Restaking has recently become one of the important narratives in the Layer2 field, but Karak, with its background in luxury investments in the Middle East, seems to be an exception. The role played by the Risk Harbor team behind Karak in the Terra collapse has led the community to constantly question the Karak project.
(Background information:
In-depth exploration of the “Restaking ecosystem”: changing the way income is generated using EigenLayer.
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(Background information:
Coinbase Report: Restaking will become an important cornerstone of Ethereum, but it hides many risks…)
Recently, the Restaking field has become one of the important narratives in the Layer2 field. From Eigenlayer’s TVL quickly surpassing $10 billion to Ether.fi surpassing $3 billion, it has caused a heated response in the market.
Restaking projects have also almost become the focus of market attention, but Karak, with its luxury investment lineup, seems to be an exception.
Karak is a popular milk tea in the Middle East, and this naming highlights its regional background. In December 2023, Karak announced that it had obtained a Series A financing of $48 million with a valuation of over $1 billion. The funding was led by Lightspeed Venture Partners, with participation from Mubadala Capital, Pantera Capital, Framework Ventures, Bain Capital Ventures, Digital Currency Group, Coinbase, Proof Group, Nima Capital, Naval Ravikant, and other institutions.
Among them, Mubadala Capital is Abu Dhabi’s second-largest fund, and other investors are mostly well-known investment institutions in the traditional and crypto circles. However, it is worth mentioning that Nima Capital had sold a large amount of its tokens and real estate holdings last year, leading to community suspicions of a “rug” incident.
On February 28th, Karak announced the launch of an early access program, where users can restake and earn XP points on Karak. However, the response was mediocre. On April 8th, Karak opened private channels, and as of April 9th, Karak’s TVL totaled $100 million. This TVL scale does not match its luxury endorsements, leading to continuous questioning on social media.
According to official introductions, Karak is a universal restaking network. Similar to projects like Eigenlayer, it also uses gamification with points to incentivize users to restake and earn multiple rewards. Currently, Karak supports restaking of various mainstream protocol assets on the Ethereum mainnet, Arbitrum (L2), K2 (L2), and other networks. Its team members come from companies such as Coinbase, Google, AWS, Microsoft, Twitter, and Goldman Sachs.
Currently, Karak’s TVL is about $100 million, which is significantly lower than EigenLayer ($13 billion) and ether.fi ($3 billion). On the one hand, this may be due to Karak still being in the early access program stage. But the more likely reason is the community’s many doubts about the background of the project.
According to a Twitter KOL named IAN (@cryptoian), Karak’s team is from Risk Harbor, which was a risk insurance service provider in the Terra ecosystem. The project previously ranked second in TVL in the Terra ecosystem and suffered heavy losses in the Terra collapse. Twitter user @RayRaspberry1 also stated that the team embezzled 200 million UST tokens (worth $7 million) from the community during their exit from Terra.
Karak’s CSO (Chief Strategy Officer) Victor Cheng responded to this on Twitter, stating that the funds were granted to the Risk Harbor Foundation as collateral for its $1 billion risk pool, minted by the Terra Foundation.
After the collapse of UST, in order to prevent further losses, the Risk Harbor Foundation sold $6 million worth of UST from the initial allocation. These funds are currently designated for the insurance fund of the initial recalibration pool.
Perhaps to distance themselves from past controversies, Risk Harbor has been renamed Andalusia Labs. Andalusia Labs has launched three products: Karak (Layer2 network), Subsea (digital asset risk management market, formerly Risk Harbor), and Watchtower (digital asset institutional security platform).
However, it seems that this response has not completely dispelled the community’s doubts about Karak. One user commented:
As of now, Karak’s Telegram channel has about 5,700 members, which does not seem to match the multimillion-dollar financing. In addition, detailed information about the use plan of the platform’s XP points has not been publicly announced. If Karak wants to increase TVL, the first step may be to eliminate the “PR crisis.”
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