I’ve been looking at LSTs and re-staking again. Honestly, the returns look pretty tempting, but what I want to figure out right now is where the money actually comes from: part of it is the “base salary” from consensus rewards and tips, and a lot of the rest is really taking the same slice of security and using it to take on more jobs—other people pay you service fees for that. The more jobs you run, the larger the exposure to incidents becomes, which is just like perpetual leverage: the curve looks smooth most of the time, and then one liquidation and everything is gone.

The “signals” I’m watching aren’t annualized figures. It’s whether, on-chain, people are starting to crowd into the same door and whether exiting turns into a line. Also, even if the protocol’s penalty and isolation mechanisms are well-written, when something really goes wrong, can they keep losses from spreading to each other. The recent NFT royalty drama also feels pretty similar: creators want stable income, but the market worries it will affect liquidity… Returns and liquidity often end up feeding off each other. Either way, I’m going to keep my positions gentle for now, and not mistake luck for skill.