2025, the End of PoS Maximalism? How Cryptography is Eating Cryptoeconomics

Recent innovations in cryptographic and cryptoeconomic technologies are reshaping how we think about trust, incentives, and security in blockchain protocols.

On the cryptographic front, tools such as Zero-Knowledge Virtual Machines (zkVMs), Multi-Party Computation (MPC), Trusted Execution Environments (TEEs), and Fully Homomorphic Encryption (FHE) are expanding what’s possible in decentralized computation. Meanwhile, restaking has emerged as a new cryptoeconomic primitive, enabling more efficient capital usage for securing networks.

These technological breakthroughs in these areas now prompt a vital question: If we can prove anything without incurring large capital requirements, do we still need to spend billions on economic incentives? I’ll explore each element, providing examples and examining the broader implications for the crypto industry.

Part 1: Cryptographic Security

Recent advances in verifiable computation and zero-knowledge systems are reshaping the blockchain space. Rather than focusing on separate frameworks, today’s trend leans toward universal proof systems capable of validating large swaths of off-chain or cross-chain transactions with minimal trust.

For instance, Succinct uses succinct proof mechanisms such as SP1 to build rollups with ZKP validity proofs or ZK fraud proofs. In a similar vein, RISC Zero with Boundless aims to support arbitrary computations across multiple chains by offloading execution to a cryptographic environment. Both reduce on-chain overhead and potentially lower the capital required for security. Even Ethereum core researcher Justin Drake recently introduced an idea “SNARKification” in Beam chain, which would incorporate SNARK-based, post-quantum cryptography using hash-based signatures that enable real-time consensus proof on standard hardware.

On a similar note, Flashblocks are block pre-confirmations issued by the TEE block builder that allow to achieve faster ‘block’ times, or to be precise, transaction times. Recently, Unichain and Base have committed to implementing Flashblocks on their chains.

MPC and FHE are still in early development, but solutions like Arcium and Zama are leading the way in adopting these latest cryptographic advancements for on-chain privacy and data encryption, which would unlock another major milestone in the crypto space of having fully verifiable encrypted computation.

Part 2: Cryptoeconomics Security

Historically, Proof-of-Stake (PoS) chains rely on validators locking up capital. Ethereum, for instance, sees billions of dollars staked, typically offering around 2-4% returns on ETH. Other networks like Solana or Celestia can spend 8-15% on rewards. These figures reflect the magnitude of incentives needed to deter misconduct. But if cryptographic proofs assure correctness, the necessity for large-scale token issuance or high fees may drop.

Restaking, where new protocols effectively “rent” security from already-staked capital, amplifies this efficiency by allowing additional services to borrow existing trust relationships. In other words, blockchains can piggyback on Ethereum’s (and other major assets’) security without bootstrapping their own validator sets, reducing overhead and opening up more resources for actual development. Current estimates suggest that restaked capital might cost less than 1% of the total amount of security, which means the savings for protocols can become significantly lower compared to spinning up your own cryptoeconomic security incentive, while also having more robust assets securing the network.

EigenLayer and Symbiotic are leading the way in restaking, having attracted $8.5b and $1b in TVL, respectively. Both of these platforms offer similar feature sets for developers building on top of these protocols, gradually reducing the need for pure economic incentives.

Given that restaking introduces lower cost to high-quality capital and lower operational overhead, the cryptoeconomic breakthroughs will undoubtedly reshape the crypto landscape, opening up new possibilities for trust, security, and scalability.

Economic incentives remain important for ensuring liveness and punishing actors who disrupt consensus. Yet, if cryptographic proofs can verify state transitions unambiguously, much of the validation process can shift away from capital lockups.

For example, if zkVMs successfully prove complex transactions across different blockchains, validators no longer need to store and process each detail themselves. Instead, they can trust the proof, focusing more on block production and finalization. In this model, slashing risk becomes less central – capital lockups act more as a fallback measure. Still, purely cryptographic approaches don’t cover every threat; issues like denial-of-service or collusion might require financial disincentives.

However, zkVMs also require incentives for ensuring honest participation in computation. Lagrange has been a good example in the space where it develops a universal ZK Prover Network with restaked capital as a backbone for honest validation. As Lagrange’s CEO & co-founder, Ismael Hishon-Rezaizade, put in a recent panel that I had the honor to moderate on why cryptography still requires cryptoeconomic security:

Even if advanced cryptographic proofs minimize the reliance on continuous capital lockups, some form of staking likely remains critical for governance, network liveness, and addressing threats beyond state validity (e.g., bribery attacks, censorship, etc.). In many ways, a future dominated by cryptography would see these economic incentives evolve into a more supplemental mechanism.

However, expanding restaking usage creates interconnected risk: if multiple protocols depend on the same validator capital, a slash event in one protocol could cascade. Hence, as cryptography takes on more responsibility, the complexity of shared security grows, requiring meticulous designs.

This particular issue on the interconnected risk is being solved by using distinct capital for each protocol, however, capital utilization can be higher and thus cheaper for each protocol if it’s reused.

Oracles, as a critical piece of infrastructure in the DeFi stack, stand to gain significantly from both cryptographic and cryptoeconomic advancements, especially in the case of DIA. As a builder in this space, I’m particularly excited about how these technologies unlock new possibilities for oracle design and security.

Cryptographic Solution

Cryptographic solutions such as zero-knowledge proofs (ZKPs) and verifiable computation can enhance the security and privacy of oracle data. For example, oracles can use ZKPs to prove the validity of data and prevent data manipulation in price derivation.

Cryptoeconomic Solutions

Cryptoeconomic solutions such as restaking can improve the efficiency and scalability of oracle networks. By allowing multiple protocols to share the same validator capital, oracles can reduce the cost of securing oracle services and increase the availability of data, while having more cryptoeconomic security.

Applications and Use Cases

Specifically, oracles can leverage cryptographic and cryptoeconomic solutions in the following ways:

• Data verification: oracles can use ZKPs to verify the integrity and authenticity of data from various sources, ensuring that the data is accurate and reliable.
• Data privacy: oracles can use cryptographic techniques to protect the privacy of data sources, ensuring that sensitive information is not exposed.
• Incentivization: oracles can use cryptoeconomic mechanisms to incentivize data providers to share accurate and timely data, ensuring the quality and reliability of the oracle network.
• Governance: oracles can use cryptoeconomic mechanisms to enable stakeholders to participate in the governance of the oracle network, ensuring that the network is operated in a fair and transparent manner.

By leveraging cryptographic and cryptoeconomic solutions, oracles can enhance the security, privacy, efficiency, and scalability of its oracle network, providing a more robust and reliable data infrastructure for decentralized applications.

Cryptographic proofs and restaking hint at shifting the load from validators onto verifiable computation, networks may cut costs, reduce inflation, and enhance scalability.

That said, cryptoeconomics isn’t disappearing anytime soon. In a purely proof-driven world, vulnerabilities could arise from external attacks or governance failures. As a result, these two layers, cryptographic verifiability and economic incentives, will likely continue to coexist. The balance point, however, is shifting: cryptography grows more capable by the day, and the cost of capital for security may steadily decline.

The net effect is a more efficient, more scalable crypto ecosystem – one in which trustlessness is increasingly powered by code and proofs, while the economic layer ensures that even the most sophisticated cryptographic solutions remain accountable to the broader network.