stakers and Operators (see below) to perform these additional tasks typically not performed by Ethereum validators.

At its core, the Nektar Network is about restaking. Restaking puts staked ETH to work to secure additional networks or functions, while granting stakers more rewards. This model increases the value of staked ETH and reinforces Ethereum's operational and security capabilities.

Actively Validated Services (AVS) on the Nektar Network

AVSs are blockchain-based applications like data availability layers, sidechains, oracle networks, and trusted execution environments that require their own distributed validation semantics for verification. Moreover, AVS developers are teams that build AVS services.

EigenLayer introduced AVSs, which harness Ethereum's collective security power to support innovative PoS-based systems that establish trust between AVSs and dApps.

Likewise, on Nektar Network, AVSs bootstrap new PoS systems by tapping into Ethereum's pooled security, thus providing a high-trust model for applications that utilize their service.

AVSs play a crucial role in bootstrapping new PoS-based distributed systems. Restakers can complement their native or liquid staking activities by opting into Nektar to earn additional rewards from AVSs. Those building a protocol who need to bootstrap their security can apply to Nektar as an AVS.

Decentralizing the Restaking Model

Centralization threatens any distributed network because it creates a single point of failure, effectively defeating the purpose of Web3's decentralization ethos. Nektar distinguishes itself from other restaking protocols that drift towards centralization by offering a decentralized solution through its Distributed Validator Technology (DVT). Nektar's approach fosters decentralization with a model that resists single points of failure, and DVT is what achieves this solution. We'll see how DVT works with the core components below.

Key Role Players in the Nektar Network - Restakers, Operators, and Distributors

Restakers restake their ETH in the Nektar Network to increase their rewards. Nektar participants can complement their staking with additional rewards from AVSs.

Operators serve as the backbone of Nektar's architecture. They register to accept staked assets delegated by Restakers and provide various services to AVSs. Operators can offer their services of managing staked assets to enhance the network's validation processes and security.

Those who desire to become Operators can register to accept staked assets delegated by Restakers and provide various services to AVSs. Operators may take on additional responsibilities and become members of the restaking network or perform duties solely to benefit the Ethereum ecosystem.

Nektar Network meticulously weaves the roles of Restakers and Operators, each playing a critical role in the ecosystem's health and efficacy. Operators validate transactions using restaked assets, and restakers select Operators based on performance, AVSs they support, and commission rate. This dynamic works toward a more secure network.

Distributors streamline the restaking process so users can assign their assets to Operators. Luganodes is an important Operator on the Nektar Network and helps to promote a more efficient and secure network. Distributors, such as LRTs, can simplify the restaking process for users by issuing deposited assets to Operators. With the EigenLayer disruption, LRT providers are making moves in the marketplace, with Kelp DAO, the Renzo Protocol, and Lido being a few.

Core Components of Nektar Network

Nektar Network operates through various interconnected parts that enhance Ethereum's security and scalability. Further, its architecture has four critical components: the Stinger Client, the Diva Staking Protocol, the Nektar Restaking Protocol, and the Nektar Marketplace.

The Stinger Client

This client is a tool that Operators can run locally to join the peer-to-peer validation network via DVT. The current testnet supports validator withdrawals and fulfills validator duties using DVT and other features.

The Diva Staking Protocol

This protocol serves as Nektar's primary component. Nektar Network facilitates decentralized restaking by building on top of Diva Staking to expand the stack rather than as a replacement. Nektar and Diva operate independently but support each other.

Nektar Diva

Diva facilitates Ethereum validation tasks by coordinating interactions between stakers and Operators. It is a liquid staking protocol powered by DVT that introduces innovative functionality for Operators and stakers, reshaping the Ethereum staking landscape. Diva's core features are:

  1. Liquid Staking
    Diva offers a Liquid Staking Token (LST) called divETH that allows users to stake any amount of ETH without facing a lockup period. These divETH tokens represent staked ETH and generate Ethereum staking rewards.

  2. Testnet Stats
    Diva has a potent infrastructure with 284 Operators running 582 validators to help ensure the security and decentralization of the platform. This set of Operators forms the foundation of the Nektar Network.

  3. Operators:
    Diva Operators run distributed validation nodes that are collateralized with ETH. This setup ensures excellent uptime and resilience, with DVT technology providing redundant fallbacks and improved network reliability. Restakers and Operators earn rewards from Nektar and Diva layers.

So, how does Nektar interact with the Diva Staking layer? For starters, the liquid staking layer is part of a larger restaking picture but can be used independently of the restaking layer. For instance, an Operator can only provide validation services to Ethereum without performing these duties for other service providers. Diva will continue to operate as the base validation layer in such cases.

Anyone can engage with Diva Staking without interacting with the additional functionalities across the broader Nektar Network.

Nektar Network and Diva Workflow

The restaking workflow begins when Operators decide to perform additional duties for third parties looking to leverage Ethereum security. Restakers simultaneously delegate ETH to virtual validators created by the DVT-based network of Operators. In native restaking, their withdrawal credentials point to Nektar without the Operators having to do so manually.

When Operators receive staked assets and provide services to AVSs, they receive rewards from the staking and restaking layers. This scenario simultaneously leverages Diva and Nektar technologies. Users can also assess the Operator's performance by taking part in the Diva Staking protocol.

