@j714785k

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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