Inside Pell Network: How BTC Restaking and DVS Unlock BTCFi’s Potential

Pell BTC Restaking

TL;DR: We dive into how Pell Network’s BTC restaking and Decentralized Validated Service (DVS) framework drive innovation within the BTCFi ecosystem. By utilizing BTC Liquid Staking Tokens (LST) to bolster network security and scalability across multiple chains, Pell is leading the way as the first omnichain BTC restaking network, offering a robust and cost-effective shared validation infrastructure that’s unlocking new DeFi opportunities for Bitcoin.

As the restaking sector rapidly develops, understanding its underlying logic and ecosystem value has become a focal point. Viewing restaking merely as a means for ETH or BTC holders to gain additional yields is an oversimplification. Where do the returns come from? What are the risks? How does the restaking mechanism contribute to network security? This article offers a comprehensive analysis of the restaking mechanism through Pell Network’s Decentralized Validated Service (DVS), a significant innovation within the BTCFi space.

1. Actively Validated Service (AVS)

Before diving into Pell Network’s DVS, understanding the concept of AVS is crucial. AVS was first introduced by EigenLayer within the Ethereum ecosystem, primarily to meet the validation needs of projects, such as data availability services, oracles, cross-chain bridges, and others. EigenLayer constructs a two-sided market through restaking users’ staked assets: one side attracts user liquidity, while the other provides validation support to business clients who require enhanced security. EigenLayer acts as the service bridge, delivering validation services with shared security for enterprise users.

1.1 How AVS Works

The basic AVS architecture is a dual-sided platform, with stakers on one side and clients with validation needs on the other:

• LSD Asset Providers (Stakers): Typically, ETH holders restake their liquid staking derivatives (LSDs) within EigenLayer, authorizing node operators to manage them. The staked assets serve as the security foundation for the validation service, contributing financial support to network security.
• Node Operators: Authorized by EigenLayer, node operators manage the staked LSD assets and act as intermediaries to provide validation services for AVS. They maintain network security while offering validation support to AVS clients, earning node rewards and service fees, which are shared with both the EigenLayer platform and stakers.
• AVS (Projects): Clients generally include projects requiring validation services, such as data availability services, oracles, or cross-chain bridges. By purchasing AVS services, they can obtain Ethereum mainnet-level security at a lower cost without building their own validation infrastructure.

1.2 Market Value of AVS

AVS establishes a decentralized validation service marketplace by combining stakers’ assets with the needs of clients seeking validation services, benefiting both parties:

• Reduced Validation Costs: Projects benefit from the AVS model by avoiding the high startup costs of building an independent validation network, instead “leasing” validation from EigenLayer. This shared validation model alleviates their operational burden.
• Enhanced Security: With the additional security provided by restaked assets, AVS significantly increases the cost of an attack. By incorporating more nodes and user liquidity, AVS creates a robust security barrier, making attacks more expensive and reducing single points of failure.
• Increased Staker Returns: For stakers, AVS offers additional income beyond ETH PoS rewards. The restaked assets enhance base chain security while generating extra returns, boosting the attractiveness of liquid staking derivatives.

1.3 Challenges in the AVS Model

While AVS enhances the scalability and economic viability of the validation service market, it still faces certain challenges:

• Yield Competitiveness: Without an incentivizing token, AVS yields can be hard to compete with high-yield DeFi strategies. EigenLayer’s restaking currently offers around 3–5% APY, while certain DeFi strategies in recursive lending can reach 8–10% APY. How to enhance AVS yields to attract more participants remains a challenge.
• Ecosystem Limitations: EigenLayer’s AVS system currently operates only on Ethereum, restricting the scope of services provided by node operators. Due to a lack of multi chain capabilities, AVS’s market reach and potential user base are limited.
• Market Maturity: The restaking and AVS markets are still in their early stages. As the Web3 market continues to grow, demand for AVS is expected to increase. However, the market is not yet fully mature, and the number and variety of AVS clients remain limited.

