Another Approach Lair Finance: Building a Multilateral Incentive Coordination Layer System to Revive LRT with Real Returns

The Rise and Fall Cycle of LRT: From Incentive Frenzy to Revenue Chill

Since the second half of 2023, LRT (Liquid Restaking Token) has gradually become one of the hot narratives in the market. By re-staking LSTs (Liquid Staking Tokens) within the LRT protocol, users hope to gain a new layer of protocol incentives in addition to the original staking rewards.

Among them, ether.fi has pioneered the concept of "non-committal points," enhancing user activity and capital retention through behavior binding, leading to a rapid increase in Restaking TVL. This mechanism employs a points model of "non-committal incentives + operational behavior binding," creating a predictable yet non-directly redeemable future incentive path for LST holders, significantly enhancing user participation and capital retention without explicitly issuing tokens.

As ether.fi's model gained market validation, it quickly sparked a TVL competition across the entire Restaking sector.

Several leading projects, including EigenLayer, Renzo, Kelp DAO, Swell, and Puffer, have successively launched their own versions of points systems, establishing "points-driven growth" as the mainstream position in the LRT field. Even the DeFi protocol Pendle has built infrastructure for early trading and pricing of these points based on its zero-interest bond model.

In fact, after experiencing a brief period of frenzy, the LRT market gradually entered a phase of slowing growth as multiple projects completed their TGEs and distributed airdrops to points users last year. Data shows that since May and June 2024, the total supply of LRT tokens began to decline after reaching a peak of $3.88M, maintaining a very limited slow growth level for a period, while market activity stabilized or even cooled down.

The End of the Points Feast: Real Returns are the Next Stop

From the perspective of the crypto market, profit-seeking liquidity never sleeps. Therefore, the overall sluggishness of the current LRT market fundamentally stems from: the continuous decline in real return levels, compounded by the market's lack of clear expectations for future returns.

The points model has exposed three major structural issues after the initial dividends:

• Unsustainable incentives: A gap in incentives post-TGE, declining TVL, and reduced APR;

• Insufficient ecological stickiness: Most LRT assets lack multi-scenario usage and have poor asset reusability;
• Imbalanced community participation: Large holders dominate the leaderboard, small holders miss out on airdrops, leading to a consensus that "mining is not as good as buying tokens."

After the original logic of "just participate to receive extra airdrops" became ineffective, LRT users gradually realized that what remained was only the basic returns corresponding to mainstream LSTs, with annualized rates generally only in the 4-6% range, significantly reducing their attractiveness.

More critically, driven by high-heat narratives like Meme, AI, and RWA, market funds and users have gradually shifted towards sectors with more short-term return capabilities. In an environment where liquidity is extremely sensitive, users and funds tend to "migrate for profit," going wherever the returns are higher, becoming increasingly unwilling to be long-term bound to a specific LRT protocol.

As a result, after multiple projects' TGEs, there has been a strong sense of disappointment within the community. Not only were the airdrop amounts below expectations, but the tokens also performed poorly in the market, further leading to a decline in user willingness to participate in the entire LRT sector. The challenge for projects in the next phase is how to build an LRT mechanism that truly possesses "native return capability" and "long-term participation stickiness."

At this stage, where the LRT market is in a transitional phase, Lair Finance is taking a different approach. The protocol is building a multilateral incentive coordination layer that no longer relies solely on pure points expectations or short-term airdrop stimuli, but is committed to introducing sustainable, verifiable real return paths to the LRT market through a series of innovative mechanisms, injecting momentum for a new round of growth in the LRT market.

Lair Finance's Path to Breakthrough

The traditional LRT model can be understood as a further repackaging based on LSD, that is, a "secondary structuring" of LST assets. Although different protocols have slight variations in mechanism design, the underlying paradigms are fundamentally the same, and the core logic is generally built around the Ethereum ecosystem. In fact, over 90% of current LRT protocols are based on the ETH and EigenLayer systems, leading to inherent limitations in return scalability and mechanism flexibility. The rigid asset pathways and single on-chain scenarios mean that the actual returns users obtain mainly rely on the native interest of LSDs, making it difficult to form a composite incentive model.

In contrast, Lair Finance is not limited to the Ethereum ecosystem but has built a cross-chain liquidity re-staking protocol from the outset, connecting multiple Layer 1s including Kaia, Berachain, Injective, Somnia, Story, and Initia.

