EigenLayer is an Ethereum-built protocol that supports the restaking of ETH on the blockchain's consensus layer. Through EigenLayer smart contracts, those who stake ETH can provide cryptoeconomic security to other applications across the network.
Following a stakedrop of EIGEN, the project's native token, users have been rewarded with a portion of EIGEN for their active restaking efforts and willingness to be early adopters in the EigenLayer ecosystem.
With EigenLayer, Ethereum security is no longer fragmented across modules but is aggregated instead, improving security for the decentralized applications (DApps) that use the modules. EigenLayer addresses some of the trust and innovation challenges faced on Ethereum, allowing for faster development and deployment of DApps.
Eager to learn more about what EigenLayer is? Read on as we explain what the project was built to achieve, the role of the EIGEN token, and the project's restaking function.
TL;DR
Innovative platform: The security of Ethereum is transformed by EigenLayer through the ability to restake staked ETH.
Solves fragmented trust: Addresses the slow progress and lack of confidence among some in Ethereum, caused by divided trust.
Enhances security: Enhances the safety of DApps and bridges, decreasing the need for security expenditure.
Market-based governance: Unifies the Ethereum community through shared security and governance.
Potential and risks: Provides rewards for extra measures to ensure protocol security in the face of novel risks.
What is EigenLayer?
EigenLayer is a platform designed to enhance the cryptoeconomic security and functionality of the Ethereum network by enabling the restaking of staked ETH.
The project addresses the challenges of divided trust and sluggish development on the Ethereum base. These challenges have traditionally hindered the network's ability to offer secure DApps and middleware services at a reasonable cost.
EigenLayer aims to enhance security for Ethereum DApps, bridges, and other protocols by enabling the restaking of staked ETH. As a result, projects using EigenLayer avoid the need to allocate further resources to their security systems.
With this approach, Ethereum can use its established network of trust while incorporating collective security and market-based governance to better align the goals of DApps, middleware services, and Ethereum.
EigenLayer has an optional feature that allows users to earn extra incentives by securing additional protocols, but this also comes with the possibility of facing new penalties. Users can decide to participate in securing protocols with specific penalty conditions, which means they must accept new risks and potential rewards. The platform supports any protocol that requires robust security, such as oracles, bridges, and rollup services, providing services such as data availability through the same network.
One example of EigenLayer's utility is EigenDA, a data availability layer designed for Ethereum. Its goal is to offer more affordable and faster data availability when compared to the current Ethereum base layer. This can ultimately improve programmability and the pace of progress on the Ethereum platform.
The benefits of using EigenLayer include improved capital efficiency, access to higher rewards, and support for novel actively validated services (AVS) and DApps. It also allows for the restaking of liquid staking tokens, which broadens the scope of participation beyond active validators to include those who've staked ETH through liquid staking providers like Lido and Swell. This inclusivity is balanced with measures to prevent centralization, such as imposing caps on the allocation of liquid staking tokens and single deposits.
However, like any innovative platform, EigenLayer comes with its challenges. These include the potential for slashing risks, where staked ETH could be rapidly depleted if validators misbehave, yield risks, and centralization risks that could pose systemic threats to the Ethereum network.Despite these concerns, EigenLayer represents a significant step forward in addressing the fragmented trust issue and making Ethereum a more unified and secure platform for decentralized finance (DeFi) and beyond.
EigenLayer's approach to restaking staked ETH is a vital component of the broader Ethereum 2.0 upgrade, aiming to enhance the security and efficiency of the network. By allowing for the creation of a security pool through restaking, EigenLayer supports DApps, bridges, oracles, and more, enabling these entities to leverage Ethereum's security without establishing their validator networks.
How does restaking work on EigenLayer?
The ability to restake ETH on multiple protocols concurrently reinforces the validation of the network, maximizes capital efficiency, and decreases the costs for validators. Restaking can be divided into two main forms: liquid restaking and native restaking.
Liquid restaking: Involves depositing liquid staking tokens (LSTs) into EigenLayer smart contracts. Supported tokens include stETH (Lido), rETH (Rocket Pool), and several others, with plans to expand support to more tokens. Liquid restaking offers flexibility and inclusivity, allowing a wider range of stakeholders to participate in the restaking process.
