Restaking is usually thought of as an improvement to staking.. The truth is, it is really about how the market is designed. When more protocols are trying to get the security and more money is going into restaked assets the question is not if restaking works. It is, about who gets to decide where the trust and money go in restaking.
The people at Lorenzo Protocol decided to create a place for restaking. They did this because they know that being neutral is not something you say it is something you have to be. For a system like this to work when restaking is no longer new and is a part of everything it has to be neutral. Lorenzo Protocol knows that neutrality is necessary, for a system that wants to keep going when restaking becomes a part of how things work. Lorenzo Protocol is doing this because they want their system to survive and be a part of the system.
Restaking becomes really fragile when the people doing it have opinions about it.
Restaking is the process of putting something at risk
When people have strong ideas about restaking it can be fragile because they might not be willing to listen to other ideas.
This is what happens to restaking when it is based on what someone thinks than, on facts.
The problem is that restaking becomes fragile when people let their own opinions get in the way of making decisions about restaking.
So restaking is fragile when it is controlled by the opinions of the people who are doing the restaking.
Many restaking platforms do not remain neutral. They tend to favor AVSs over others. These platforms push money towards the partners they like. They also design their systems around a set of ideas. This approach works for a while especially when the groups are small and people can easily talk to each other. Restaking platforms, like this can be a problem because they do not give all AVSs a chance.
Restaking is not something that is separate from everything else. It actually connects a lot of things together like validators and AVSs and chains and the people who provide the capital. When you put all of these things together it creates one area of risk. As this area of risk grows, having a system that is very set in its ways becomes a problem. The people who provide the capital start to wonder if the decisions, about how to use their money are being made because they make sense or because the protocol is set up to make them happen. The AVSs get worried that some people will have an advantage. The validators get worried that they will be forced to take on risk than they want to. Restaking is what connects all of these things. It is what creates this big area of risk.
A marketplace that is fair to everyone gets rid of this problem. A neutral marketplace is really good, at doing this. It helps to make things okay when people are stressed about buying and selling things. A neutral marketplace is very helpful.
Lorenzo does something important. He does not play favorites with any of the people using the system. This means that the risks and rewards people get are based on what happens in the market not because the system is biased towards some people. This is really important because the system is set up so that everyone is in it together and if someone makes a mistake it can affect everyone quickly. Lorenzo makes sure that the system is fair, to all the participants and that is what makes it work. The risks and rewards of the market are what drive it not any biases that the system may have. Lorenzos approach helps to keep the system safe and stable which is crucial when everyone is relying on each other.
Neutrality is really important because it lets capital make the choices on its own. When we talk about capital it needs to be able to move and find the best places to go without any outside influence. This is what neutrality is about. It helps capital find its way, to the people and the right projects and that is what makes it work correctly. Capital is a deal and it needs to be able to make its own decisions and neutrality is what makes that happen.
Money works best when it is free to make its choices. When there are many rules that tell money what to do things get messed up. Money starts taking risks it does not want to take just because the system pushed it that way. Money should be able to decide for itself without being forced into something it does not like. When money is allowed to choose it makes decisions and that is good, for everyone. Money and the system they need to work so money can do what it does best.
Lorenzos marketplace is really different. It does not try to control where the money goes. Instead Lorenzos marketplace gives people a system to work with, where:
Automatic Vehicle Systems present their security demand in an open and honest way so Automatic Vehicle Systems are clear, about what they need to be secure. This is how Automatic Vehicle Systems work they present their security demand transparently.
Vaults are really good, at showing what kind of risks they have. The Vaults make it very clear what could go wrong. When you look at the Vaults you can see the risk profiles. Understand what is going on with the Vaults.
Money is given to people based on what they want to do not because of rewards they might get. Capital is allocated in this way it is about the intention behind it not the incentives that come with it. The people in charge of capital look at what someone wants to achieve and then they decide if they should give them the money. It is, about the intent the plan, the goal and that is what decides if capital is allocated or not.
This self-selection is actually pretty organized. It is really disciplined. When we talk about neutrality it does not mean that there are no rules. It means that the self-selection does not favor one thing over another. The protocol is what tells us how to interact with each other. It does not tell us what the result will be. The protocol defines the rules of interaction not the outcome of the self-selection.
A marketplace model is really good because it stops security from being controlled by one person or group. This is important for security because when one person or group is in charge of everything it can be a problem if something goes wrong. A marketplace model helps to spread out the security so that it's not all, in one place. This makes it harder for bad people to get in and cause trouble. A marketplace model is a way to prevent security centralization and it helps to keep everything safe.
So when you have a lot of restaking going on it can be really bad for security. This is because restaking can lead to a lot of money being put into a few AVSs. When this happens the whole system becomes very fragile. If something goes wrong in one of these AVSs it can cause problems, with the restaking and the whole ecosystem. Restaking is a part of this issue because it makes the system weaker when too much restaking is focused in one place.