Its core value lies in three aspects:

• Multi-chain adaptability: Deployed on emerging high-potential public chains like Kaia and Berachain;

• Multi-source return design: Native staking + re-staking + ecological incentives forming a three-layer flywheel;

• Multilateral ecological connections: Covering three types of behavioral scenarios: on-chain users, gamers, and Web2 users.

This design allows Lair to break away from the traditional "ETH-EigenLayer" path, flexibly designing an LRT framework with native adaptability, creating a sustainable, traceable composite incentive closed loop.

In the new liquidity staking system, staked assets can not only earn basic returns but also gain additional incentives through multi-dimensional return stacking and combinations with DeFi protocols, while participating in validator security assurance, enhancing native yield without sacrificing liquidity. More importantly, Lair unlocks liquidity bridges between different Layer 1 blockchains, thereby amplifying the security and economic synergy potential of each underlying blockchain, becoming a new infrastructure to drive multi-chain ecological growth.

Currently, Lair has been deployed on the two emerging L1 networks, Kaia and Berachain:

• On the Kaia chain, Lair occupies over 66% of the staking market's TVL, and has collaborated with seven applications, including Catizen, Avalon, and LineNEXT from the LINE ecosystem, connecting over 3.6 million KYC users, facilitating the conversion of Web2 users into on-chain asset participants.

• On the Berachain chain, Lair has reached a deep cooperation with the leading LSD protocol Infrared, integrating over 95% of the LST liquidity market, and launched LrBGT through the AVS mechanism, achieving a multi-source return structure closed loop on Berachain.

In summary: Lair is not just doing re-staking; it is building the infrastructure for "incentive coordination."

Helping the Kaia Ecosystem Form a Community Flywheel

Kaia is a next-generation high-performance Layer 1 blockchain initiated by LINE NEXT, aimed at achieving a seamless transition for Web2 users into the Web3 world. One of its core advantages is the deep integration of the mainstream communication platform LINE's Mini App system, significantly lowering the barriers for developers to build dApps or migrate traditional applications onto the chain, while providing applications with a large user base and strong traffic entry, thus creating a Web3 application environment that is highly scalable and user-friendly.

Leveraging the LINE ecosystem, Kaia has over 300 million potential users and has opened up key pathways for user cold starts through Mini dApps, points systems, and preset identity mechanisms. Therefore, Kaia is seen as one of the most promising infrastructures for achieving large-scale user migration to Web3.

In terms of ecological structure, Kaia actually connects two distinctly different community groups:

• One group consists of crypto users represented by Web3 natives, who interact with the Kaia network through staking and on-chain trading;
• The other group comprises Web2 users from LINE Mini dApps, who primarily engage in on-chain activities through consumer-facing light applications like games, SocialFi, and Memes.

However, the differences in cognitive structures and behavioral patterns between the two lead to a lack of consensus bonds between $KAIA holders and actual DApp users, making it difficult for Web2 users to deeply integrate into the community ecosystem, thus preventing Kaia from forming a complete community flywheel effect.

As Lair Finance expands its layout in the ecosystem based on Kaia's KIP-163 proposal (CnStakingV3) and builds the LRT system, the long-standing issues of community fractures and staking participation barriers in the Kaia ecosystem are gradually being improved.

For users who are not yet familiar with KIP-163, this proposal introduces a new generation of staking architecture to the Kaia mainnet. The previous CnStakingV2 framework only supported users staking $KAIA tokens to a limited number of nodes, leading to uneven distribution of staking rewards, concentration of node power, and even potential security monopoly risks. The biggest innovation of CnStakingV3 is the support for "public delegation," allowing any non-validator user to freely delegate their held KAIA to trusted GCs (governance committee members), thus achieving a more decentralized and balanced staking ecosystem.

Lair Finance is the first staking service protocol built on the Kaia CnStakingV3 architecture. Users can delegate $KAIA to multiple GC nodes through its platform and further participate in the LRT system built by Lair, obtaining richer structured and more composite staking rewards. The entire process requires no custody, ensuring asset security while greatly enhancing the convenience for $KAIA holders to participate in ecological governance and revenue acquisition. Notably, Lair Finance currently accounts for as much as 70% of the TVL on the Kaia chain.

