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Is restaking APY smoother with diversified AVS participation? Yes, diversifying across a basket of uncorrelated AVSs is the primary method to smooth restaking APY. This is a direct application of Modern Portfolio Theory. If an operator only secures one AVS whose rewards depend on a single blockchain's activity, their APY will be highly volatile. By also participating in AVSs for data availability, oracle feeds, and decentralized compute, the operator gains exposure to different revenue drivers. A downturn in one sector (e.g., gaming) may be offset by stability in another (e.g., DeFi). The key is that the AVSs have low correlation in their demand and failure modes. Proper diversification reduces the portfolio's overall variance, turning a jagged, unpredictable yield into a more consistent stream, though it cannot eliminate systemic risks affecting the entire ecosystem.

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