Native restaking: Native restaking is targeted at those operating an Ethereum validator node. It involves setting an Ethereum validator's withdraw credential to EigenLayer's smart contracts, enabling direct participation in the restaking mechanism. This form of restaking is crucial for maintaining the Ethereum network's integrity and security.
EigenLayer improves Ethereum ecosystem security by pooling resources and using a free-market governance model. This extends security to different protocols, incentivizing participation and honesty for validators and stakeholders who choose to restake with EigenLayer.
Restaking has benefits such as promoting competition among security providers, lowering barriers for new protocols, and strengthening Ethereum's resilience against attacks. Validators earn income, and stakeholders can increase efficiency by diversifying their staked assets.
Who uses EigenLayer?
Three parties make up the EigenLayer ecosystem, and each plays its own specific role.
Stakers
Stakers in the EigenLayer ecosystem can restake ETH or liquid staking tokens (e.g. stETH, rETH, cbETH, and LsETH) across multiple protocols. This allows them to use their staked ETH as security for other protocols and earn fees and rewards. This is essential for improving Ethereum's network security and efficiency by using existing staked capital.
Operators
Operators validate transactions and maintain network integrity. They benefit from the EigenLayer ecosystem by validating multiple networks at lower costs, promoting a competitive market for pooled security. As a restaker, users will get to select from a pool of operator nodes that includes OKX, Coinbase, and others.
Actively Validated Services (AVS)
The EigenLayer ecosystem allows AVS developers to access Ethereum's staked capital and validator set, enabling them to create decentralized services and tap into a trusted network for security. This eliminates the need to create a new trust network, reducing fragmentation and promoting permissionless innovation. AVS developers within the ecosystem today include Edgevana, Ethos, and Everstake, among others.
What are some key features of EigenLayer?
Restaking mechanism
Allows for the restaking of assets by both ETH stakers and Liquid Staking Token holders.
Contributes to Ethereum's security and allows stakers to earn extra rewards without additional capital.
Liquid Staking Derivatives (LSDs)
Market value of $28B, enhancing liquidity for stakers.
Enables engagement in DeFi ventures while maintaining possession of staked assets.
EigenDA
EigenLayer's initial AVS offers decentralized data availability.
Provides lower transaction fees, increased speed, and reliable compatibility with rollup technology.
Cost reduction and throughput in EigenDA
Addresses capital, operational, and congestion costs through erasure coding and other mechanisms.
Can sustain high-throughput, accommodating applications that require large amounts of bandwidth.
Security features
Uses restaking to ensure economic stability and promote decentralization.
Uses proof of custody to guarantee the validity of stored data.
Faults and EIGEN, the universal intersubjective work token
When it comes to blockchains, faults can be categorized into four types:
Objectively attributable faults: Verified mathematically and cryptographically.
Intersubjectively attributable faults: Most observers must agree.
Non-attributable faults: Privacy breaches that only the victim notices.
Subjective faults: Relies on personal preferences. To use a real-world example, something like your favorite cafe.
EigenLayer focuses on objectively attributable and intersubjectively attributable faults, for broader consensus and resolution.
The role of social consensus
Social consensus is crucial for solving conflicts. It makes decisions fairly and that are, in theory, widely accepted. Several methods help achieve this.
Slashing operators' stakes: Here, operators are penalized if they act outside of the norm.
Using a committee: A group determines the true answer and penalizes those who disagree.
Forking the chain: If there's a big disagreement, a new version of the blockchain can be made.
Restaking ETH and the role of EIGEN
EigenLayer uses Ethereum's security to handle objective faults. But, it needs a new way to deal with subjective faults. This is where the EIGEN token comes in.
EIGEN token explained
The EIGEN token introduces intersubjective staking to fix intersubjective faults. This process involves a setup phase, where rules of coordination are established, and an execution phase, where these rules are implemented.
If the majority of EIGEN token stakers act outside the rules, a challenger can make a new token version. This new version penalizes malicious stakers to encourage honest and compliant behavior.
Unique features of EIGEN
The EIGEN token has numerous unique features. It's universal and can be used in various applications, providing broad cryptoeconomic security. It also uses a two-token system to avoid forking issues. One token is fork-unaware and is suitable for applications like lending protocols.
To prevent malicious challenges, anyone who wants to fork the token must put up a bond in EIGEN. If an attack happens, the system redistributes the malicious stake to compensate for the losses, preserving cryptoeconomic security.
