What is Eigenlayer?
In the rapidly evolving world of blockchain technology, EigenLayer emerges as a groundbreaking protocol built on Ethereum, introducing a novel concept known as 'restaking'. This innovative approach enables the reuse of staked ETH and Liquid Staking Tokens (LSTs), allowing users to opt-in to EigenLayer smart contracts to restake their ETH or LSTs. This process not only extends crypto economic security to various applications on the Ethereum network but also opens avenues for earning additional rewards.
The necessity of EigenLayer in the blockchain ecosystem becomes evident when considering the challenges faced by new decentralized services on Ethereum. Traditionally, these services would need to bootstrap their own trust networks to ensure system security, leading to a fragmented and inefficient security landscape. EigenLayer addresses this issue head-on by enabling services to tap into the pooled security of Ethereum's stakers. This integration is not limited by the service's composition, making EigenLayer a versatile and inclusive platform that fosters permissionless innovation and free-market governance.
Eigenlayer has already received over $1 billion in deposits to date, receiving a large variety of LSTs from across the broader Ethereum ecosystem. The goal of this report is to explain how Eigenlayer functions at a high level, work through some of the benefits concerning restaked ETH and explore the ecosystem in its current state.
Features of Eigenlayer
A standout feature of EigenLayer is its customizability in terms of decentralization and slashing mechanisms. It empowers native ETH restakers to opt for services that prioritize high decentralization, such as those facilitating censorship resistance through advanced techniques like multilateral ordering and secret sharing. Furthermore, EigenLayer introduces specific slashing contracts for each service, adding an extra layer of security and trust. These contracts specify the terms and conditions under which stakers might be penalized, ensuring a high cost of corruption and reinforcing the integrity of the network.
Operator delegation is another key aspect of EigenLayer, offering flexibility for stakers who prefer not to run software containers themselves. Through EigenLayer, these stakers can delegate operations to trusted operators, who run actively validated service modules on their behalf. This delegation is based on various factors, including trust in the operator, potential rewards, and preferences for specific services.
In essence, EigenLayer revolutionizes the Ethereum blockchain by providing a mechanism for rehypothecation of staked ETH, thereby enhancing the overall security of the Ethereum network. It addresses critical challenges such as fragmented security and high capital costs for validators, paving the way for a more robust, efficient, and secure blockchain ecosystem. As we delve deeper into EigenLayer’s mechanics, its impact on Ethereum’s security model, and the broader implications for the blockchain world, we uncover the true potential of this innovative protocol in reshaping the future of decentralized technology.
Operators play a pivotal role in the EigenLayer protocol. They are the entities—individuals or organizations—that actively participate in the network by running software containers of various services. These operators are not confined to a singular role; they can simultaneously act as both operators and restakers. This dual capacity is instrumental in EigenLayer's flexibility, allowing a broader range of participation and engagement within the ecosystem. What makes the operator model particularly interesting is the absence of a minimum restaking requirement. This inclusivity encourages a diverse range of participants, from small individual restakers to large institutional operators, fostering a rich and more varied network ecosystem.
Operators have the option to either self-delegate by using their own restaked tokens or to accept delegations from other restakers. This feature introduces a dynamic interplay between trust, reward potential, and service preferences. For instance, restakers choose operators based on their reliability and the rewards they offer, as well as their alignment with specific services. This creates a competitive environment where operators are incentivized to maintain high standards of operation and transparency to attract and retain delegations.
AVSs are specialized services within the EigenLayer ecosystem requiring their own distinct validation mechanisms. These can range from sidechains and oracle networks to data availability layers and new virtual machines. AVSs represent a broad spectrum of blockchain functionalities, each with unique security and operational requirements. EigenLayer's architecture allows these services to leverage the pooled security of Ethereum's stakers, essentially broadening the application and utility of staked ETH beyond the traditional confines of the Ethereum blockchain.
This integration of AVSs is a significant advancement in blockchain technology. It addresses a fundamental challenge in the blockchain space: the fragmentation of security. By enabling AVSs to tap into Ethereum’s existing security pool, EigenLayer not only enhances the security of these services but also streamlines their operational efficiency. This reduces the burden on individual AVSs to establish and maintain their own trust networks, thereby lowering barriers to entry and fostering innovation within the ecosystem.
Rollups play a synergistic role in the EigenLayer ecosystem. They work by executing transactions outside the main Ethereum chain but posting transaction data on-chain. This mechanism significantly enhances transaction throughput while maintaining the security guarantees of the Ethereum mainnet. When integrated with EigenLayer, rollups can benefit from the additional security layer provided by restaked ETH. This integration is particularly important for rollups that require high levels of trust and security, such as those handling large volumes of transactions or those that are critical to the functioning of large-scale dApps.
The interaction between rollups and EigenLayer is a prime example of how layered security and functionality can enhance the overall robustness of the Ethereum network. Rollups, in leveraging the pooled security offered by EigenLayer, can operate with heightened security assurances. This not only benefits the users of these rollups but also contributes to the overall security posture of the Ethereum ecosystem.
By enabling a more efficient and secure use of staked assets, EigenLayer paves the way for a more scalable, robust, and versatile blockchain ecosystem. This synergy among different components underlines EigenLayer's potential to revolutionize how blockchain networks operate and secure a wide array of decentralized services.