A marketplace that is fair gives attention and money to people and things. AVSs have to be good at what they do look good and behave well to get people to trust them of just relying on what protocol they use. This makes the whole system safer over time because it is stronger when it has different parts, not just one thing, in charge. AVSs are better when they have to compete with each other in a marketplace.
Lorenzos design says that shared security is only good when it is not controlled by one person. Lorenzos design thinks that shared security will work when lots of people have a say in it not one person who makes all the decisions, about Lorenzos design and shared security.
Neutrality is really important, for the protocol. It keeps the protocol safe from conflicts of interest. The protocol needs to be neutral so it can work fairly. This way the protocol is not influenced by any conflicts of interest. Neutrality is what protects the protocol.
When a protocol starts to favor people it takes on their problems. It becomes really tough to make decisions about how the protocol should be run. Making changes, to the protocol becomes a political issue. People start to lose trust in the protocol. This happens very slowly.
Lorenzo stays out of things. That is a good thing. This means Lorenzo does not have to take sides or get involved in things that do not concern him. Lorenzo does not have to explain why he made choices or why some people get special treatment. This helps because now Lorenzo can focus on what he's really good at. Lorenzo is good at making sure the system works well and that people can work together to restake. This is very important for restaking coordination. Lorenzo does a great job, with it.
This is really important for things to work well over a time. When the system favors one side it will eventually cause problems. Slow everything down. Infrastructure, like this will become an obstacle.
Institutions need a place where everyone is treated the same. This place is called ground. Institutions require ground so that people can feel safe and comfortable. Neutral ground is very important for institutions because it helps them to be fair. Institutions, like schools and hospitals require ground. Neutral ground is a place where institutions can make decisions without being biased. Institutions need ground to work properly.
Big companies that invest money do not like it when people are not fair. These companies, the people who check things and big businesses like to use platforms that're straightforward and do not have any secrets. A marketplace that is fair and lets people put their money in again is what big companies want because it is like the way they already think about markets. They like things to be based on rules to see and not based on what one person decides. Institutional capital is deeply sensitive, to conflicts of interest. Institutional capital likes a restaking marketplace because it is rules-based, transparent and non-discretionary.
Lorenzo is really good at staying neutral. This makes it easy for institutions to work with Lorenzo. They do not have to worry that the rules of Lorenzo will change in a way that affects the risks they take. It is very important to know what to expect from Lorenzo. This is more important, than trying to get the results right now. Lorenzos predictability is what institutions really need.
Being neutral does not mean you are passive. Neutral means you do not take sides. You can still express your thoughts and feelings when you are neutral.
Neutral people are not afraid to speak up when something's wrong. They just do it in a way.
The main thing to remember about being neutral is that it is not the same as being passive. Neutral people can be very strong and determined.
For example a person who is neutral in a fight, between two friends can help them find a solution without taking sides. This person is not passive they are just neutral.
So neutral does not mean passive. Neutral means being calm and fair and being able to think.
So what does neutrality really mean? Lorenzo is not just sitting back. Doing nothing. It is not someone who does not care about risks. Lorenzo actually does a lot of work to set up vaults make sure rules are followed and handle tasks. Lorenzo is very active when it comes to dealing with risks.
Neutrality is about who gets treatment not about how the rules of the system are made or enforced. The system of rules is what it is and neutrality is really, about making sure that the system does not favor one person or group over another.
The protocol is what defines the boundaries it does not decide who the winners are. The protocol is really, about setting boundaries not about choosing winners.
Why This Matters as Restaking Scales
As restaking gets bigger it gets harder for people to work together. There are AVSs, more ways of doing things more kinds of money and more things that can go wrong. When you have all these things it is not an idea to have one person making all the decisions, for restaking. Restaking needs to be able to adapt to all these changes and one person cannot do that alone for restaking.
A marketplace that is fair, to everyone works better because it allows things to get sorted out on their own through interactions. The system does not have to know about every thing that people will do in the future. The marketplace only has to make sure that everything is fair and that it can handle everything that happens. This way the marketplace can handle complexity. Let people figure things out for themselves.
Financial systems are able to deal with a lot of things without falling apart. This is how financial systems handle all the stuff and still keep going. Financial systems can get really complex. They do not collapse because of it.
The Lorenzo Protocol is making a marketplace for restaking that's neutral. This is because being neutral is the way to be stable when you have things like trust and security and money all mixed together. The Lorenzo Protocol does not pick favorites when it comes to allocating things. This means that the restaking system can figure out what works best for it on its own. The Lorenzo Protocol is, about letting the restaking ecosystem find its own balance.
