Author: Frank, PANews

Recently, the restaking track has become one of the important narratives in the Layer2 track. From Eigenlayer's TVL quickly surpassing $10 billion to Ether.fi surpassing $3 billion, it has caused a strong market response. Projects in the restaking track have also become the focus of market attention, but Karak, with its luxurious lineup of investment institutions, seems to be an exception.

Karak is a popular type of milk tea in the Middle East, and its naming highlights its regional background. In December 2023, Karak announced that it had raised over $100 million in Series A financing at a valuation of over $1 billion, led by Lightspeed Venture Partners, with participation from Mubadala Capital, existing investors Pantera Capital, Framework Ventures, Bain Capital Ventures, Digital Currency Group, Coinbase, Proof Group, Nima Capital, Naval Ravikant, and other institutions. Mubadala Capital is the second largest fund in Abu Dhabi, and the other investors are mostly well-known investment institutions in both traditional and crypto circles. However, it is worth mentioning that Nima Capital had sold a large amount of its tokens and real estate last year, leading to community suspicions of a "rug" incident.

On February 28, Karak announced the launch of an early access program, allowing users to restake on Karak to earn XP points, but the response was mediocre. It opened a private channel on April 8, and as of April 9, Karak's total TVL was $100 million, a level of TVL that seems incongruent with its luxurious endorsement lineup, leading to continuous questioning on social media.

According to the official introduction, Karak is a general restaking network, similar to other restaking projects like Eigenlayer, using a points-based incentive mechanism to encourage users to restake and earn multiple rewards. Currently, Karak supports multiple mainstream protocol assets on networks such as the Ethereum mainnet, Arbitrum (L2), and K2 (L2). Its team members come from companies such as Coinbase, Google, AWS, Microsoft, Twitter, and Goldman Sachs.

Currently, Karak has a TVL of approximately $100 million, which is significantly lower than EigenLayer ($13 billion) and ether.fi ($3 billion). On the one hand, this may be due to Karak still being in the early access program stage. However, the more likely reason is the community's numerous doubts about the background of the project team.

According to IAN (@cryptoian) on Twitter, the team behind Karak is from Risk Harbor, which was a asset risk insurance service provider in the Terra ecosystem. The project previously ranked second in TVL within the Terra ecosystem and suffered heavy losses in the Terra collapse event. Twitter user @RayRaspberry1 stated that the team, during their exit from Terra, misappropriated 200 million UST tokens (worth $7 million) from the community.

Karak's CSO (Chief Strategy Officer) Victor Cheng responded to this on Twitter, stating that the funds were granted to the Risk Harbor Foundation as collateral for our risk pool by the Terra Foundation, worth $1 billion. After the collapse of UST, in order to prevent further losses, the Risk Harbor Foundation sold $6 million worth of UST from the initial allocation. These funds are currently designated for the initial recharging cost pool of the insurance fund.

Perhaps in an effort to distance itself from past controversies, Risk Harbor has been renamed Andalusia Labs. Andalusia Labs has launched three products: Karak (layer2 network), Subsea (digital asset risk management market, formerly Risk Harbor), and Watchtower (digital asset institutional security platform).

However, this response seems to have not completely dispelled the community's doubts about Karak. One user commented, "All their posts are about earning XP points through restaking. They never mention progress, development, technology, ecosystem development, and so on." As of now, Karak's Telegram channel has approximately 5,700 members, which seems incongruent with a funding level in the tens of millions. In addition, detailed information about the use plan for the platform's XP points has not been disclosed. If Karak wants to increase its TVL, the first step may be to eliminate the "public relations crisis." PANews will continue to follow the progress of this project.

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