Hierarchical Re-staking System Driving Multi-dimensional Return Flywheel

Lair Finance's liquidity staking system consists of several parts:

• Lair Finance LSD Pool

Supports $KAIA token holders to stake their tokens into the pool to mint $stKAIA. Lair Finance will collaborate with GCs that have the best APR to stake these users' $KAIA tokens on the Kaia chain to earn native chain rewards, distributing part of these rewards to $KAIA stakers and the other part to the Liquidity Vault.

The earnings from the staking pool will automatically accumulate without requiring users to manually claim them. After staking $KAIA, users will receive the yield-bearing token stKAIA, whose value will increase as staking rewards grow. For example, if a user stakes 1 $KAIA at an annual interest rate of 10%, after one year, the value of their stKAIA will increase to 1.1 $KAIA.

• Re-staking Pool

Users holding $stKAIA (or other LST tokens on Kaia such as $sKLAY, $gcKLAY, or $stKLAY) can stake these LST assets along with an equivalent amount of $LAIR tokens (the Lair Finance protocol token) into the Lair Finance re-staking pool to generate $rstKAIA tokens. Holders of this token will further enjoy annualized returns from $LAIR tokens. Conversely, this also enhances the necessity and utility of $LAIR tokens.

• Liquidity Vaults

This incentive pool targets two user groups: Web3 stakers and Web2 LINE users. Its structure includes a gaming rewards pool and multiple Active Vault Services (AVS Vaults).

AVS is a unique mechanism of Lair Finance, allowing users to deposit re-staked assets (like $rstKAIA) into specific Vaults. By completing on-chain actions (such as participating in designated GameFi games, holding specific NFTs, or completing interactive tasks), users can earn points and rewards. These Vaults are typically initiated by Kaia ecosystem projects (initially mainly by game developers on LINE) and are launched after being reviewed by the Lair DAO.

As mentioned earlier, Lair's LSD pool will inject part of the staking rewards into the gaming rewards pool under Liquidity Vaults. When LINE game users participate in games, they will receive receipt tokens (Receipt Tokens), which can be used to redeem $stKAIA rewards in the Vault.

In fact, the AVS mechanism is merging "staking" with "interaction," and is leveraging a new logic for capturing the value of on-chain behavior. With the push of this mechanism, the early explosion of GameFi may be replayed in Lair's AVS model.

At the same time, users holding $rstKAIA can further stake it into AVS Vaults, which contain tokens (such as Game Tokens, points, etc.) from LINE games to incentivize stakers.

It is worth mentioning that Lair Finance has recently successfully completed its first round of AVS activities. The first round of AVS collaborative projects includes:

• Elderglade (Binance IDO, Bybit Megadrop, already launched)

• Bombie (collaborating with Cattea, TGE approaching)

• Frog Defense (launched on BingX)

• And Slime Miner, Captain Tsubasa -RIVALS, Heroic Arena, etc.

The first round of AVS collaborative projects has high TGE starting points and community attention, laying expectations for the upcoming second round and further validating the strong potential and project selection capability of the Kaia ecosystem and Lair collaboration matrix.

In fact, this re-staking system is gradually facilitating a positive value cycle among $KAIA holders, gamers, and game developers/projects, jointly promoting the growth and endogenous drive of the Kaia ecosystem.

For $KAIA holders, this staking system provides a clear and measurable three-fold return path:

• Staking $KAIA to Lair can yield $stKAIA while enjoying native staking rewards from the Kaia PoS (Proof of Stake) consensus mechanism.
• Users can re-stake $stKAIA along with $LAIR to mint $rstKAIA, further obtaining incentives from the Lair platform tokens.
• $rstKAIA can be further staked into AVS Vaults to receive tokens, points, and airdrop rewards from cooperative game projects.

Under this series of incentive mechanisms, $KAIA holders not only become long-term participants and loyal users of LSTs but also effectively transform into co-builders and beneficiaries of Kaia's gaming economic growth.

For gamers, the incentive mechanism drives them to maintain high-frequency activity in LINE mini dApp games. By completing game tasks to obtain Receipt Tokens, players can redeem $stKAIA in Lair's liquidity vaults, further participating in on-chain staking or utilizing assets in ecological DApps, achieving a natural transition and deep integration from Web2 to Web3, gradually solidifying their status as on-chain users.

