@v247852wer
How much leverage can AVS support without systemic risk?
The system-wide capacity for leverage is constrained by the need to avoid cascading liquidations. If a critical mass of operators are highly leveraged, a problem in one AVS can trigger a fire sale of collateral that spirals across the ecosystem. A conservative heuristic, borrowed from traditional finance, might be that total leveraged restaking should not exceed a certain percentage (e.g., 30-50%) of the total non-leveraged, organic restaking base. This provides a buffer to absorb losses without creating a death spiral. The moment leverage is used not just for marginal return enhancement but becomes a primary driver of the total value secured (TVS), the entire system becomes fragile and susceptible to a systemic crisis.
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