Restaking Creates Irreconcilable Conflicts of Interest

Restaking creates unavoidable conflicts. A validator securing both EigenLayer and Ethereum must prioritize one chain's liveness during a slashable event. This forces a profit-driven choice that undermines the security of the weaker-paying chain.

Yield optimization fragments security. Validators will naturally allocate resources to the highest-paying Actively Validated Services (AVSs), like AltLayer or EigenDA. This creates security arbitrage where critical infrastructure becomes under-secured relative to its economic value.

The slashing dilemma is real. A conflict between Ethereum and a high-stakes AVS, such as a bridging oracle, forces validators to calculate losses. Protecting a lucrative AVS contract is more rational than avoiding a minor Ethereum penalty, breaking cryptoeconomic alignment.

Evidence: The rehypothecation multiplier. EigenLayer's TVL exceeds $15B, representing capital pledged to hundreds of external services. This capital efficiency directly translates to risk concentration, as the same stake backs an expanding surface area for correlated failures.

Restaking creates validator schizophrenia. A single operator securing both Ethereum and an actively traded AVS like EigenDA must prioritize one chain's liveness during a conflict, creating an unavoidable conflict of interest.

Economic security is not fungible. The same $10B in restaked ETH securing a data availability layer and a new L1 is a dangerous illusion of safety; a slashable event on one chain does not protect users on the other.

The slashing dilemma is unsolvable. Protocols like Babylon and EigenLayer must define slashing conditions, but overly strict rules deter adoption while lenient ones make security worthless, a fundamental design flaw.

Evidence: The 2022 Solana Wormhole hack required a $320M bailout from Jump Crypto; a similar failure in a restaking system would trigger contagious, cross-chain insolvency as the same capital is impaired in multiple places.

Economic alignment fails under stress. A validator's stake secures multiple Actively Validated Services (AVSs) like EigenLayer and Espresso. A slashing event on one AVS threatens the entire staked capital, creating a dominant strategy to orchestrate a failure on a lower-value AVS to protect a higher-value one.

Cross-service slashing is the trigger. Protocols like EigenLayer and AltLayer define slashing conditions independently. A rational validator facing a penalty on a high-TVL Oracle AVS will deliberately trigger a slashable offense on a lower-TVL Data Availability AVS to preserve the more valuable stake, betraying the weaker service.

This is not a bug but a feature of pooled security. The shared security model that makes restaking efficient also creates irreconcilable conflicts of interest. Validators optimize for total economic preservation, not the health of individual AVS networks.

Evidence: In a simulated crisis, validators securing both a hypothetical Chainlink-like oracle and a Celestia-like DA layer would rationally sacrifice the DA layer to avoid slashing on the oracle, which commands higher fees and total value secured (TVS).

Market forces enforce alignment: Optimists claim slashing mechanisms and reputation costs will prevent malicious collusion. This fails because the loyalty premium from a dominant restaker like EigenLayer is a more powerful, immediate incentive than a distant, probabilistic slashing penalty.

Diversification mitigates risk: The argument that operator set diversity prevents attacks ignores coordination costs. A few large, capital-efficient operators like Figment or Kiln will dominate, creating centralized points of failure that can be bribed or coerced.

Evidence: The Lido dominance problem on Ethereum PoS demonstrates that capital efficiency and staking rewards create natural centralization. Restaking amplifies this by layering additional yield on the same centralized operators, concentrating systemic risk.