2. Pell Network’s Decentralized Validated Service(DVS)

From the preceding discussion, it is evident that restaking goes beyond extending staking returns — it enables a new model for decentralized network security through multi-tiered services.

In contrast to EigenLayer’s AVS, Pell’s DVS is backed by BTC and its LSTs, providing secure guarantees across multiple applications through economic incentives and customizable penalty mechanisms. DVS flexibly adapts to different validation scenarios, delivering efficient economic security for developers and projects and reducing the costs of building independent validation layers.

Additionally, Pell’s DVS offers the industry’s first seamless, onmichain validation service, spanning various smart contract platforms. Supporting EVM-compatible chains, Solana, Sui, and other Move-based blockchains, Pell maximizes earning potential while serving diverse decentralized applications across multiple networks.

The following sections will detail Pell’s DVS mechanisms.

2.1 Concept of DVS

DVS refers to project parties that require decentralized validated services, including middleware, services, chains, networks, and PoS systems. Pell’s node operators provide validation services by leveraging restaked BTC LSTs delegated by users as the underlying assets.

Each DVS is governed by a set of smart contracts with dedicated slashing rules to penalize misbehavior by node operators. By reusing BTC LSTs across multiple services, stakers benefit from reduced capital costs while significantly enhancing the trust assurances for individual services.

2.2 Modular Architecture of DVS

To accommodate varying computational needs, Pell’s DVS is divided into large-scale and lightweight modes for modular and flexible scaling:

• Large-scale DVS: This mode is designed for compute-intensive applications, distributing computing tasks across multiple validation nodes to ensure efficient execution. For instance, in data availability (DA) protocols, data is partitioned and stored across multiple nodes, reducing storage costs. This horizontal scaling approach provides strong support for high-throughput decentralized applications.
• Lightweight DVS: This mode focuses on repetitive, low-computational tasks like light client validation and zero-knowledge proof validation. With its low computational demands, lightweight DVS is ideal for operating oracles, cross-chain bridge validation, and other lightweight applications, reducing node overhead and ensuring a cost-efficient service model.

To illustrate the layered modular design of DVS, consider Pell as a large logistics company, with node operators as its drivers maximizing earnings:

Pell’s large-scale and lightweight DVS modes resemble two types of delivery models in logistics: freight truck and local courier delivery:

• Large-scale DVS: Similar to freight trucks handling long-haul shipments, catering to large, long-distance cargo. Trucks distribute goods to regional warehouses, where they are further dispatched to various destinations. This model is efficient, high-capacity, and suited for tasks requiring substantial resources and long-distance transport, much like data availability services.
• Lightweight DVS: Like local couriers managing frequent, short-distance deliveries, ideal for small parcels or documents. Lightweight and flexible, they operate efficiently at lower costs for high-frequency, short-distance tasks. Lightweight DVS serves similar functions for smaller computational tasks, such as light client validation, optimizing resource usage and offering a cost-effective service.

Pell DVS

This modular structure allows Pell’s DVS to meet high-performance computing demands while supporting lightweight tasks, enhancing validation efficiency and maximizing node profitability.

2.3 Roles within the Pell Network Ecosystem

In Pell Network’s ecosystem, DVS functions as the B2B client base, with stakers and operators serving crucial roles:

• Stakers: They restake assets (such as BTC or its derivatives) in Pell Network, delegating them to operators for earning returns. Stakers can switch operators and receive rewards based on operator performance.
• Operators: Responsible for running validation nodes within Pell Network, operators provide validation services for DVS clients and receive a portion of the service fees. Operators are tasked with ensuring network security.

