Why Restaking Creates New Centralization Vectors We Ignore

EigenLayer's $18B+ TVL and first-mover advantage create a single point of economic and governance failure for hundreds of AVSs. Its slashing decisions and operator set define the security floor for the entire ecosystem.

• Single Slashing Arbiter: One entity's council governs the economic security of dozens of protocols.
• Protocol Lock-In: AVSs are incentivized to build exclusively for the dominant restaking pool, creating a winner-take-most market.

Capital efficiency drives stake to a handful of professional node operators (e.g., Figment, Kiln, P2P). This recreates the Proof-of-Stake validator centralization problem, but now with control over cross-chain bridges, oracles, and DA layers.

• Concentrated Fault: A collusion or bug in ~10 major operators could compromise dozens of AVSs simultaneously.
• AVS Capture: Operators prioritize high-fee, low-risk AVSs, starving innovative but nascent services.

Restaked ETH becomes trapped in a complex derivative stack (LST -> LRT -> AVS), creating systemic liquidity risk. Withdrawals are gated by EigenLayer's queue and operator performance, making capital sticky and illiquid during crises.

• Cascading Unstaking: A major AVS slashing event could trigger a mass exit queue, freezing billions in capital across the stack.
• Yield Dependency: The entire model depends on perpetual AVS inflation, a fragile incentive that could collapse.

EigenLayer's dominance creates a single point of failure for the entire restaking ecosystem. A critical bug or governance attack here doesn't just affect one chain—it cascades to hundreds of AVSs and $10B+ in restaked capital. The validator set is not meaningfully diversified.

• Single Client Risk: The EigenLayer smart contract suite is the universal client.
• Governance Capture: Control over slashing parameters becomes a superpower.
• Liquidity Blackhole: A crisis triggers mass unbonding, paralyzing Ethereum consensus.

AVS operators (like Oracles, Bridges) must delegate to node operators who can afford slashing risk. This concentrates power with large, capital-rich staking pools (e.g., Figment, Coinbase). They become de facto arbiters of which AVSs survive, creating a permissioned layer.

• Barrier to Entry: Small, innovative AVSs can't attract secure operators.
• Collusion Surface: Major operators can collude to slash competitors or censor services.
• Risk Aversion: Operators favor high-fee, low-risk AVSs, stifling innovation.

AVSs are not independent. A failure in a major data oracle (e.g., Chainlink) or cross-chain bridge (e.g., LayerZero) could trigger slashing across dozens of AVSs simultaneously. This creates a correlated failure mode where a single exploit causes a cascade of slashing events, draining stake from the same set of node operators and collapsing the system.

• Tight Coupling: AVSs share dependencies and operators.
• Non-Isolated Risk: Slashing is contagious.
• Death Spiral: Capital flight from one AVS triggers liquidity crises in others.

Restaking aggregates legal liability. A regulated AVS (e.g., a real-world asset platform) that gets slashed could sue the node operators. Jurisdictional attacks become viable. Large, identifiable node operators are easy targets for regulators seeking to disable an entire application category by threatening the underlying security providers.

• Liability Stacking: Operators bear legal risk for all AVS actions.
• Geo-Political Risk: A single nation-state can target known entities.
• Chilling Effect: Forces operators to pre-censor AVSs.

Liquid Restaking Tokens (LRTs) like ether.fi, Kelp DAO abstract complexity but create financialized centralization. They become the dominant liquidity layer, deciding AVS reward distribution and operator delegation. Their tokenomics and governance effectively control capital allocation for the entire restaking economy, replicating TradFi's fund manager problem.

• Capital Allocation Power: LRTs pick winner AVSs.
• Yield Black Box: Opaque point systems replace transparent slashing.
• Vote-escrow Capture: Governance tokens decide ecosystem direction.

Restaked ETH is not just securing Ethereum. It's securing bridges (e.g., Across), oracles, and other chains via AVSs. This rehypothecation of security means the same capital is promised multiple times. A simultaneous crisis on Ethereum and a major AVS creates an insolvency vortex where slashed capital cannot cover all obligations, breaking the trust model for every dependent system.

• Security Dilution: Capital is over-leveraged.
• Insolvency Cascade: A single shortfall breaks multiple promises.
• Trust Collapse: Undermines the core value proposition of cryptoeconomic security.

EigenLayer's $18B+ TVL creates a single point of failure for dozens of AVSs. A slashing event or governance attack here cascades across the entire restaking ecosystem, violating the core crypto tenet of modular risk isolation.

• Single Slashing Corridor: A major bug or malicious governance proposal could simultaneously penalize hundreds of protocols.
• Concentrated Governance: ~5 entities (Lido, Ether.fi, etc.) control the majority of delegated stake, creating a cartel.

Liquid staking tokens (LSTs) like stETH and eETH become the dominant restaking assets, transferring Ethereum's validator governance power to a handful of LST providers. These entities now wield meta-governance over every AVS their tokens secure.

• Vote Escrow Capture: AVS tokenomics must now appease Lido's veToken holders, not their own community.
• Liquidity Fragility: AVS security becomes tied to the peg stability of a few LSTs, a non-native risk.

AVSs compete for attention from the same small set of professional node operators (Figment, Blockdaemon, etc.). This creates a bidder's market where only the wealthiest AVSs can afford security, centralizing innovation and creating systemic liveness risk.

• Operator Overload: Top operators run 50+ AVSs simultaneously, creating operational brittleness.
• Economic Censorship: Niche or low-fee AVSs are priced out, stifling permissionless innovation.

The counter-trend is protocols like Babylon (Bitcoin staking) and EigenDA (dedicated data availability). They bypass the generalized restaking pool by creating dedicated, purpose-built security layers with isolated slashing and aligned incentives.

• Risk Containment: A failure is contained to its own security pool.
• Sovereign Economics: Protocol controls its own validator set and reward distribution.

Follow Cosmos and Celestia's lead. Mandate that AVSs require operators to bond the native AVS token alongside restaked ETH. This aligns operators with the long-term health of the specific protocol, not just EigenLayer's yield.

• Skin-in-the-Game: Operators face slashing in the token they should care about.
• Break the Cartel: Opens the operator set to anyone willing to acquire protocol-specific stake.

Move beyond simple delegation. Use intent-based architectures (like UniswapX or CowSwap) where AVSs post their security requirements and a solver network (e.g., Across, Socket) matches them with optimized operator sets. Decentralizes the discovery and pricing of security.

• Dynamic Pricing: Security becomes a competitively priced commodity.
• Anti-Fragile Networks: Operator failure triggers automatic reallocation by solvers.