Composability Explained

+-----------------------------------------------------------+
|                     COMPOSABILITY                          |
+-----------------------------------------------------------+
|                                                           |
|   Every ponzi design is a closed system model             |
|   With its audience, conditions, and limits               |
|                                                           |
|   Nest different model types to extend range              |
|                                                           |
+-----------------------------------------------------------+

1/ Traditional Migration vs Crypto Composability

Traditional Ponzis: Often called "migration" because of development structure, very difficult to make major changes while the scheme is running.

Crypto Advantage: Due to open protocol design, you can without affecting current operations:

• Embed new scheme modules into existing products
• Directly nest portions of other schemes

This characteristic is usually described as "composability"

2/ Restaking: Representative of Three-Scheme Combination

Restaking is the representative of "composability" in three-scheme combinations, because it's itself a launch component for entire blockchains.

Restaking Essence:

• Ethereum staking's "P2P"
• Users earn rent by staking ETH or LSD
• Simultaneously enjoying LSD and restaking yields

Restaking is a typical mutual-aid Ponzi, its bubble comes from the opportunity cost of staked ETH

3/ Leverage & Capital Mismatch

Question: If ETH is staked for LSD, and LSD is staked for LRT, when both LSD nodes and LRT staking nodes are slashed for misbehavior, how is one fund slashed twice?

This is actually leverage.

Without discussing technology, just simple logic: There's capital mismatch here

4/ Three-Scheme Combination: Mutual-Aid + Dividend + Split

Restaking Three-Scheme Combination Structure:

Mutual Aid Layer (Restaking)
    |
    | Profit from TVL --> Maximize TVL
    v
Dividend Layer (Staking Protocols)
    |
    | "Shared Security" = dividend ponzi
    | More protocols --> More TVL
    v
Split Layer (Token Launches)
    |
    | Price up --> APY up --> More staking
    | Low liquidity assets --> Easy to pump

5/ Lock: Dividend Ponzi's Role

Restaking's downstream are so-called "shared security" protocols. The accepted definition of security is high staking quantity.

Logic Chain:

1. Does staking need dividends? Yes
2. Then these "security-needing" protocols are essentially dividend Ponzis
3. Restaking makes these dividend Ponzis place deposits (TVL) with it
4. Dividend Ponzis only need to provide dividends

More dividend Ponzis = higher Restaking TVL total = more extraction

6/ Sell: Split Ponzi's Role

Token price rises, APY rises, users are willing to stake in dividend Ponzis.

And new dividend Ponzis are often low-liquidity assets, very easy to pump.

This uses the split Ponzi's [Sell], splitting more dividend Ponzis from Restaking

7/ From ETH Market-Making Perspective

Ethereum POS is a staking dividend Ponzi. It needs to release ETH chips via LSD to pump split schemes.

Bear Market Problem:

• Split assets can't beat Beta
• Fewer new projects slow splitting
• ETH becomes sell pressure

Solution: Use Restaking to provide sufficient market Beta, keeping ETH chips locked without dumping

8/ Left Foot Steps on Right Foot Flywheel

Early bull releases more "infrastructure" dividend Ponzis to Restaking clients
    │
    ▼
Increases Restaking APY
    │
    ▼
Causes massive $ETH to be locked
    │
    ▼
Easier to pump ETH
    │
    ▼
Lower cost to form positive flywheel for entire Ethereum sector
    │
    ▼
Lock ETH → Pump ETH → Massive project launches require Restaking staking
    │
    ▼
Restaking APY expectations rise → More locking

9/ Cost: Centralization

This isn't really "everyone wins"

If you're an "infrastructure" project team, ask yourself:

• "Shared security" cost is your dividend Ponzi user deposits aren't in your hands
• Your native token and even "governance" value must partially yield to ETH
• If Eigenlayer has issues you'll go down with it

As a scheme operator, are you really willing?

10/ Central Consensus

Such a model requires:

• ETH operator cartel
• Restaking providers
• "Shared security" demanders

Aligned interests, even family.

Coordinating so many stakeholders requires very good composability, needs a coordinated "central consensus" to command.

The entire ecosystem will "inevitably" become more centralized

11/ Composability Design Principles

Understanding the Restaking case, we can summarize composability design principles:

Core Formula

Composability Value = Σ(Single Scheme Limit) × Nesting Multiplier - Coordination Cost

Common Three-Scheme Combination Patterns:
├── Mutual-Aid (pool) + Dividend (lockup) + Split (expansion)
├── Dividend (deposit) + Mutual-Aid (volume) + Split (growth)
└── Split (attraction) + Dividend (retention) + Mutual-Aid (leverage)

Design Points:
├── Each layer solves different problems
├── Stakeholder coordination
└── Risk exposure control

Those good at launching schemes, do you already know how the next L1 scheme should be done?

Next: On-Chain Liquidity