For game developers/projects, after obtaining Lair DAO approval and successfully establishing AVS Vaults, project tokens can be directed to $rstKAIA users, completing early user guidance and cold starts. Meanwhile, when players receive $stKAIA in games and enter the on-chain ecosystem, it not only enhances user stickiness but also helps games acquire real on-chain behavior data and potential governance participants, thus building a sustainable community foundation.

As this value system continues to operate, Lair is creating an ecological flywheel driven by "re-staking + incentive coordination layer" for Kaia, becoming the core engine for on-chain application growth and capital circulation.

From PoL to LrBGT: Unleashing the Real Power of Berachain

Following Kaia, Berachain has become the second Layer 1 network where Lair Finance is deployed.

Compared to other chains, Berachain's biggest feature is its liquidity-centric consensus mechanism—PoL (Proof of Liquidity), which essentially transforms "liquidity providers" into block producers, constructing an incentive model that deeply binds network security with ecological activity.

In the PoL framework, the role of ordinary token holders is also redefined. Unlike traditional PoS models where tokens are staked to validation nodes, users on Berachain will delegate $BERA to their trusted PoL pools. These pools are operated by ecological project parties and must be approved by Berachain's governance mechanism before joining the incentive system.

This means that token holders are actually supporting a specific "liquidity strategy," rather than merely participating in network consensus security.

These PoL pools typically use the assets received to build liquidity for key trading pairs in DEXs, thereby enhancing the trading depth and market efficiency of on-chain assets. In return, the pool operators will receive ecological tokens $BGT issued by Berachain based on their liquidity contribution scale and activity, and can distribute part of the earnings to liquidity participants through the incentive mechanisms set by the protocol. To some extent, PoL transforms "security mining" into "ecological construction mining," forming a positive growth closed loop centered on incentive alignment, promoting the active development of Berachain's application layer.

Currently, the PoL Vault LAIR/BERA mining pool deployed by Lair Finance on Berachain has been approved for launch on Kodiak. Users providing liquidity for this pool can earn native LP rewards and LAIR token rewards while also obtaining $BGT token rewards.

At the same time, the WBERA/LAIR pool deployed by Lair Finance on Infrared Finance has also been newly launched, allowing users to earn basic LP rewards while also receiving rewards in iBGT (the BGT LST token on Infrared Finance).

Of course, in addition to deploying PoL Vaults, Lair Finance has also brought a brand new LRT system to Berachain, providing multiple return effects for $BGT token holders and ensuring the continuity of PoL mechanism rewards.

Currently, Lair Finance has introduced its liquidity re-staking token LrBGT on Berachain, which is a Liquid Restaking Token (LRT) built on the native asset $BGT of Berachain. This mechanism integrates the liquid staking token iBGT issued by Infrared Finance and constructs a financial derivative asset with automatic compound interest and combinability. Users only need to deposit their iBGT into Lair's re-staking contract to mint LrBGT tokens, without needing to stake additional $LAIR or other assets.

The core advantage of LrBGT lies in its composite return structure and asset liquidity compatibility. While holding LrBGT, users will automatically receive two types of returns:

• Basic staking rewards: From the block rewards generated by the validator nodes staking the $BGT behind iBGT, this part of the income is provided by Infrared and automatically compounded through Lair's mechanism without requiring active claims.

• PoL ecological incentives: Since LrBGT is part of the contributing assets in the PoL model, users can also receive $BGT incentives from the Berachain network, and in the future, may also include additional incentives provided by Lair or other cooperative protocols (such as $LAIR).

Currently, although LrBGT does not yet support re-staking, we see that Lair Finance is showing that secondary staking for LrBGT will be launched soon. Drawing parallels to the secondary staking for game token incentives on Kaia, it is possible that after users perform secondary staking for LrBGT, they may further receive token airdrop rewards from other projects on Berachain.

In fact, the significance of Lair building LRT for $BGT lies not only in enhancing the yield efficiency for holders, but also in unleashing the capital potential of the PoL mechanism and the Berachain ecosystem.

As the core of governance and incentives for the network, $BGT has long faced a short-term behavioral model of "mining—extracting—selling," leading to a lack of token holder loyalty and willingness to participate in governance, which reduces the effectiveness of token incentives and community stickiness.

At the same time, the current DeFi system of Berachain provides limited capital efficiency support for $BGT, with most staked assets being in a closed state, making it difficult to participate in lending, trading, and yield aggregation scenarios, thus suppressing its DeFi activity and system composability, and weakening the actual incentive effect of $BGT under the PoL model.

