Thanks to buffalu from Jito Labs for the discussion and review.

Today, we’re announcing our partnership with Jito to introduce $fragSOL, the first Solana native Liquid Restaking Token based on Jito Restaking VRT. Currently, existing LRTs lack clarity on some critical features. They struggle with distributing various types of AVS rewards to LRT holders effectively. Additionally, none offer a practical solution for determining appropriate slashing ratios for different LSTs in the event of a slashing incident, particularly when multiple LSTs are involved in AVS validation. Let's skip the tired narrative about using LRTs in DeFi to generate additional revenue. In this blog post, we will go over how $fragSOL solves these problems and establishes a new standard for the restaking ecosystem, optimized for Solana. $fragSOL, the true LRT only possible on Solana.

Token Extension for Reward Distribution

The Liquid Restaking Protocols in Ethereum have not been successful in establishing a concise approach for distributing AVS rewards to LRT holders. For LSTs, rewards are usually singular, like SOL, and can be managed with yield-bearing tokens like jitoSOL. However, LRTs and VRTs, which are rewarded with a variety of tokens as rewards, present a unique challenge. Rio Network is the only team to propose a solution, which involves swapping all AVS rewards for ETH and then adding them to reETH, their LRT. However, this approach is flawed because it involves immediately dumping reward tokens onto the market.

Fragmetric, on the other hand, overcomes this by leveraging Solana's token extension. $fragSOL, Fragmetric’s first LRT, utilizes the transfer hook feature of the token extension to precisely track balances over time, ensuring that NCN rewards are distributed accurately based on how long each user has held their LRTs. No other protocol has come close to this level of precision.

The diagram above provides a summary of this procedure. When Alice transfers $fragSOL to Bob, the $fragSOL transfer hook is activated, which updates their $fragSOL balances in Fragmetric's Rewards Module. When NCN rewards are received in Fragmetric’s vault, the reward module records the time-based balance, allowing users to claim their respective rewards. This method ensures that $fragSOL accurately calculates and distributes NCN rewards to all users.

Normalized Token Program for Delegation & Slashing

Restaking protocols, including EigenLayer, have yet to provide a method for determining the slashing ratio for different LSTs. For example, if a Node Operator performs NCN validation with 10 $jitoSOL and 10 $mSOL, there's currently no established standard for how much of each LST should be slashed. Fragmetric has designed a new architecture called the Normalized Token Program to utilize various types of LSTs for NCN validation simultaneously.

Normalized Token Program allows Fragmetric to manage a pool consist of variety of LSTs. When a user deposits an LST such as $jitoSOL, the number of $fragSOL tokens issued is determined by the number and value of tokens in the pool. The corresponding amount of $nSOL is minted and restaked to the Fragmetric Vault of Jito Restaking. By delegating the newly created $nSOL to Node Operators, NCN validation can be performed with the economic security based on the basket's various LSTs. In the event of a slashing, the Jito Restaking Slasher can claim the corresponding proportion of LSTs from the Normalized Token Pool with slashed $nSOL.

The Fragmetric Way

In this post, we discussed how Fragmetric's Normalized Token Program and Token Extension address two major issues that existing liquid restaking protocols have not addressed. Moving forward, Fragmetric will not only develop secure standards for LRT/VRTs but also quantitatively evaluate the profitability and security of NCNs once restaking goes live. Through collaboration with actual node operators, we aim to establish a stable economic security system. Fragmetric is committed to being more than just a leverage product; it strives to be a Liquid retaking Protocol that contributes to the security of the Solana ecosystem.