Automated Restaking Mechanisms in DeFi

Analyzing Efficiency and Scalability of the Protocol and its theoretical implications

Decentralized Finance (DeFi) has revolutionized the traditional financial ecosystem by offering permissionless, transparent, and open financial services. Among its most innovative concepts is staking, a process that allows users to secure Proof-of-Stake (PoS) blockchain networks while earning rewards. Liquid Staking Tokens (LSTs), such as stSOL and mSOL in the Solana ecosystem, have emerged as a pivotal innovation, enabling users to maintain liquidity while participating in staking. However, despite their promise, the manual process of restaking rewards introduces inefficiencies, such as increased gas fees, suboptimal returns, and time-consuming user interactions. These challenges hinder the growth of staking and limit its accessibility, especially for less experienced users.

This research delves into the concept of automated restaking mechanisms, which streamline the process of compounding staking rewards for LSTs. By eliminating manual intervention, these systems promise to maximize user returns, reduce operational costs, and enhance network efficiency. The paper explores the theoretical underpinnings and practical applications of these mechanisms, presenting a mathematical model to analyze their impact on DeFi ecosystems. Empirical data from existing automated restaking protocols are used to validate the findings. The study concludes that automated restaking mechanisms not only optimize reward generation but also play a critical role in scaling DeFi platforms to accommodate increasing user participation and transaction volumes.