This article will explore KelpDAO's insights into the Restaking track, the project's future product plans, its views on competitors, and the Chinese-speaking market.
Author: Deep Tide TechFlow
As the Solana ecosystem rises again and the slogan "Surpassing Ethereum" gains popularity in the community, loyal supporters of Ethereum will inevitably strengthen Ethereum's position by emphasizing the narrative of Restaking.
As an important narrative in this cycle, the heat of the Restaking track is evident: on the one hand, the track has attracted a huge amount of funds, with CoinGecko data showing its market value exceeding 9 billion US dollars; on the other hand, there have been frequent innovations within the track, from the native restaking protocol mainly based on LST at the beginning, to the LRT protocol that implements the "one fish, multiple meals" gameplay. High-quality projects continue to emerge, and KelpDAO is one of the outstanding ones, with a TVL (Total Value Locked) of over 8.5 billion US dollars and more than 40,000 active restakers.
At a critical time when KelpDAO is calling on the community to collectively sprint towards the milestone of 10 billion US dollars TVL in the "Mega Million Marathon" activity, we had an in-depth discussion with Amitej Gajjala, the founder of KelpDAO, to explore KelpDAO's insights into the Restaking track, the project's future product plans, its views on competitors, and the Chinese-speaking market.
In the interview, Amitej Gajjala frankly stated: "Increasing adoption can make Ethereum and similar platforms strong competitors to traditional finance. KelpDAO also plans to develop staking solutions on platforms such as Solana, BNB Chain, and Bitcoin, expanding our product to multiple ecosystems."
In this issue, let's delve into KelpDAO's past, present, and future, and understand how it, as a representative project in the LRT track, meets user demands to achieve multiple financial innovations, and what thoughts and extensions its successful experience brings to current Web3 entrepreneurs.
Key Points
The revolutionary nature of the crypto market comes from the following reasons: the market is global, with no geographical restrictions, allowing anyone to participate; all systems and codes are open source, enabling developers worldwide to freely use existing technologies and innovate; the introduction of tokens gives practical value to these technologies.
DeFi platforms need to provide significant incentives to retain their users, and Eigenlayer must also increase rewards to prevent TVL outflow, creating a zero-sum game. KelpDAO alleviates this issue by building a liquidity layer on top of restaking platforms (such as Eigenlayer).
Kelp DAO is somewhat similar to protocols like Lido, but it focuses on restaking rather than staking. Kelp DAO supports LST and native tokens as well as multiple L2 chains, serving as an abstraction layer on top of Eigenlayer, allowing users to invest without worrying about underlying technical interactions, simplifying user processes and reducing friction and cost.
Kelp DAO's smart contracts have been audited by three well-known security companies: Sigma Prime, MixBytes, and Code4rena. In addition, with the cross-chain functionality we provide today, users can confidently stake their assets and withdraw them as needed.
Kelp DAO actively collaborates with media in China, South Asia, Europe, and the United States to raise awareness and educate potential users, playing an important role in gaining a large user base. In addition, Kelp DAO also collaborates with numerous hardware and software wallets to enable liquidity staking directly within the wallets.
Kelp DAO's current focus is on expanding its user base and increasing TVL. Additionally, Kelp DAO plans to build restaking platforms on Solana, BNB Chain, Bitcoin, and non-EVM chains to expand the project's influence and accessibility.
Integrating real-world assets into blockchain platforms may drive widespread adoption of DeFi. Additionally, L2 solutions, with their lower gas fees and faster transaction speeds, attract a wider audience to join the crypto ecosystem, playing a crucial role.
Eigenlayer itself does not directly provide additional rewards; these are provided by services built on top of Eigenlayer. Essentially, the more services developed on Eigenlayer, the higher the potential rewards for users.
LRT has the potential to act as an aggregation layer for various restaking platforms such as Eigenlayer, greatly improving the user experience.
For any young entrepreneur, regardless of the industry, the most critical aspect is to identify the real problems that affect the majority of the market. Understanding and addressing genuine needs is the foundation for building a successful business.
