HackMD
Yield (+,+): the new yield scaling curve for restaking
Don't overload consensus auctions
Ethereum's Proposer Builder Separation (PBS) framework has created asymmetric auction conditions where private order flows dominate block value, leading to centralization of profits among builders and creating a monopolistic market. Over the last year we have implemented and validated on mainnet a collection of improvements that resolve these issues and in addition have shown additional yield growth of ~1.5%.
The gang finds out about principal-agent issues
Private Order Flow/Exclusive Order Flow is when a Block Builder receives transactions from a proejct/service for the purposes of including the transactions into a block they build. The exclusivity of this 'order flow' is what produces an information asymmetry: the builder now has a better representation of the future potential global state of the chain, thus can use this to their advantage. This leads to reduced profits for validators, as seen on mainnet and documented in various published papers[^1]
Losses due to Inefficiencies
20% Due to Builder Bid Behaviour
9-12% Due to Flashbots Auction Implementation Details
PBS cannot achieve robust fairness. For builders with information and auction asymmetry, the emergence of a monopoly state is inevitable. The builder market always tends to a monopoly in the current PBS regime.
https://arxiv.org/pdf/2410.12352
ETH denominated Yield Recapture
XGA is a venue for Computation Outsourcing Markets. It's current primary market, a second price call market runs concurrently with the flashbot's priority auction.
By splitting the block into 'Top of Block', and 'Rest of Block' searchers can now bypass builders, thus bounding and reducing this informational asymmetry.[^2] Validators benefit as they now get more in ETH payments for their blocks than they would get under only flashbots.
The XGA Auction introduces several innovative approaches:
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Elastic Supply Scheduling - Instead of a fixed supply, the amount of available blockspace varies with price. When prices are low, less blockspace is offered, creating a concave supply curve to prevent severe underpricing.
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Forward Contract Market - Enables purchase of future blockspace (2 epochs ahead), creating a 'futures' market for blockspace.
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Modified Uniform Price Auction - Addresses "winner's curse" issues in traditional uniform price auctions through alternative tie-breaking rules that exert more pressure at the margin.
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Fees improve underlying LST liquidity: A portion of fees have to LP some % of the underlying Validators LST/LRT.
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Deterministic Window: Part of the auction mechanism implements a deterministic window in which the auction closes. This has the added benefit of reducing undesirable bidding behavior by strategic builders.
AVS Boost -> AVS Turbo
AVS Boost is our MEV Boost fork, it implements an interface to support the XGA Auction. It is also supported in Vouch. Technically, you can use the existing MEV Boost client and point to our relay and participate in the XGA Auction. The changes made are to ensure safety under failure.
Validators can always fallback to other MEV Boost relays meaning that any node operator using AVS Boost/Turbo can't be worst off in the case of a failure: they simply resolve to other operating relays.
AVS Turbo adds mev-pre-commit support and zkAVS support as a standardized AVS Sidecar interface. AVS Boost is also implemented in Vouch.
No Cascading Failures
Enhanced Network Security and Stability: AVS Boost/Turbo is designed to avoid cascading failures.
Increased MEV Competition produces more yield
By implementing a second price auction, AVS Boost/Turbo promotes competition in the builder market, reducing the potential for monopolies and ensuring fairness.
Known operational model and footprint
Seamless Integration and Reduced Operational Overhead: Because of the sidecar model, the integration is easy.
System Diagram
$328,860,000+ / 132,420+ ETH
ETH@$2,200
XGA v1 operated from May 2024 to December 2024. During this time it operated exclusively with mevETH, a vertically integrated LST we operate and with FraxLST on a subset of their validators. mevETH currently has a reported APY of ~4.7%.
XGA Forecast and Restaking Unit Economics
| Unit Economics | TODAY | XGA/AVS |
|---|---|---|
| ETH Quantity | 120,560,000 | 120,560,000 |
| ETH Staked Ratio (%) | 27.6% | 27.5% |
| ETH Staked Quantity | 33,678,112 | 33,678,112 |
| Total # of ETH Validators | 1,052,441 | 1,052,441 |
| Quantity of ETH Per Validator Node | 32 | 32 |
| Restaked Share of ETH Stake (%) | 10.0% | |
| # of Validators Opted-In for Restaking | 105,244 | |
| Restaked ETH Quantity | 3,367,811 | |
| ETH Staking | ||
| ETH Staking Yield (%) | 3.38% | 4.70% |
| ETH Price | $2,200 | $2,200 |
| ETH Staking Revenue | $2,380 | $3,309 |
| Restaking on EigenLayer | ||
| # of Networks on EigenLayer | 1 | |
| Individual Network Yield | 4.7% | |
| Total Yield Across All Networks (%) | 4.7% | |
| Yield Compression from More Validators (%) | -31.3% | |
| Total Net Yield Across All Networks (%) | 3.2% | |
| Restaking Gross Revenue | $2,272 | |
| Less: EigenLayer Fee (%) | 10% | |
| Restaking Net Revenue | $2,045 | |
| Total Node Operator Revenue | $2,380 | $5,354 |
| % of Revenue from EigenLayer | 0% | 38% |
| Staking APY Summary | ||
| ETH Staking APY | 3.4% | 3.4% |
| MEV-Boost | 0.6% | 0.6% |
| Restaking APY | 0.0% | 1.50% |
| Total APY | 4.0% | 5.5% |
| Growth in APY through EigenLayer | 0.0% | 37.5% |
| MEV Solution (e.g. MEV-Boost) | ||
| Weekly ETH Paid Out for MEV-Boost | 3,000 | |
| ETH Paid Out for MEV-Boost (Annualized) | 156,000 | |
| % of Validators Registered for MEV-Boost | 92.0% | |
| Registered Validators | 800,000 | |
| Annual ETH Paid Out Per Registered Validator | 0.20 | |
| APY from MEV-Boost | 0.6% | 0.6% |
| % of ETH Staking APY | 18.0% | 18.0% |
| Yield Compression Calculation | ||
| Restaked ETH Quantity | 3,400,000 | 3,367,811 |
| ETH Yield Curve on Restaked ETH Quantity | 9.0% | 6.2% |
| % Change in Yield vs. Today's Assumption | N/A | -31.3% |
| Annual Revenue Comparison | Today | XGA/AVS Turbo |
| Restaking Revenue | $0 | $348,231,678 |
| ETH Staking Revenue | $2,504,304,408 | $3,482,316,781 |
| Total | $2,504,304,408 | $3,830,548,459 |
| % Restaking Revenue | 0% | 9% |
Derived from https://docs.google.com/spreadsheets/d/1W0JJc_BQxHMXQMQVpcNqMaSkOEnXOKGqNF1jWxOXjE0/edit?gid=347266829#gid=347266829
Not an endorsement/used for educational purposes only
Future Work
Contact us to get started testing now, we will reach out to you to onboard onto Holesky test net.
