Exclusive interview with Kelp DAO founder: Kelp’s ambition to become a complementary liquidity layer for LRT and DeFi is not limited to re-staking

24-06-11 20:00
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With the approval of the Ethereum spot ETF and the announcement of EigenLayer's upcoming governance token, the two most important narratives of the Ethereum ecosystem have made breakthrough progress this summer. In this storm of financial revolution, Kelp DAO is one of the best, rising rapidly with its unique liquidity staking solution.

According to the official website data, Kelp DAO's current TVL has exceeded US$1 billion, and the total TVL reached US$1.06 billion at the time of writing. Kelp DAO, which has just completed US$9 million in private financing, is currently preparing a broader ecological construction plan.

BlockBeats had the honor of interviewing Amitej Gajjala, the founder of Kelp DAO. In this interview, Amitej detailed the unique advantages of Kelp DAO and its future development strategy. By continuously expanding its cooperation with Layer 2 solutions and actively promoting its integration in the traditional financial field, Kelp DAO is steadily advancing its path in the DeFi world.

Kelp DAO's DeFi Road

Amitej Gajjala studied at a top business school in India. After graduation, he worked in management consulting. Soon after, he joined Swiggy, India's largest food technology company, as the head of strategy and transformation. At the end of 2019, Amitej became interested in DeFi. During the DeFi Summer period, Amitej began to study the staking track in the crypto field.

In June 2021, Amitej co-founded Stader Labs, a liquidity staking protocol, and since then, he has started his work in the Ethereum ecosystem. Amitej mentioned in the interview that it began to pay attention to re-staking in early 2023, realizing that it would attract a large influx of funds and was an area that could not be ignored.

When asked about the background of the establishment of Kelp DAO, Amitej Gajjala replied, “In late 2022 and early 2023, we were very actively looking at the re-staking space and found that re-staking attracted a large number of users and capital, and the DeFi protocol would lose a lot of capital as a result. Therefore, a lot of incentives must be provided to re-attract this capital, which will form a negative cycle where everyone is at a disadvantage. Therefore, we realized that there is a potential opportunity to build a liquidity layer that complements re-staking and DeFi. ”

Kelp DAO accepts LST including stETH, sfrETH and native ETH. Users can stake and earn points and tokens rsETH, which can be used in multiple DeFi projects. Currently, Kelp DAO has been launched on the mainnet and multiple second-layer networks, and users can natively re-stake their ETH on networks such as Arbitrum and Blast.

Kelp DAO is somewhat similar to protocols such as Lido, but its focus is on re-staking rather than simply staking ETH. Kelp DAO supports LST and native tokens, covers multiple L2s, and acts as an abstraction layer on top of Eigenlayer. Users can invest without worrying about underlying technical interactions, which not only simplifies the user process, but also reduces friction and cost.

BlockBeats: How does Kelp DAO differ from projects like Ether.fi and Renzo, and what are its unique advantages?

Amitej Gajjala: Kelp DAO has two key differentiating advantages. First, we are a full-service LRT re-staking platform, which means we accept LST, such as Lido, Stader Labs, Frax, etc. as well as native ETH. This gives us about $30 billion or $40 billion of ETH to use, and all of these users can participate in Kelp DAO without unstaking.

Kelp DAO is live on 10 L2s, which means that users of these L2s, including Arbitrum, Optimism, Blast, and Scroll, can natively re-stake on Kelp DAO, not only Ethereum, but will soon be able to re-stake stETH directly from these L2s without any slippage and gas fees, which is the second biggest advantage.

BlockBeats: Kelp DAO has established partnerships with many Layer 2 solutions, how do these partnerships promote the integration of Kelp in the Ethereum ecosystem?

Amitej Gajjala: Currently, we have helped implement re-staking capabilities on 10 different blockchains, and the advantages here include that first of all, users can stake their native Ethereum directly on these L2s.

We work with foundations to raise awareness among L2 users and make them eligible for benefits such as re-staking rewards, Eigen Layer Points, and Kelp Miles. For example, on zkSync we are the only LRT, and on Scroll we are one of two LRTs included in the MARTS program.

BlockBeats: As Kelp DAO prepares to launch its token, it is critical to understand its governance structure and user growth strategy. Can you provide some insights into Kelp DAO's governance structure and user attraction and retention strategy?

Amitej Gajjala: Kelp DAO's governance token will be a very important part of Kelp's roadmap and it has multiple uses. As we all know, one of the biggest risks in the re-staking ecosystem is the potential slashing risk caused by EigenLayer. We have designed a mechanism so that the Kelp governance token can serve as insurance for any slashing events.

For example, any KELP holder can stake KELP, and these staked KELP will serve as insurance for any future slashing events. The benefit of users staking KELP tokens is that a portion of the Kelp DAO's revenue will be issued to users as staking rewards, which is the first and largest use of the Kelp token.