Kelp DAO's Origin: Building a Liquidity Layer on Restaking Platforms to Break the Zero-Sum Game
Deep Tide TechFlow: Given that your initial career experience was as a business analyst in the tech industry, how did you get involved in the crypto industry? What attracted you to participate in the crypto industry? And why did you decide to focus on the Restaking narrative?
Amitej Gajjala:
One of the most crucial experiences in my career came from my business management background. I studied at a top institute in India and graduated from a top business school. After that, I worked at a leading management consulting firm, AT Kearney, in India and Southeast Asia. That period was crucial for me as it nurtured my insights into business operations and organizational capabilities.
My passion for startups began in the late 2010s, which was an important period for India's startup ecosystem, with major unicorns like Flipkart and PhonePe gaining increasing influence. As a result, I joined India's largest food tech company, Swiggy, as the head of strategy and transformation. Over the course of three years, I gained a lot of skills and experience in expanding companies and building efficient organizations.
By the end of 2019, during the DeFi Summer period, I developed a great interest in the blockchain field, as protocols like Uniswap and Aave began to gain popularity. I started to seriously study cryptocurrencies, including the staking track. As my research deepened, I realized the transformative potential of this technology to completely change the entire financial industry. At that moment, everything became clear to me, and I decided to leave traditional work and pursue a full-time career in cryptocurrencies.
Deep Tide TechFlow: Do you think this innovation has the potential to change the financial system, as it can operate on a distributed ledger and maintain open standards, allowing for permissionless integration with other protocols, free from the limitations of isolated islands?
Amitej Gajjala:
Yes, I believe the revolutionary nature of the crypto market comes from several reasons:
Firstly, the market is global, with no geographical restrictions, allowing anyone to participate.
Secondly, all systems and codes in the crypto field are open source, meaning developers worldwide can freely use existing technologies and innovate. In this regard, we can see the allure of open-source technology, similar to the change Linux brought to the internet infrastructure. In the past few years, the crypto field has also undergone a similar revolution, and this trend is expected to further accelerate in the next decade.
The third reason is the introduction of tokens, which has enabled people to give practical value to these technologies. Developers worldwide are leveraging these open-source systems to create a "supercharged internet" new world.
Deep Tide TechFlow: About three years ago, you created Kelp DAO, or more precisely Stader Labs. I remember I started to get involved in the cryptocurrency field at the end of 2021, which happened to be the time when Ethereum transitioned from Proof of Work (PoW) to Proof of Stake (PoS) in the summer of 2022, when the Restaking narrative was gaining momentum. Could you share the story of Kelp DAO's birth? What prompted you to create Stader Labs, which eventually incubated Kelp DAO? In the early stages of the project, why did you believe that Restaking was a promising direction?
Amitej Gajjala:
Stader Labs is not just an incubator; it is a stable and direct investor behind Kelp. Additionally, we have common co-founders.
In early 2023, we closely monitored the entire Restaking ecosystem and realized that Restaking would attract a large influx of funds, a trend easily captured in Eigenlayer's market performance, with approximately 140 to 150 billion US dollars staked in Eigenlayer. We also observed that many DeFi applications would offer various incentives to users to maintain their Total Value Locked (TVL), and we quickly realized that this could lead to a zero-sum game situation. Therefore, we decided to build a liquidity layer on top of restaking platforms (such as Eigenlayer), which would provide significant advantages to users.
Deep Tide TechFlow: Could you explain in detail the concept of the zero-sum game you mentioned?
Amitej Gajjala:
Let's take the scenario of Eigenlayer operating independently as an example. Typically, users would deposit their assets into Eigenlayer to receive higher rewards. For example, users might transfer their Ethereum from platforms like Aave or Uniswap to Eigenlayer for restaking because the rewards there are more attractive. As a result, other DeFi platforms need to provide significant incentives to retain their users.
Currently, as these DeFi platforms increase their incentive measures, Eigenlayer also needs to increase rewards to prevent the outflow of Total Value Locked (TVL). Ultimately, this could lead to both platforms not gaining a significant advantage, and users facing a dilemma as they have to choose between traditional DeFi platforms and Eigenlayer, unable to benefit from both simultaneously.
Additionally, when users deposit assets into platforms like Eigenlayer, they lose liquidity because they cannot unstake within seven days. This is why adding a liquidity layer on top of Eigenlayer is a strategic move, allowing users to maximize their returns from DeFi and restaking.