How do EIGEN and ETH complement each other?
ETH and EIGEN work together inside EigenLayer. ETH makes the system decentralized and prevents collusion, while EIGEN helps with cryptoeconomic slashing. Together, the tokens support the network's security and effectiveness, and contribute to a stronger decentralized space overall.
What's next for EigenLayer?
The potential applications of EigenLayer are diverse, including DeFi, governance, and cross-chain interoperability. The protocol's embrace of permissionless innovation opens the door to fresh advancements built by developers using the platform.
Meanwhile, the protocol has taken major steps forward itself during 2024, including the EigenDA mainnet launch during April 2024 and the onboarding of rollups onto the EigenDA mainnet for test traffic. Following this final testing and hardening stage, EigenLayer will begin to onboard production traffic for all rollups. The protocol has stated that onboarding of the first rollups onto the EigenDA mainnet is "the next phase of a multi-stage launch towards the endgame for data availability for the Ethereum ecosystem".
Although big things lay ahead for EigenLayer, its future development isn't without challenges. This includes complicated technology, uncertainty about market acceptance, and the need to balance maintaining overall security and providing economic incentives within its community.
Despite facing these obstacles, EigenLayer is paving the way for a significant impact on the larger blockchain community. By addressing the long-standing hurdles of scalability, interoperability, and security for Ethereum, its solutions have the potential to encourage a new phase of blockchain advancement. This new era could be characterized by heightened productivity, a wider range of applications, and a fairer and more decentralized digital market.
EigenLayer airdrop: explaining the EIGEN Stakedrop
To bootstrap the EigenLayer ecosystem and drive higher liquidity, EigenLayer announced the EIGEN stakedrop. Pegged as an airdrop designed for EIGEN staking, the stakedrop is meant to reward users who interacted with the overall EigenLayer ecosystem before the season one snapshot. This mostly includes Liquid Restaking Token users, and those who directly restaked ETH or LSTs on EigenLayer. As a whole, the EigenLayer team mentioned that approximately 113 million EIGEN tokens will be distributed to users in season one.
How to claim your EIGEN stakedrop
At the time of writing, ETH and LST restakers can begin redeeming their EIGEN stakedrop claims while season one phase one is live. Simply visit the EigenLayer claim site, connect your OKX Wallet, claim the EIGEN tokens you’re allocated, and begin staking and delegating. Find out more about EIGEN season one eligibility to see if you qualify.
The final word
EigenLayer innovates on Ethereum by enabling the restaking of ETH to boost network security and speed up development. It helps to align the various interests within the ecosystem, offering incentives for additional protocol security. Key features like EigenDA aim to enhance data availability, improving Ethereum's efficiency.
Despite its obstacles, EigenLayer is an important milestone in developing a stronger and more cohesive Ethereum ecosystem.
FAQs
The EigenLayer protocol aims to reduce the complexities developers face when building and bootstrapping networks. This is achieved by leveraging the pooled security of Ethereum stakers. By creating a vibrant new ecosystem for builders, EigenLayer is helping to bring fresh innovation to crypto's second-biggest blockchain. Meanwhile, through restaking, the protocol incentivizes greater adoption of the Ethereum network and holding of the Ether token.
Restakers stake their ETH or one of the network's liquid staking tokens (stETH, rETH, cbETH, and LsETH) across the protocol of their choice. These staked assets help to secure protocols, earning the stakers a reward in return. By restaking already staked tokens, users are essentially doubling the rewards to be gained.
There's always an element of risk in crypto given its inherent volatility, and EigenLayers comes with a variety of technical and asset-based risks. When restaking, you could face a loss of ETH assets if a failure of the EigenLayer protocol were to occur. It's also possible for attackers to cripple the network by taking control of certain percentages of the active stake. Meanwhile, validators face the risk of slashing penalties on their originally staked ETH should they violate a protocol's rules. Although risks do exist, measures have been worked into the platform to mitigate them and protect stakers and developers.
Yes, and it's called EIGEN. The token helps to fix intersubjectively attributable faults through intersubjective staking. Here, rules for the protocol are set and implemented. Should a token staker misbehave, a new token version can be created, penalizing malicious stakers and encouraging positive behavior.
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