The second major use is governance, and any Kelp token holder can participate in proposals such as validator exits, selection criteria, AVS selection criteria, fee changes, and any important protocol decisions will be decided by Kelp governance token holders.

The third important use is that users who provide liquidity to the AMM secondary market will be eligible for additional KELP rewards or incentives. Therefore, the Kelp token will become an important part of the Kelp ecosystem.

Kelp DAO is one step ahead in entering traditional finance

On May 22, Kelp DAO announced the completion of a $9 million private placement, a major milestone in its growth. This round of financing was led by Bahamian proprietary trading company SCB Limited and Nomura Group's digital asset subsidiary Laser Digital with $3.5 million, and the remaining investors include Bankless Ventures, Hypersphere, Draper Dragon, GSR, DWF Ventures, etc.

As mentioned earlier, Kelp DAO is actively promoting cooperation with the Ethereum Layer2 ecosystem to advance its path in the on-chain world. At the same time, Kelp DAO is also expanding its territory in the traditional financial world. In the interview, Amitej said that Kelp DAO will make breakthroughs in traditional finance, traditional asset management and family offices.

With the smooth progress of the approval of the Ethereum spot ETF, the relationship between the crypto market and traditional finance will become more inseparable. Kelp DAO has reached a good cooperative relationship with traditional financial institutions at this point in time, laying a solid foundation for the future expansion of the ecological map.

BlockBeats: Kelp DAO recently announced a round of financing led by Laser Digital. Previously, Kelp DAO also cooperated with Laser Digital to launch a digital fund re-pledge solution for the present and future. Discuss the impact of this partnership on Kelp DAO and its position in the traditional financial industry?

Amitej Gajjala: Laser Digital is one of the co-lead investors in our recently closed funding round. Laser Digital has many traditional customers who want to hold ETH or earn additional staking and restaking rewards on their ETH. Therefore, we have a significant advantage in this regard as we will be the preferred restaking partner in Laser Digital's future funds.

From a macro perspective, whenever Laser Digital launches its ETH staking and restaking funds, they will work with many financial institutions that have a large number of traditional investors participating in these funds. As the primary administrator of these funds, Laser Digital will choose Kelp DAO as one of its preferred restaking partners to deploy its users' funds with us.

This means that in the future Kelp DAO will have a very good prospect in the traditional finance, traditional asset management and family office sectors, who want exposure to Ethereum and staking or re-staking. Kelp DAO will be selected as one of the main re-staking partners, and through Laser Digital, there will be a lot of ETH flowing into re-staking organically.

On the other hand, the addition of Laser Digital also brings us legitimacy, which means that our industry is very serious and we have big players like Laser Digital, who have the support of Nomura Securities behind them, to do great things in this space. So I think this is a very important development for us and also gives us legitimacy in the traditional finance sector, and people will understand that this is an important asset class that is emerging and there is a lot of interest in it.

Kelp DAO, a core player in re-staking, provides dual guarantees of liquidity + security

As a pioneer in the field of re-staking, Eigenlayer has demonstrated its strong ability to provide economic security and programmable penalty conditions. As market demand increases and technology continues to mature, it is expected that more re-staking solutions will emerge on major blockchains in the future, such as Bitcoin, Solana, and BNB chains.

In this blue ocean, Kelp DAO, with its unique liquidity layer advantages, is actively promoting the development of the ecosystem, significantly improving the overall efficiency of the DeFi field by providing users with higher returns and utility. At the same time, the rapid growth of the AVS ecosystem also shows the profound impact of re-staking on the entire blockchain industry.

BlockBeats: Let's talk about the entire re-staking field. How do you foresee the development of its competitive landscape?

Amitej Gajjala: First of all, we have to realize that this space is only about six to eight months old, it's very, very young. We've just seen a large re-staking player emerge, Eigenlayer. I believe there will be a large number of re-staking solutions emerging on multiple blockchains, including Bitcoin, Solana, other chains like BNB, etc. So this space may grow 10 times or 100 times from now.

On top of these staking layers, many ecosystems will be built, such as the LRTFi ecosystem, the AVS ecosystem, and there may be multiple different types of sub-sectors within the staking space in the next two to three years. So my expectation for the future is that we will see rapid expansion and innovation in this space.

BlockBeats: What role will Kelp DAO play in this?

Amitej Gajjala: Kelp DAO, built on top of Eigenlayer, acts as a liquidity layer that further enhances this ecosystem by providing users with higher yields and utility. These liquidity re-staking tokens can be leveraged in the DeFi space for activities such as lending or participating in protocols such as Uniswap, Balancer or Gearbox. This will further the ability to leverage assets within DeFi, significantly driving the development of the entire ecosystem.

BlockBeats: What do you think of the AVS narrative?

Amitej Gajjala: I think the AVS space is growing, and there are probably 60 to 70+ AVS running on EigenLayer right now, which is a very positive outcome for the entire ecosystem.