Advantages of Kelp DAO: Simplified processes, support for withdrawals, and multiple audits for security
Deep Tide TechFlow: Could you explain how Kelp DAO operates based on Eigenlayer?
Amitej Gajjala:
Kelp DAO operates by interacting with smart contracts and protocols like Eigenlayer. When users deposit their Ethereum into Kelp DAO, they receive a synthetic token called rsETH. Essentially, Kelp DAO restakes the users' Ethereum on Eigenlayer. Subsequently, users hold the rsETH token, which represents their staked Ethereum.
Deep Tide TechFlow: Regarding the synthetic tokens issued by Kelp DAO, are they similar to synthetic stablecoins, or do they serve a different function?
Amitej Gajjala:
Kelp DAO is somewhat similar to protocols like Lido, but it focuses on restaking rather than staking. While Lido facilitates liquidity staking, Kelp DAO specifically focuses on liquidity restaking. This means that when users deposit their Ethereum into Kelp DAO, the platform restakes it on systems like Eigenlayer. In return, users receive a synthetic token representing their restaked Ethereum, allowing them to maintain liquidity even when their assets are being used elsewhere.
Deep Tide TechFlow: Could you explain the token economics and the mechanism for managing the functionality of this synthetic token?
Amitej Gajjala:
Kelp DAO simplifies the process for users who want to participate in staking and restaking. Users can stake their Ethereum or liquidity staking tokens, such as Lido's stETH or Stader Labs' ETHx, using Kelp DAO and receive rsETH. As Ethereum staking and restaking rewards accumulate, the exchange rate of rsETH relative to Ethereum increases, reflecting the growth in the value of the staked assets.
Deep Tide TechFlow: How does Kelp DAO maintain a competitive advantage and stand out relative to other projects in the restaking track?
Amitej Gajjala:
Firstly, Kelp DAO is a comprehensive platform that accepts liquidity staking tokens (LST) and native tokens, with approximately 40 billion US dollars in staking tokens available for use, and we also accept these tokens. A significant advantage for users in different regions is related to cost impact. Typically, converting staking tokens back to their original form may result in double cost consumption. However, through Kelp DAO, users can easily restake their staked tokens and receive rsETH without incurring additional fees.
The second advantage is the security and reliability of Kelp DAO. Our platform benefits from the experience of the Stader Labs team, which has developed six different liquidity staking solutions on multiple blockchain networks. Additionally, Kelp DAO's smart contracts have been audited by three well-known security companies: Sigma Prime, MixBytes, and Code4rena. In addition, with the cross-chain functionality we provide today, users can confidently stake their assets and withdraw them as needed. These are the two main advantages that Kelp DAO offers.
Deep Tide TechFlow: Why can't other projects replicate what Kelp DAO is doing? What is unique about Kelp DAO in providing this solution?
Amitej Gajjala:
This is actually a difference in product architecture. While some protocols only accept Ethereum, Kelp DAO also accepts liquidity staking tokens (LST) as part of our collaborative approach, which sets our product apart from others. Currently, most platforms do not offer withdrawal options, but Kelp DAO does provide withdrawal functionality. This is particularly advantageous in situations where there is a lack of secondary market liquidity.
Deep Tide TechFlow: You mean if someone deposits funds, they can withdraw after 7 days?
Amitej Gajjala:
There is a 7-day delay for withdrawals, but users can indeed withdraw their funds through us. This sets us apart from some protocols that do not yet offer this feature, resulting in users' funds being locked and unable to be withdrawn.
Deep Tide TechFlow: As a project in the Restaking track, Kelp DAO has a close relationship with EigenLayer. How do you think the cooperation between Kelp DAO and EigenLayer promotes a win-win situation for both ecosystems?
Amitej Gajjala:
We do have a close collaboration with Eigenlayer, and our team works closely with them on technical and ecosystem development.
For users to interact with Eigenlayer through our platform, they do not need to directly interact with Eigenlayer themselves. We act as an abstraction layer on top of Eigenlayer, simplifying the process for users. When users restake with us, we handle the restaking on Eigenlayer, allowing them to invest without worrying about underlying technical interactions.
