AVS Evaluation

It can be posited that every decision in life can be analyzed through a Risk/Reward (R/R) lens. Therefore, we aim to develop a decision-making framework based on this approach.

This section focuses on evaluating an AVS from a Restaker's perspective. This narrows the range of variables we must consider, which should help us construct a more effective framework and make more informed decisions.

The objective of this evaluation framework is not to be exhaustive, but rather to introduce the reader to a mental model that we find useful when assessing any AVS.

Risk Engaging with an AVS involves a comprehensive array of inherent risks even before assessing the specific characteristics of the AVS. Key risks include:

  • Native ETH staking risks

  • Risks associated with EigenLayer smart contracts

  • Centralization risks within EigenLayer

  • Potential collusion among Node Operators

  • Risks of unintended slashing

Additionally, each AVS may present its own unique risks, such as:

  • Vulnerabilities in AVS-specific smart contracts

  • Subjective conditions for slashing

  • Network requirements that may not be optimal

  • The presence of centralized components within the system

  • Software used by node operators that may be prone to errors

Reward Choosing to opting into an AVS undoubtedly offers benefits, most objectively measurable through the Annual Percentage Rate (APR).

If the APR is sufficiently high to offset the risks outlined previously, engaging with a specific AVS could be a prudent decision. However, it's important to recognize that this isn't merely a matter of individual preference. The entire YieldNest DAO is affected by these decisions, emphasizing the need for a collective approach to risk evaluation. To support this, we are developing a comprehensive framework that will guide the DAO in making informed, methodical decisions about AVS onboarding. This framework will provide a structured means to assess both risks and rewards effectively.

Takeaway on AVS Evaluation

We believe that the array of AVS offerings could be extensive and unpredictable. Given the rapid pace of developments, it becomes a crucial responsibility for the YieldNest DAO to identify which AVSs are appropriate for integration. This selection process involves a detailed review of each protocol's unique attributes and a strategic approach to diversifying exposure across various AVS protocols. This task will undoubtedly be ongoing and starts with a thorough understanding of the risks and benefits associated with each AVS, enabling the DAO to make well-informed onboarding decisions.

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