2.4 Diverse Application Scenarios for DVS

Pell Network’s DVS can be applied to various decentralized applications, providing reliable infrastructure for data transmission, validation, compliance, and more. Key use cases include:

• Oracle Networks: Oracle networks leverage Pell Network’s economic security to fulfill diverse on-chain data needs without requiring a separate DVS layer, reducing development and maintenance costs.
• Large-scale DA Protocols: Through restaking and community resources, Pell Network offers efficient and cost-effective support for DA protocols, enhancing the integrity of decentralized applications.
• Cross-chain Bridges: Pell’s lightweight cross-chain bridge mechanism enables efficient cross-chain data validation. Through off-chain signature verification, penalties are swiftly enforced during disputes, enhancing bridge security.
• RWA: Pell’s robust data processing capabilities open new use cases in the Real World Assets (RWA) sector.

2.5 Becoming a DVS within the Pell Ecosystem

To integrate with Pell’s core contracts, each DVS must deploy or modify contract instances from the Pell repository, ensuring service updates with operator information and efficient interaction with Pell’s network.

Each DVS must implement a critical on-chain function that defines operator registration and deregistration conditions, specifying how operators join or leave the DVS. Pell’s repository provides foundational contract components to support these functions.

In the future, the core contracts and repository will expand to include more conditional functionalities:

• Reward Conditions: Clear reward mechanisms for operator services, ensuring fair compensation.
• Slashing Conditions: Criteria for penalizing malicious behavior, ensuring system fairness and security.

Each DVS is composed of two core components:

• On-chain Contracts: Manage interactions between stakers and operators, ensuring asset security, and validating operator behavior through contract logic.
• Off-chain Software: Validation software run by operators, responsible for executing validation tasks efficiently and maintaining data integrity.

2.6 Key Components of the Pell Network Ecosystem

Pell Network has established a robust ecosystem that ensures the stable operation of DVS (Decentralized Validation Services) and decentralized applications. Its architecture primarily consists of the following components:

• Restaking Layer: Composed of restaking contracts and cross-chain transmission protocols deployed across multiple blockchain networks, this layer provides services for asset staking, delegation, and redemption. It has already been deployed on several EVM-compatible chains and plans to extend compatibility to BitVM, SVM (Solana), and MoveVM (Aptos).
• Pell Chain: Built on the Cosmos SDK and Tendermint PBFT consensus, Pell Chain is a PoS (Proof-of-Stake) blockchain capable of processing over 4,000 transactions per second. Serving as the hub for multi-chain interaction, Pell Chain employs a combination of DHC, Ring VRF, and TEE to ensure system security. In the future, it will integrate Babylon’s timestamp service to further enhance the network’s overall security.
• DVS Developer Ecosystem: Pell Network boasts an active community of developers and a dedicated development team who are continually expanding innovative BTCFi and DeFi applications. With Pell Network’s support, developers can achieve “one-time development, multi-chain deployment” at a lower cost while benefiting from encrypted economic security.
• Execution Layer: This layer consists of distributed operator nodes that accept staking delegations and run DVS clients, providing data support for the service layer and generating corresponding rewards. This design ensures decentralization while enhancing the flexibility of operators.
• Service Layer (DVS): The service layer interfaces with on-chain and off-chain users, offering decentralized validation services such as decentralized ordering, oracle services, and automation protocol functionalities. This layer is key to Pell Network’s expansion of application scenarios and service scope.

2.7 Supported Networks and Assets

Pell Network supports multiple major blockchain networks, including Ethereum, BNB Chain, Core, Bitlayer, BOB, and various BTC assets, such as BTCB, SolvBTC, coreBTC, tBTC, LBTC (Lombard), wBTC (Bitlayer), and stBTC (Lorenzo). This ensures that users receive optimal support for asset management and restaking needs across a wide range of chains.

With its innovative omnichain DVS design and modular architecture, Pell Network has successfully established a presence in the BTCFi sector. Its cost-effective decentralized validation services bring new developmental possibilities to the blockchain industry. Moving forward, Pell Network will continue to expand its application scenarios, empowering the BTCFi and DeFi ecosystems with innovative technology and professional services.

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