Likewise, Restakers can opt into Nektar to complement their liquid or native staking by earning extra rewards from AVSs. However, Nektar only supports ETH and Diva's LST generated within its ecosystem. It does not support outside LSTs like stETH, leaving this choice to the creativity of the pools that build on top of Nektar.

Diva Staking focuses on Ethereum validation, while Nektar Network addresses the needs of multiple AVSs with its decentralized restaking process. This distinction allows Diva and Nektar to operate independently of each other while supporting each other through shared resources. They also benefit from the overlap in team expertise.

Nektar benefits Diva by providing additional opportunities for all network participants. This configuration enhances each project's effectiveness without compromising its unique objectives.

The Nektar Network's Restaking Protocol

This protocol allows stakers to restake ETH and Diva's LSTs within the Nektar Network. Furthermore, stakers can delegate ETH to Validators for other tasks. These Validators can take on additional responsibilities to serve external parties who desire to use Ethereum's security, such as AVSs.

Nektar's Marketplace for Decentralized Trust

Nektar operates as an open marketplace where trust is decentralized. It's an open platform for service providers who want to tap into Ethereum's security and offer rewards to Nektar's Operators. It enables modularization and delegation of consensus security.

Within this marketplace, stakers help with project growth through restaking, and developers can access security from a collective staking pool.

AI and the Role of Coprocessors

Nektar's restaking process integrates Ethereum staking security and seeks to enhance AI protocols and bring trust incentives to decentralized AI applications via economic and verification mechanisms.

Verifiable computation is essential for projects looking to scale blockchains in the AI era. Nektar aims to unlock a new generation of AI-enabled dApps by integrating Ethereum staking security into crypto economic coprocessors via restaking.

Coprocessors are customized computational environments designed to handle challenging and tedious tasks. Their purpose is to maximize work efficiency. With verifiable computation, coprocessors can perform off-chain functions without compromising the trustlessness aspect of blockchain technology.

Off-chain verifiable compute devices can provide proof of computation without maintaining state themselves for projects that don't need the ability to execute more transactions but instead require more computing power to run complex computational tasks (or data-heavy workloads).

Nektar Consensus Computation

Off-chain verifiable compute devices can ensure accuracy and privacy for complex tasks. Coprocessors also support AI use cases, thus ensuring data integrity and correct execution of AI models.

Coprocessors can leverage Ethereum's historical state for security while keeping data private. Machine learning operations are too cost-prohibitive on-chain, making coprocessors more useful for AI.

More importantly, coprocessors allow off-chain computations to tap into Ethereum's state without additional trust assumption requirements. Smart contracts do not possess this capability thus far. AI-powered coprocessors can provide advanced features that assist users in informed decision-making.

Types of Coprocessors

Coprocessors differ in security assumptions, ranging from trustless (ZK) to optimistic and crypto-economic.

ZK-coprocessors are an excellent choice for sensitive calculations requiring maximum security and minimum trust assumptions. Optimistic coprocessors suffer from latency issues but do offer cost-effective solutions.

Lastly, we have cryptoeconomic coprocessors. These are optimistic but with a large enough economic bond and insurance that allows others to secure compensation for computation errors. Instant settlement is the upside, but the there is the cost of getting insurance. Users can purchase this economic bond and insurance through Nektar's marketplace.

Nektar Coprocessor

Cryptoeconomic coprocessors are more cost-effective than others when insurance covers the value at risk. Sometimes, unverified coprocessors are a reasonable compromise when dealing with non-critical computations.

Different types of coprocessors each exhibit distinct cost, security, and latency characteristics. The necessary levels of security depend on the applications' risk tolerance. However, users can combine different types of coprocessors to blend them into a desired security vs. efficiency tradeoff.

When the stakes are high and security is critical, the project can source economic trust from staked ETH on the Nektar Network, but it requires an AVS to power the infrastructure.

Smart contracts can cost-effectively access machine learning models off-chain and natively for AI use cases.

By making use of Ethereum's network, Nektar creates a high level of decentralization and security for other operations like finetuning, quantization, distillation, and training across AI networks. Other efforts underway include AI protocol settlement on PoS networks that are secured with restaking:

Nektar Network - Conclusion

To sum up, Nektar Network focuses on providing a secure and cohesive restaking environment for users within its ecosystem. Furthermore, the network offers one of the most resilient restaking options available. Its emphasis on decentralization by integrating Distributed Validator Technology makes Nektar an attractive alternative to other restaking protocols. If Nektar reaches its goals, it will bring a more secure, decentralized, and scalable restaking model into the blockchain ecosystem.

About Luganodes

Luganodes is a world-class, Swiss-operated, non-custodial blockchain infrastructure provider that has rapidly gained recognition in the industry for offering institutional-grade services. It was born out of the Lugano Plan B Program, an initiative driven by Tether and the City of Lugano. Luganodes maintains an exceptional 99.9% uptime with round-the-clock monitoring by SRE experts. With support for 45+ PoS networks, it ranks among the top validators on Polygon, Polkadot, Sui, and Tron. Luganodes prioritizes security and compliance, holding the distinction of being one of the first staking providers to adhere to all SOC 2 Type II, GDPR, and ISO 27001 standards as well as offering Chainproof insurance to institutional clients.

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