A universal re-recording layer designed by the Andalusia Labs team has emerged from stealth to launch its mainnet today. Karak is a layer-2 blockchain risk management solution that simplifies the process of providing economic security through recaptures.
The company is based in San Francisco and Abu Dhabi. It previously raised $50 million at a $1 billion valuation from investors including Coinbase, Mubadala – an Abu Dhabi Sovereign Wealth Fund – Lightspeed, Bain Capital, Pantera Capital, Framework Ventures and others.
Raouf Ben-Har, the co-founder of Karak, told Blockworks that Karak was founded to solve the problem of fragmented crypto-economic security in the space, which prevented startups from achieving initial success with their projects.
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“They struggled to guarantee their own economic security and suffered from highly dilutive reward mechanisms, which was unfortunate, especially for critical infrastructure such as bridges, oracles and other infrastructure layers,” Ben-Har said.
For this reason, Ben-Har and his co-founder Drew Patel decided to create a universal trust layer applicable to all software. This would allow developers to bypass the need to start from scratch and avoid being limited solely to Ethereum due to security measures.
“We saw Karak as the key to unlocking this new era of innovation. Just as AWS made it easy and affordable for developers to access and build on the cloud, we wanted to make it easy and affordable for developers to access and build on any trust network,” he said.
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According to Patel, there are similarities between EigenLayer and Karak, in that both teams are building a strike protocol that will allow other projects to gain access to economic security to infrastructure layers.
“Like EigenLayer, Karak has its own version of AVSs called Validation-as-a-Service or VaaS,” said Patel. “However, unlike EigenLayer, which anchors itself exclusively on Ethereum, Karak introduces this idea of universal security, or take it for all, where anyone can provision the crypto economy with any asset on any chain.”
Ben-Har notes that the security of a renewed protocol is often measured by the dollars that underlie its economic security. With Karak, this means that these dollars can be provided by assets outside of ETH without compromising security.
“Many assets have a lower opportunity cost compared to ETH, meaning the [VaaS] has a simpler and much more achievable path to sustainable returns,” said Ben-Har.
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Ben-Har explains that in an ETH-only environment, the AVS would have to compete with any ETH yield opportunity with a new, novel risk profile – something that is not sustainable without airdrop speculation.
“There are billions of untapped assets, such as stTIA, ARB and many others, with very little revenue opportunity to create sustainable flywheels for building VaaS in their ecosystem,” he said. “Each ecosystem is different and has its own unique protocols that create different VaaSs designed on top of their assets. There is no one-size-fits-all for every chain.”
The team notes that they are currently experimenting with different ways to use the xERC20 standard and different message bridges to reduce liquidity fragmentation between staked tokens. They hope this will allow them to create a universal liquidity layer across chains to reduce supply-demand mismatches.