Deep Tide TechFlow: Imagine that in the future, there will be more projects similar to Eigenlayer. In the increasingly competitive environment, how will these platforms maintain reward incentives for their liquidity providers?
Amitej Gajjala:
First, it's important to note that Eigenlayer itself does not directly provide additional rewards; these are provided by services built on top of Eigenlayer. Essentially, the more services developed on Eigenlayer, the higher the potential rewards for users. If the ecosystem expands and we see a surge in services on Eigenlayer, users can expect more rewards. Imagine if there are three or four platforms equivalent to Eigenlayer, each hosting multiple services. This means that the services on such staking platforms will increase, resulting in more rewards for users. As long as these services continue to prioritize and pay for enhanced security, users are sure to receive rewards.
Deep Tide TechFlow: Could you share the development history of the Restaking track? An overview of the history, how Eigenlayer was developed, and how the concept of a liquidity layer emerged? Additionally, could you share your initial impressions of this ecosystem and your thoughts on the future development of the Restaking track?
Amitej Gajjala:
The initial emergence of Eigenlayer addressed a critical need for services that not only required significant economic security, sometimes in the tens of billions of dollars, but also customizable penalty conditions. For example, an oracle provider might establish specific penalty conditions based on the accuracy of validators' on-chain data. Similarly, MEV protocols might require validators to construct blocks in a specific format and penalize non-compliant behavior.
The concept of Eigenlayer was based on two key assumptions. The first is the existence of protocols that require programmable penalty conditions to ensure economic security. The second assumption is that a large amount of staked Ethereum represents economic security resources that can be leveraged.
A year after its launch, the development of Eigenlayer seems to have confirmed these assumptions. It currently manages a Total Value Locked (TVL) worth $160 billion and supports at least 60 services or applications built on its platform, demonstrating a strong demand for its security.
Furthermore, liquidity layers like Kelp DAO, built on top of Eigenlayer, enhance this ecosystem by providing users with higher returns and utility. These liquidity restaking tokens can be utilized in the DeFi space for activities such as lending or participating in protocols like Uniswap, Balancer, or Gearbox. The ability to further leverage assets within DeFi significantly drives the development of the ecosystem.
Deep Tide TechFlow: Given the recent attention and active participation in the incentive activities conducted by Kelp DAO, could you share the team's achievements in this regard? What factors do you think contributed to the tremendous success of this activity besides the rewards?
Amitej Gajjala:
Our incentive strategy significantly increased our attractiveness in the eyes of users. Initially, we offered 100 Eigenlayer points for the first 30,000 ETH staked, followed by 50 points, attracting 55,000 to 60,000 ETH. Last week, we relaunched the activity, offering 100 Eigenlayer points and an additional reward of $50,000 USDC to the top 100 stakers. This activity brought in an additional 10,000 to 20,000 ETH for the Kelp DAO platform. The activity ended last week, and we plan to launch another activity today or tomorrow. Once the activity is finalized, we will immediately share detailed information about the upcoming event.
PS: At the time of this article's publication, the Kelp DAO "Mega Million Marathon" event is in full swing. The event aims to provide over $1 million in rewards to users restaking through the Ethereum mainnet and L2 networks, with rewards including USDC, ARB tokens, OP tokens, SD tokens, and more EigenLayer points and Kelp Miles rewards. Currently, Kelp DAO accepts native ETH, Stader Labs' ETHx, and Lido Finance's stETH, and supports the native minting of rsETH on 7 chains. Rewards will be distributed after the event ends on May 21, 2024. Interested restaking users are welcome to actively participate and win lucrative rewards.
Click to learn more about the event details
Deep Tide TechFlow: User acquisition is a key feature of success in the crypto industry. Could you share the specific strategies you have adopted for user acquisition?
Amitej Gajjala:
One of our key strategies is leveraging media partnerships in different regions, including China, South Asia, Europe, and the United States. We have conducted extensive media and marketing work to raise awareness and educate potential users, which has played a crucial role in acquiring a large user base.
