Eigen Layer Launches Restaking on Ethereum Mainnet
What’s better than some good news in days full of FUD?
Today’s good development regards Eigen Layer, which launched on the Ethereum mainnet.
What is Eigen Layer?
In a few words, is a protocol that allows ETH stakers to opt-in and reuse their ETH on the consensus layer.
Stakers can opt-in to EigenLayer and have additional staking opportunities by extending security to other applications to earn extra yields
This has positive contributions since reusing ETH to provide security:
Reduced capital costs for stakers
Increased trust guarantees to services
Until now, in fact, any new application building has to bootstrap a way to secure its system. EigenLayers allows these applications to tap into the pooled security of already staked ETH.
In turn, this:
Makes it easier for any app to bootstrap the same level of security as Ethereum
Introduces new revenue streams for ETH and LSD stakers
Opens new use cases for “pooled security”
Protocol Features
1. Custom Decentralization
EigenLayer expects the number of restakers to grow exponentially.
What’s important about it is that stakers can opt-in and secure other services focused on high decentralization. In this way, other protocols could introduce requirements to boost decentralization (e.g. by including only opt-in from native stakers).
Nonetheless, to maximize the opt-in, those protocols should not have significant increases in the required infrastructural capabilities.
2. Custom Slashing
Similar to the mechanics of staking, Slashing is a mechanism to align incentives of stakers. Each service will have different terms and conditions for slashing, according to the rules in the slashing contracts.
Restakers who opt-in into EigenLayer earn additional rewards on their staked ETH
Validators who participate gain additional revenue from the services that benefit from their validation operations.
3. Operator Delegation
Stakers can also choose to delegate EigenLayer operations to “operators” who will run validated services software on their behalf.
Stakers delegate based on:
Trust
Rewards
Preference for services
Nonetheless, it comes as no surprise that delegating increases trust assumptions, and reliance on third parties and as such introduces further risks.
4. Restaking Points
A measure of restaking activity, restaking points could have future utility as a sort of reputational score and can allow services to prioritize restake from the most committed participants in the ecosystem.
5. Permissionless Innovation
Open marketplace for permissionless innovation: validators can choose whether to opt-in or out of each module built on EigenLayer.
Free market governance to launch new capabilities;
New blockchain modules can have better-tuned trade-offs for security and performance.
First-come-first-serve
The protocol incentivizes users to restake ETH as early as possible, to ensure a place in the ecosystem and maximize staking opportunities.
Why Restaking early?
Secure Your Spot
Skip The Withdrawal Queue
Maximize Staking Opportunities
Access to Premium Services
Isn’t this similar to Merge Mining?
Some may be familiar with the concept of Merge Mining, where miners use the same cryptographic PoW to mine blocks across the chains simultaneously (this, for instance, is what Dogecoin and Litecoin do).
Nonetheless, merge mining does not “transfer cryptoeconomic security” (no added security): there’s no slashing, and the fact that even if the smaller chain loses value then the merge-mined chain will also lose some utility.
On the other hand, restaking means that if there’s an incorrect state than “the stake held by the malicious validators in the main chain would be slashed.”
As such, in restaked networks, the cost of corrupt subsets would be equal to the amount restaked from the main chain
Future Phases
EigenLayer's next phase will introduce Operators, who will be responsible for performing validation tasks for AVSs (Actively Validated Services) built on the EigenLayer protocol.
In the third phase, the protocol will facilitate the launch of multiple AVSs, leveraging the robust foundation provided by EigenLayer.
In turn, this will enable additional use cases such as:
Decentralized Sequencers, Oracles, Bridges for Rollups etc.
How will EigenLayer work?
Restakers will delegate their staked ETH to Operators, or run validation services themselves (becoming an Operator).
Both parties have to opt-in and mutually agree: restakers retain control over their stake and choose which AVSs they opt-in to validate for.
What is the difference between an Operator and AVS?
Operators and AVSs operate together.
Operators: perform validation tasks for AVSs (ensuring the security and integrity of the network)
AVSs: “deliver innovative use cases to users”, leveraging the power of Ethereum's shared security.
Launch Limitations
As this is a Guarded Launch, Eigen Layer is launching with a series of limitations:
Restaking limits
Limited support for LSDs (Lido, RocketPool, Coinbase)
7-day delay window for withdrawals
It’s interesting to note that EigenLayer is designed with:
Upgradable smart contracts
Ability to pause functionality
Various adjustable parameters
All are delegated to 3 different multisigs.
There’s no immediate concern with regard to these but we are all familiar with the fact that ideally, all DeFi contracts would be immutable.
That’s what governance looks like in EigenLayer:
Why EigenLayer?
EigenLayer is poised to be an essential infrastructural component in solving the issue of “fragmented trust” and the fact that new projects have to bootstrap their security from scratch in order to protect their protocol.
What is the issue there?
Modules that cannot be deployed on top of EVM cannot rely on the pooled security of Ethereum (e.g. sidechains with new consensus, DA layers).
As such, they rely on AVS that “have their own distributed validation semantics to do verification”. In turn, this is expensive, requires the bootstrapping of a new trust network, and adds extra fees and trust requirements.
By opting in EigenLayer stakers can validate new modules build on top of Ethereum:
consensus protocols, data availability layers, virtual machines, keeper networks, oracle networks, bridges, threshold cryptography schemes, trusted execution environments, etc.
Permissionless security: no need to build your own trust network in order to have distributed validation, but can rely on the security and decentralization of Ethereum.
As such, EigenLayer can be defined as an “open marketplace where AVSs can rent pooled security provided by Ethereum validators”.
In the example below we highlight the difference in costs for an attack on an AVS today, compared to an EigenLayer AVS (on the right):
Food for Thought
EigenLayer creates a “free market” for decentralized trust coming from ETH stakers.
In turn, this allows stakers to opt-in for the modules of their choice: either directly, or delegating to other operators.
The lent security can be leveraged to build a variety of modules and use cases.
Different modules may choose to rely on specific features of stakers: high computational capacity, and high-risk propensity, thus opening up even further differentiation.
EigenLayer is an infrastructural component that will strengthen the use case of ETH staking, while basically creating a public good out of it, that other networks and protocols can leverage without the need of bootstrapping their own security.
Pretty big deal!
It is, however, fair to say that the system doesn’t come without risks as all stakers will be subject to additional third parties risks, such as smart contract risks, and specific slashing conditions. etc.