What Is Kelp?

Introduction

In previous articles, we have explored the concept of restaking and introduced some key players in this emerging sector. In this article, we will turn our focus to Kelp, an innovative force in liquid restaking. Kelp is redefining how ETH holders can maximize their staking potential through its unique platform and comprehensive ecosystem. We will provide an overview of Kelp’s features, including its integration with EigenLayer, the use of rsETH, and the various components that make up the Kelp ecosystem.

What is Kelp?

Kelp is an Ethereum-based liquid restaking platform and Decentralized Autonomous Organization (DAO) integrated with EigenLayer. It enables ETH holders to stake and restake their ETH, even if they don’t have the 32 ETH required for a validator node. Through Kelp, users can validate and secure EigenLayer modules and earn staking rewards.

Kelp provides rsETH, a non-rebasing liquid restaking token (LRT), which offers instant liquidity and increases in value as rewards accumulate. It supports various liquid staking tokens like ETHx, stETH, and sfrxETH, converting them to rsETH when deposit caps are lifted. Kelp eliminates lock-up periods, enhances flexibility, and maximizes the potential of staked assets while ensuring optimal liquidity and DeFi composability.

How Does Kelp Work?

Kelp DAO simplifies liquid restaking by allowing users to restake native Ethereum and ETH LSTs (ETHx, stETH, and sfrxETH) as collateral. Moreover, users can earn Kelp Miles and EigenLayer points by restaking when they make deposits to Kelp. The formula for earning Kelp Miles is: Amount of $rsETH * number of days * 10,000.

Kelp is also integrated with Pendle, Uniswap, Curve, and Balancer, allowing contributors to use their $rsETH to interact with these protocols. This interaction can generate additional profits and extra Kelp Miles/EigenLayer points for users.

What Is The KEP Token And What Is It For?

KEP or Kelp Earned Point, is a token that represents a share of EigenLayer Points acquired by Kelp users. It simplifies the use of EigenLayer Points, making them easy for users to hold, share, and consume. Each $KEP is equivalent to one EigenLayer Point.

One notable feature of $KEP is its liquidity. As an ERC-20 token, KEP can be easily exchanged among users, enabling them to buy and sell their EigenLayer Points for other assets or crypto. This liquidity also means $KEP can be traded on Automated Market Makers (AMMs) or Decentralized Exchanges (DEXs).

Furthermore, $KEP introduces a new dynamic in the restaking market with two types of restakers: point producers and point accumulators. Point producers earn EigenLayer Points by restaking ETH or Liquid Staking Tokens (LSTs), while point accumulators earn points by interacting with $KEP through buying, selling, or trading without necessarily staking Ethereum or LSTs.

The Kelp Ecosystem

The Kelp ecosystem integrates central banking principles with blockchain technology to maintain the stability of the $KELP token. The ecosystem features the Kelp Protocol, a variable interest rate system, various savings and reserve vaults, a token release strategy, a variable taker fee, and liquidity guard mechanisms. These components work together to regulate the money supply and encourage specific market behaviors. Let’s look at the major components.

The Kelp Protocol

The Kelp Protocol is a monetary policy framework that ensures the price stability of the $KELP token through dynamic adjustments based on the Quantity Theory of Money. It regulates token supply by considering factors such as price changes, market base growth, and velocity of money.

Strategy For Releasing Tokens:

Token Release Strategy (TRS) manages the emission of new Kelp tokens from Kelp Saving Accounts, Liquidity Guard, and the Reservation Program. Using predictions from the Kelp Protocol, TRS calculates the daily amount of Kelp tokens to release based on positive price momentum. If there’s negative price momentum, TRS pauses releases until positive momentum returns. This strategy helps maintain price stability and achieve daily price targets.

Kelp Reservation Program (KRP)

The Kelp Reserves Program The Kelp Reservation Program (KRP) aims to expand the Kelp community and distribute Kelp tokens to the public without fiat costs. Users can reserve Kelp tokens by referring others or completing specific tasks. Upon task completion, both the referrer and referee earn reserved Kelp tokens. The program manages 25 billion tokens using a Variable Vesting Contract (VVC), with the Token Release Strategy (TRS) determining daily token releases based on market conditions and positive price momentum.

Liquidity Guard

The Liquidity Guard (LG) allows users to enjoy lower transaction fees by letting the Token Release Strategy (TRS) manage the timing of their sell orders. It prioritizes these orders based on criteria like Priority Fee, Slippage Tolerance, and Transaction Speed. The TRS calculates the token amount for sale, and the Liquidity Guard executes these orders over 24 hours to minimize price impact, adjusting order priority as needed.

Click here to learn more about the Kelp Ecosystem.

Conclusion

Restaking has significantly impacted Ethereum, and Kelp is enhancing this process for stakeholders. This improves liquidity and confidence in DeFi while supporting the development of other promising projects. By doing so, Kelp plays a crucial role in advancing the industry and promoting its growth.