Additionally, we have established partnerships with numerous hardware and software wallet providers to enable liquidity staking directly within the wallets. For example, we have integrated with popular wallets such as Ledger & OKX Web3 Wallet. We are also finalizing a partnership with another major wallet provider, and we expect to announce and launch it soon.
Deep Tide TechFlow: You mentioned that Kelp DAO's smart contracts have been audited three times. As a founder, you have undoubtedly made significant contributions. Regarding network security, what is the one issue that concerns you the most? How will you continue to enhance security to protect the liquidity layer?
Amitej Gajjala:
We ensure that every smart contract we deploy undergoes multiple audits by top-tier auditors. This is crucial as it ensures that high-quality security experts have thoroughly reviewed our contracts. Our team is highly skilled in developing smart contracts, but independent audits are essential before launching any new contract. Ultimately, this is to protect users' funds, which is our top priority.
Deep Tide TechFlow: In terms of smart contract coding, what does security specifically mean?
Amitej Gajjala:
It is crucial that no hacker or malicious actor can access users' funds or affect the operation of our smart contracts. Ensuring the security of users' assets is our top priority.
Deep Tide TechFlow: How challenging is it to develop a perfect smart contract that is completely secure, free from potential vulnerabilities and hacker attacks?
Amitej Gajjala:
Effective smart contract development relies more on experience and vision than just hard work. Having a strong architect with a clear vision is crucial, as they can design contracts correctly to minimize potential attack vectors for external hackers. Additionally, the skill level of the development team is also crucial. These factors together ensure that our smart contracts are robust and secure.
The Future of Kelp DAO: Heading towards Solana, BNB Chain, and the Bitcoin ecosystem
Deep Tide TechFlow: As we enter the second half of 2024, what will be the focus of Kelp DAO's upcoming work?
Amitej Gajjala:
Our current focus is on expanding our user base and increasing our Total Value Locked (TVL). We see significant growth opportunities through partnerships with wallet providers and integrations with various DeFi platforms, and we plan to achieve these goals in the second half of 2024.
Additionally, we aim to expand our product to multiple ecosystems by developing staking solutions on platforms such as Solana, BNB Chain, and Bitcoin. We also plan to build restaking platforms on non-EVM chains to expand our project's impact and accessibility.
Deep Tide TechFlow: What challenges do you face in expanding to non-EVM ecosystems such as Solana and Bitcoin?
Amitej Gajjala:
We plan to expand in the third quarter. One of the challenges we face is the unique languages and technical architectures in each ecosystem. However, given our expertise in development on both EVM and non-EVM chains, this technical aspect is not a major obstacle for us.
The more significant challenge lies in building a community and expanding our user base in these new ecosystems. To address this, we plan to deploy targeted marketing and educational programs to attract potential users and cultivate strong community support.
Deep Tide TechFlow: Can you describe the current state of the community and the governance structure of Kelp DAO?
Amitej Gajjala:
Currently, the Kelp token has not been issued. We plan to gradually implement governance features after the Kelp token generation event (TGE).
Insights into the Industry of Kelp DAO: Mass Adoption is Key, RAW and L2 Play Important Roles
Deep Tide TechFlow: What changes or innovations do you think LRT will bring in the future?
Amitej Gajjala:
LRT has the potential to act as an aggregation layer for various restaking platforms like Eigenlayer. This will allow users to choose which platforms to delegate their Ethereum to, enhancing strategic flexibility. One of the major innovations we introduce is native restaking on L2 networks, where users on various L2s such as Arbitrum and Optimism can interact with us seamlessly without paying any gas fees. This is a significant advancement as it eliminates any transaction fees or slippage, providing users with a seamless experience.
Another notable innovation involves liquidity. Typically, restaking directly on platforms like Eigenlayer would mean liquidity loss as funds cannot be withdrawn within 7 days. However, with LRT, users can immediately trade their tokens on the secondary market or use them as collateral in lending markets. This flexibility significantly enhances the liquidity and utility of staked assets.
The innovation in user experience is twofold. Firstly, users no longer need to choose validators or research which validators perform well; the Kelp DAO platform manages this for them. Secondly, users no longer need to differentiate services based on slashing conditions or security concerns. Kelp DAO handles these considerations, ensuring that users use services that maintain high security standards without having to deal with the complexity themselves.
