Euclid tranched delegation: slashing protection for restakers
Post445 words
Explains how Euclid's tranched delegation orders slashing: operator self-delegation and staked ECL sit in junior tranches ahead of restaker assets in the senior tranche. Addresses unintended slashing, operator authority bias and trust assumptions.
Key claims
Euclid FDV is about $10M
Slashing hits operator self-delegation first, then staked ECL, before restaker funds
Design is inspired by Rocket Pool
✨💎 Tranched Delegation on Eigenlayer 💎✨
$ECL is live and @Euclidfi is gearing up to build out the ecosystem around its unique restaking protocol.
With a strong focus on L2 ecosystems and considering the team's deep involvement in DeFi (it's the team behind @Equilibriafi, the first yield booster built on @pendle_fi), we can expect some big announcements soon.
This will likely drive demand for $elETH as the attractiveness of its use cases improves. Consequently, more value will be restaked through @Euclidfi's protocol architecture.
What few understand, is that @Euclidfi is not just your average restaking protocol. It leverages an innovative design inspired by @Rocket_Pool and relies on tranched delegation to mitigate some of the key issues/risks inherent to restaking.
This includes:
✦ Unintended Slashing: Restakers might lose funds if an AVS or operator is exposed to an unintentional slashing vulnerability (for example, a programming bug) that gets triggered.
✦ Operator Authority Bias: Restakers or AVS intend to choose operators in a position of authority.
✦ Trust Assumption: Both restakers and AVS must trust that the operators will act honestly.
The flowchart above shows how liquid Euclid help facilitate restaking for users. Restakers deposit ETH/LST, which the platform then delegates to operators based on certain selection criteria.
After receiving the delegation, operators use the funds to provide security for an AVS. In return, operators will receive rewards offered by the AVS (native tokens), which are distributed to restakers.
@Euclidfi aims to overcome these challenges by establishing a tiered delegation framework within its LRT platform. A structured approach for a set of operators to manage their delegated positions, also referred to as tranched delegation.
With tranched delegation, operators must pledge collaterals in addition to their delegated position (restaked $ETH that comes from restakers using a protocol like Euclid), both of which are then organized into tranches of different seniority for slashing:
✦ The senior tranche comprises of assets delegated by restakers.
✦ The junior tranches consist of assets including assets self-delegated by the operator and staked $ECL tokens, which basically serve as a security deposit.
In the unfortunate event of slashing, the tranched delegation framework ensures a specific order of priority for the slashing process. Initially, the self-delegated position is subject to slashing, followed by the staked $ECL tokens in the junior tranches.
Having this framework embedded in the operator network, protects restakers from being slashed in the worst case and adds additional crypto-economic secuirty layers to the restaking framework which is also beneficial for AVS protocols.
Sitting at an FDV of $10M, @Euclidfi seems undervalued and remains my main underdog bet on the @eigencloud narrative, which will likely lead this cycle.
NFA but DYOR anon! 👀
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