The introduction of LRT is a structural response to the above dilemmas.

By "liquefying" staked assets in the form of LrBGT, $BGT is re-empowered to participate in the ecosystem. Users can continue to earn basic staking rewards while holding LrBGT, and also access various DeFi paths such as liquidity mining, lending, and re-staking, significantly enhancing capital utilization efficiency and yield combination space.

At the network level, LRT lowers the staking threshold for users, allowing more BGT holders to shift from "watching" to "participating," which not only helps increase staking coverage and network security but also further promotes a virtuous cycle of on-chain governance and incentive structures.

Furthermore, as a structural derivative asset, LrBGT has the capability to participate as a "second-order asset" in more protocol components within the PoL model, becoming a composable capital unit in the Berachain DeFi system. This not only provides new financial building blocks for protocol developers but also offers users more flexible composite yield strategies, further expanding the application radius and value anchoring ability of $BGT.

From a broader ecological perspective, the implementation of LRT is gradually forming a growth flywheel around $BGT.

Although the structure adopted by Lair on Berachain is slightly different from that on Kaia, as the platform's TVL continues to expand, a stable connection has been established between LrBGT and the iBGT provided by Infrared, jointly amplifying the liquidity influence of core staked assets. As the re-staking mechanism continues to gain user recognition within the PoL framework, the staking participation and ecological stickiness of BGT are simultaneously enhanced, and more capital flows into the incentive structures built by Lair.

At the same time, the penetration of LrBGT into various application scenarios on Berachain also accelerates the market's recognition of the functionality and value of $LAIR, gradually solidifying its role as the incentive hub.

In the positive closed loop of "staked assets → LRT derivatives → protocol participation → incentive distribution → token value growth," the DeFi activity of $BGT is reactivated, while $LAIR achieves cross-system value synergy in the multi-chain ecosystem, consolidating its core positioning as a connective protocol asset.

It is worth mentioning that through deep binding with Infrared, Lair Finance currently occupies 95% of the LST market on Berachain and is achieving a new level of liquidity sharing.

Conclusion

The Lair Finance protocol is transforming staking behavior from a closed system into a combinable, sustainable composite yield system through a three-layer path of "PoS native staking to LRT derivative assets, and then to DeFi/GameFi incentives," forming a structured positive cycle.

In the Kaia ecosystem, Lair connects the incentive mechanisms between stakers, players, and developers, binding LINE player behavior with re-staking rewards through the AVS points model, achieving the first true connection between Web2 users and the LRT model. In the first round of AVS activities, the total staking scale of rstKAIA reached 74 million tokens, accounting for as much as 70% of the total TVL, demonstrating the ecological penetration power.

In the Berachain ecosystem, Lair has constructed a dual return path based on the PoL mechanism, allowing users to obtain both node rewards and PoL incentives through the iBGT → LrBGT structure, while participating in mining pools like LAIR/BERA and WBERA/LAIR, currently occupying about 95% of the LST market share on Berachain.

As the closed loop of "staking → derivative assets → multi-scenario participation → value return" matures, Lair Finance is injecting truly verifiable native return capabilities into the LRT framework.

Lair Finance is building a new path: possessing both Lido-style liquidity entry capabilities and integrating EigenLayer's security consensus mechanism with LayerZero's cross-chain scheduling capabilities. Its goal is to become a true "multi-chain unified incentive layer." It not only covers real user behavior but also possesses cross-ecological incentive scheduling and asset distribution capabilities, embodying all the characteristics of becoming the "next-generation cross-chain Restaking hub."

Current mainstream LRT projects like ether.fi ($ETHFI) and Renzo ($REZ), even if they have not yet established a commercial closed loop, have reached FDVs of $2.5 billion and over $1 billion, respectively. In contrast, Lair has already implemented a multi-layer return structure on Kaia and Berachain, constructing traceable real incentive paths by combining diverse application scenarios like GameFi and DeFi, and is still in the early valuation gap, with enormous potential.

At present, Lair resembles the embryonic form of "infrastructure-level LRT": driving systemic closed loops through on-chain behavior, cross-chain return synergy, and multilateral ecological interaction. For a market seeking the "second spring of LRT," Lair may not only be an underestimated project but also an underestimated paradigm.

The next round of incentive distribution is on the way, and the true story of re-staking infrastructure is just beginning.