Why Did Binance Labs Invest in Solayer?
How Does Solayer Differ from Jito Restaking?
Today, I want to share my thoughts on these questions based on the information currently available.
Fundraising of Solayer
To quickly understand a project, we can easily use Rootdata to look at Solayer’s project overview and investment background.
In its latest funding round, Solayer received investment from Binance Labs. In the previous Builders Round, notable participants included Anatoly (co-founder of Solana), Ansem (a core influencer in the Solana community), Sandeep (co-founder of Polygon), Dong Xishu (Chief Strategy Officer at Babylon), as well as the co-founders of Tensor and Solend.
Analysis of the Solayer Project
I believe that in today’s market, the core of content creation is not to detail the protocol’s architecture or analyze its data, but to explain how the market should perceive the project.
Therefore, starting with this article, I want to change my previous writing style and focus directly on my understanding of this project, rather than going into lengthy explanations of protocol architecture and data.
For those interested, the protocol’s architecture can be found here and the protocol’s data here.
Currently, the market’s understanding of Restaking is primarily dominated by Eigenlayer, which aggregates and extends Ethereum’s economic security through $ETH Restaking (shared security). In simple terms, public chain teams can use EigenDA as a DA layer.
Celestia’s DA service is its competitor. However, it’s worth mentioning that while DA services are a straightforward business, they require a sufficient number of clients and thriving application users to get the flywheel spinning.
Although Solana Restaking shares the same name as Ethereum’s Restaking, their business focus and target customer groups are completely different.
Eigenlayer is more focused on providing external services (exogenous AVS), while Solayer is more focused on providing services to Solana’s internal applications (endogenous AVS). Of course, Solayer can also expand externally, but this is only its first phase.
I think Solayer’s blog provides a fitting explanation of its business model in the first phase: Introducing Solana Restaking Standard: Endogenous AVS.
Imagine Solana as a highway with multiple lanes, where different lanes have varying tolls and congestion levels, representing different Staking Tiers.
The different DApps, like cars on the highway, have varying speed needs and toll tolerance. Solayer plays the role of coordinating these cars (DApps), the different lanes (Validators), and the toll booths (Restakers) by accepting user fund delegations.
This means that DApps within the Solana ecosystem can use Solayer’s services to ensure they are in the fast lane or slow lane, depending on their needs for block space and priority transactions, thereby offering a better experience for their users.
How to Generate Revenue
Users who participate in Solayer Restaking can earn revenue from three sources:
- Solana Staking Rewards;
- MEV Income;
- Potential Solayer Token Airdrops.
With this explanation, we can perhaps understand why Binance Labs invested in Solayer—because Solayer is likely to occupy a critical niche in the Solana ecosystem in the future.
Competitors
Now, let’s briefly discuss Solayer’s competitors: Jito and the recently popular Sanctum.
In the article Announcing Jito Restaking, although Jito did not specify the focus of its future business, it highlighted some of its product advantages.
From the oracle example it provided, we can infer that Jito Restaking is more focused on providing services like Eigenlayer, offering economic security to cross-chain bridges, oracles, or Rollups. This is the main difference between Jito Restaking and Solayer’s current business model.
These are still just my speculations, and I will delve deeper into this once more information is released.
Sanctum’s narrative is not as grand as Jito’s or Solayer’s. It aims to create a liquidity layer for LST (Liquid Staking Tokens). In simple terms, some smaller LSTs lack sufficient liquidity, making it difficult to quickly exit through swaps.
Sanctum addresses this by creating an integrated liquidity layer that provides liquidity support for various Solana LSTs. In short, Sanctum’s product aims to solve the current liquidity issues for SOL LSTs.
Is Solana Restaking a Good Business?
From Solayer’s perspective, I believe it is a good business. Unlike exogenous AVS, in the first phase, Solayer’s target customers are the current DApps within the Solana ecosystem.
Moreover, Solayer’s services are easy to adopt—DApps can easily use Solayer’s services if they need them. This ease of adoption is why I believe Solayer can quickly build a strong moat within its ecosystem.
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