Ethereum

can someone who understands this much better than me show me how restaking doesn't totally turn a decentralized system into a fragile one vulnerable to cascading risk

views are my own, protocol @ eigen labs; prev working on decentralization @ gitcoin, llama, stanford medicine.

ceo @ helius.dev, host @ lightspeed, ex coinbase — wartime shitposter

It's not very different from rehypothecation in tradfi, which is a common practice

The benefit of doing it onchain is that the "daisy chain" of AVSs leveraging restaked security is transparent, so risks can potentially be unwound before they become systemic

cc @kydo who prob has more well formed thoughts on this

it is very different from rehypothecation and I hope we can stop using totally unrelated finance terms to describe computer science concepts.

it significantly differs on many aspects, namely:
1. Who controls the asset?
2. What is the purpose of the interaction?
3. Liquidity and counter-party risk.

2. Purpose:  Staker uses its own assets to support blockchain validation and generate yield for itself from its own validation services.  

Dealer (who rehypothecate, think JPM or Goldman) uses others’ assets solely in financial transactions to generate yield for itself.

3.  Liquidity and counterparty risk: when a staker withdraws, it simply withdraws, there's no counterparty liquidity or risk involved.

In traditional finance, rehypothecation carries additional non-programmable risks for the involved parties. Money may be recalled and not fulfilled, leading to significant risks.

1. Control:  Staker retains a better measure of control over staked assets, can withdraw the assets timely, and instructs their use.  

Borrower/counterparty (in your rehypoth example) does not have control and does not instruct use.  Borrower/counterparty has a mere claim for the rehypothecated asset.