Deep Tide TechFlow: So, in the future, LRT will be able to improve user experience and serve as a potential liquidity aggregation layer?
Amitej Gajjala:
The innovation in user experience is twofold. Firstly, users no longer need to choose validators or research which validators perform well; the Kelp DAO platform manages this for them. Secondly, users no longer need to differentiate services based on slashing conditions or security concerns. Kelp DAO handles these considerations, ensuring that users use services that maintain high security standards without having to deal with the complexity themselves.
Deep Tide TechFlow: Considering that Restaking is part of DeFi, how do you view the future direction of DeFi, especially in Ethereum-based DeFi and non-EVM DeFi?
Amitej Gajjala:
The role of Ethereum in the future financial ecosystem is a rather philosophical question, largely depending on the number and quality of applications developed within its ecosystem, as well as the performance of other platforms like Solana. Ethereum is currently the frontrunner, largely due to its large developer community, making it the preferred choice for many developers. It has the potential to become a financial pillar of the world.
Innovative DeFi applications, especially those pioneering new financial services on the blockchain, are crucial for driving the adoption of decentralized finance. Increased adoption can make platforms like Ethereum and similar ones strong competitors to traditional finance. The emergence of diverse financial applications on these platforms is crucial for this transition. I am optimistic that we will make significant progress in this direction in the next decade.
Deep Tide TechFlow: What do you think is the turning point that will shift public attention from traditional finance to decentralized finance?
Amitej Gajjala:
Integrating real-world assets onto blockchain platforms could be a game-changing adoption. Additionally, L2 solutions, with their lower gas fees and faster transaction speeds, play a crucial role in attracting a wider audience to join the crypto ecosystem. These factors are key drivers of growth. As the user base expands, traditional finance may take cryptocurrency more seriously and begin to offer more solutions utilizing this technology, further encouraging widespread adoption.
Deep Tide TechFlow: Besides the difference in gas fees, what are the main differences between various Layer 2 solutions?
Amitej Gajjala:
We are currently in the early stages of Layer 2 development. While platforms like Arbitrum and Optimism are leading, ZK-based L2s (such as Scroll and Linear) also have tremendous potential to gain attention. Each L2 has the potential to dominate the market, depending on its ability to attract a strong developer ecosystem capable of creating innovative applications.
Deep Tide TechFlow: What are the criteria for choosing feature L2 networks when Kelp DAO selects to collaborate?
Amitej Gajjala:
Our strategy involves a combination of business development work and evaluating the potential Total Value Locked (TVL) on specific L2 platforms. This approach helps us effectively identify opportunities and determine priorities.
Deep Tide TechFlow: Given the competitive landscape, from the perspective of a founder and ecosystem, what bottlenecks do you observe that hinder the growth of TVL? Additionally, which strategies have proven to effectively attract more TVL and increase daily and monthly active users, and how do you plan to further improve these metrics?
Amitej Gajjala:
Our most important goal is to attract sustainable TVL. While aggressive growth is our aim, we prioritize sustainable development to avoid attracting short-term speculators or yield farmers only interested in immediate profits. Our focus is on attracting a diverse user base that understands and appreciates the long-term benefits of our platform. To achieve this goal, we combine media exposure, targeted marketing, and educational efforts to build a knowledgeable and loyal community.
Deep Tide TechFlow: Considering Kelp DAO's success and your transition from engineering to business focus, do you have any advice for aspiring Web3 entrepreneurs with a business background? Specifically, do you have any advice for team building and finding skilled architects to collaborate with?
Amitej Gajjala:
For any young entrepreneur, regardless of the industry, the most critical aspect is identifying the real problems that affect the majority of the market. Understanding and addressing genuine needs form the foundation of building a successful business.
Deep Tide TechFlow: So, the industry doesn't matter, right?
Amitej Gajjala:
Yes, that's a fundamental concept. Today, for a company, focusing on solving actual, substantive problems is crucial. While many companies currently prioritize superficial measures like ratings and reviews, the most successful entrepreneurs are those who address challenging problems. If the problem is significant enough, there will always be an opportunity to create value and generate revenue by solving it. Therefore, identifying and focusing on real problems is crucial for long-term success.
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