Obviously restaking has several advantages for the AVS ecosystem. The first major advantage is that anyone can start an AVS without significant economic security, because they can borrow economic security from EigenDA, and at the same time they don't need to issue millions of rewards as inflation tokens.

BlockBeats: What plans does the Kelp DAO team have regarding AVS?

Amitej Gajjala: We are evaluating, and doing some internal research and R&D work to determine if there is an opportunity for us to build AVS in the AVS ecosystem. At this point, our expansion plans mainly consist of expanding our product into different ecosystems.

Regarding AVS, we are delegating LSTs to all AVSs, at least the majority of AVSs, to leverage our existing capital.

BlockBeats: How does Kelp DAO ensure the security and safeguards of its project?

Amitej Gajjala: I think the systemic risk of re-staking is very limited, and we have to understand that slashing events are very insignificant and almost negligible from a statistical point of view. But I still remain cautious because we have not seen these situations actually happen in practice or in reality. So, I am optimistic, but also cautious.

Kelp DAO takes security very seriously, we have completed three comprehensive audits, and the fourth audit is also in progress. We have selected some top audit partners such as Sigma Prime, MixBytes and CodeFarina to audit our smart contracts.

In addition, we have internal monitoring and alarm systems to monitor suspicious behavior of smart contracts throughout the system. Security is the most important thing, and it is also the most important thing we focus on every day.

Macro and future, how does Kelp DAO plan?

BlockBeats: All currently approved Ethereum spot ETFs do not adopt any staking mechanism. What do you think about this? How will this affect the ETH ecosystem?

Amitej Gajjala: Yes, I think the most important thing we need to understand is that it will take some time before the SEC or any government starts to form opinions and formulate policies regarding staking. The approval of spot ETFs itself is the most important and positive prospect for the entire ecosystem. As the spot ETF ecosystem matures, staking will gradually be realized in the future. I do have hope, but I think it will take some time.

BlockBeats: In light of the recent discussions about the US election and cryptocurrency regulation, what do you think of the current regulatory environment?

Amitej Gajjala: This is a very complex question. Without going into too much about the US political environment, I firmly believe that regulation through policy rather than through enforcement is the right approach.

Governments should provide clear guidance on how cryptocurrencies should be treated as an asset class (not just Bitcoin and Ethereum, but other tokens as well). They should provide a strong policy framework that guides developers and industry participants on the right path, which is the right approach, regardless of which party is in power in the US or any other country. Because it gives developers more clarity and enables them to make informed choices, rather than being enforced and penalized for past behavior.

BlockBeats: What strategies does Kelp DAO have to respond to regulatory developments and ensure compliance with changing regulations?

Amitej Gajjala: On the regulatory side, we consult lawyers and consultants in multiple countries to get their professional guidance to help us think about product development and marketing. Based on these guidance, we follow them throughout the process and incorporate them into our work.

In terms of monitoring the evolving regulatory environment, we always keep a close eye on any policies or frameworks that may have an impact on staking and re-staking. We adjust our strategies and operations in a timely manner to ensure that Kelp DAO always meets the latest regulatory requirements.

In summary, we ensure our compliance through cooperation with legal experts and continuous regulatory monitoring to remain flexible and proactive in the ever-changing regulatory environment.

BlockBeats: In the financing announcement, we learned that Kelp DAO is building a multi-chain re-staking service. Can you talk about this plan?

Amitej Gajjala: We will share more about the relevant plans after the product development work of these L1 ecosystems is completed. At present, these works are still in progress. What is worth looking forward to now is that we will do some interesting explorations in multiple ecosystems.

We are currently in multiple phases of testing and auditing, and once we have completed product development and preliminary testing, we will officially release more details and specific timelines. We are very much looking forward to sharing more information with you in the coming weeks.

BlockBeats: Do you want to add anything in the end?

Amitej Gajjala: We became an L2 enterprise, focusing on products for retail and institutions, such as corporate cash, liquidity, etc. We don't know what Puffer and Renzo are doing specifically, but they don't seem to have this ambition to become the entire re-staking layer.

I think one of the most important things we always want to do is to build an ecosystem around our products. Obviously, as an LRT, it's just an application and it doesn't generate an ecosystem. And what we see developing on EigenLayer is that EigenLayer has created a whole ecosystem around them, including AVS, LRTFi, etc., which is exactly what we want to build. So thinking about how to build a re-staking layer on these elements is our motivation.

Technically, this means that we will build a platform that enables not just our own products, but a complete ecosystem to run and interact on it. This will include deep integration with other chains and platforms, ensuring that users can re-stake seamlessly and can get the most out of it.

The reason for this decision is that we saw the potential and success of developing on EigenLayer and realized that creating a similar ecosystem would bring great value to our users and partners. We believe that by building such a re-staking layer, we can bring more innovation and opportunities to the entire industry and occupy an important position in the market.

Therefore, our goal is not only to provide a single solution, but to create an ecosystem that can support a wide range of applications and collaboration, bringing more vitality and development to the re-staking field.

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