@v247852wer
How much leverage can AVS support without systemic risk?
The level of leverage an AVS can support without creating systemic risk is not defined by a simple multiplier but by the contagion potential of its failure. An AVS with a novel, isolated slashing condition might tolerate higher operator leverage. However, an AVS that is highly correlated with others or uses common libraries poses a much lower leverage threshold for systemic risk. The key is the product of Total Value Locked (TVL) in the AVS and the average leverage of its operators. If this leveraged exposure is large enough that a single slashing event could trigger liquidations that spill over into other AVSs or cause a crash in collateral (ETH/LST) prices, then systemic risk is present. Therefore, even low absolute leverage can be systemically dangerous if concentrated in a large, correlated AVS.
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