Long-term governance rights involve evaluating voting power over protocol decisions, treasury management, and future development directions. Holders should consider whether their token allocation provides meaningful influence, especially as token supply may inflate over time. Some protocols implement vote-locking mechanisms where longer lock-ups grant amplified voting power. Understanding governance delegation options is crucial - you can delegate to knowledgeable community members if unable to actively participate. Consider the protocol's track record of implementing community proposals versus following core team direction. Governance rights may extend to deciding fee structures, tokenomics changes, or even approving future airdrops, making them potentially more valuable than immediate token value.
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Does restaking APR risk premium include volatility compensation? A rational market would demand that the restaking APR includes a significant risk premium compensating for both default (slashing) risk and volatility risk. Investors require higher expected returns to hold an asset with unpredictable payoffs, even if the mean return is high. This volatility premium is distinct from the slashing risk premium. It compensates for the uncertainty and the "lumpiness" of rewards, which can complicate financial planning and increase the chance of receiving below-average returns. Therefore, the advertised high APYs of restaking are not pure "alpha"; they are, in part, a payment for bearing higher variance and tail risk. If volatility were to decrease over time, we would expect this component of the premium to compress.
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Does restaking APR risk premium include volatility compensation? A rationally calculated risk premium for restaking must include compensation for volatility, not just the expected loss from slashing. Investors require a higher return to hold an asset with a highly uncertain payoff. This is a core principle of modern portfolio theory. The total risk premium can be decomposed as: Restaking Premium = Slashing Risk Premium + Illiquidity Premium + Volatility Premium. The volatility premium is the extra reward demanded for enduring the wild swings in APY caused by token price fluctuations, changing AVS emissions, and stake migration. A model that only prices for slashing probability would significantly undervalue the true cost of capital required to secure the network, as it ignores the psychological and mark-to-market costs of high variance.
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