Utility of Restaked ETH
Restaked ETH refers to the process where users who have already staked their ETH in the Ethereum network can opt-in to restake this ETH through EigenLayer smart contracts. This mechanism allows the staked ETH, which is originally locked for securing the Ethereum blockchain, to be repurposed or 'rehypothecated' for securing additional services and applications built on Ethereum. By opting to restake, users essentially grant EigenLayer additional enforcement rights over their staked ETH, enabling it to be utilized for extending crypto economic security to a variety of Actively Validated Services (AVSs) and other applications. This innovative approach not only enhances the security of these applications but also allows stakers to earn additional rewards, thereby creating a compelling incentive to participate in the restaking process.
The introduction of restaked ETH addresses a fundamental challenge in the current blockchain security model: the fragmentation of trust and security networks.
Traditionally, each new service or application built on Ethereum has to establish its own security mechanism, leading to scattered and isolated security pools. This fragmentation is inefficient and increases the overall vulnerability of the ecosystem. Restaked ETH, by allowing the reuse of staked assets, creates a pooled security system. This system consolidates security resources, thereby enhancing the robustness of the entire network. It also reduces the burden on individual services to maintain their own security infrastructures, promoting innovation and growth within the Ethereum ecosystem.
Restaked ETH has a pivotal role in the existing liquid staking ecosystem.
Liquid staking allows users to stake their ETH and receive a liquid staking token in return, representing their staked ETH and the accruing rewards. These LSTs can be traded, used in DeFi protocols, or redeemed for the underlying ETH. EigenLayer's model integrates seamlessly with liquid staking by enabling the restaking of these LSTs. This integration provides a dual benefit: it maintains the liquidity of staked assets while also contributing to the pooled security of the Ethereum network. By participating in EigenLayer, holders of LSTs can now contribute to securing a broader range of services while continuing to benefit from the liquidity and utility that liquid staking tokens offer.
The implementation of restaked ETH through EigenLayer is poised to bring transformative changes to Ethereum's security and economic model. It offers a more capital-efficient way of leveraging staked assets, which traditionally have been locked in a singular function. This efficiency not only benefits stakers through additional reward streams but also strengthens the security of the entire network. By aggregating security resources and minimizing the need for individual services to establish standalone security mechanisms, restaked ETH fosters a more unified and resilient Ethereum ecosystem. Furthermore, the potential increase in the number of secured services and applications can lead to greater innovation and growth within the Ethereum blockchain, making it a more attractive platform for developers and users alike.
Intro to EigenDA
EigenDA, developed by EigenLabs, is set to be a transformative addition to the Ethereum ecosystem, acting as the first actively validated service (AVS) on EigenLayer. This decentralized data availability (DA) service is designed to leverage the restaking primitive of EigenLayer, enhancing the security and efficiency of Ethereum's network. The integration of EigenDA brings forth several notable advancements and strategic considerations for the blockchain environment.
EigenDA aims to revolutionize the data availability aspect for Ethereum, particularly benefiting rollups. It is structured to provide a secure, high-throughput DA solution that is not only cost-effective but also scales horizontally with the amount of restaked ETH and participating operators. This scalability is crucial, as it ensures that the security and throughput of EigenDA can grow alongside the expanding EigenLayer ecosystem. By enabling restakers to delegate stake to node operators for validation tasks, EigenDA creates a symbiotic relationship where both parties benefit - operators receive service payments, and restakers gain additional utility from their staked ETH.
The integration of rollups with EigenDA is particularly strategic. Rollups, designed to enhance transaction throughput on Ethereum, can utilize EigenDA to achieve even lower transaction costs and higher processing speeds. This synergy significantly benefits the Ethereum network, leading to more efficient scaling solutions. Furthermore, the use of EigenDA by rollups can foster secure composability across the EigenLayer ecosystem, providing a robust infrastructure for a wide range of applications, including gaming, social networks, and video streaming.
A key aspect of EigenDA is its contribution to maintaining decentralization within shared security systems like EigenLayer. By distributing the workload across numerous nodes and ensuring that each operator handles only a fraction of the total data, EigenDA effectively avoids the risk of centralization. This design not only preserves the decentralized ethos of blockchain technology but also makes the operation of EigenDA nodes more manageable and cost-effective, enhancing the overall efficiency of the system.
EigenDA exemplifies the concept of programmable trust within the Ethereum ecosystem. It demonstrates the ability of Ethereum stakers and validators to support critical infrastructure beyond just the Ethereum consensus. This advancement opens doors for new business and token models based on the modularity of Ethereum's trust network. The adoption of EigenDA by various rollups and services – including Celo, Mantle, Fluent, Offshore, and Layer N – underscores its potential as a foundational component in the evolving Ethereum landscape.
From a technical standpoint, EigenDA's architecture is meticulously designed to balance economics, throughput, security, and customizability. Its operational model includes a disperser responsible for erasure encoding data blobs and operators that verify and persist data. This architecture addresses the challenges of high operational costs and network congestion typically faced in blockchain systems. By optimizing the cost structure and enabling rollups to pay in native tokens, EigenDA provides an economically viable and predictable DA solution.
Security in EigenDA is twofold: it inherits economic security from EigenLayer and enhances it with features like Proof of Custody and Dual Quorum. These features collectively ensure data integrity and resist censorship, crucial for maintaining trust in the system. Moreover, EigenDA's customizability allows rollup developers to tailor various parameters, offering flexibility to adapt to different needs and scenarios within the Ethereum network.
Exploring the ecosystem of operators and AVSs
Espresso:
The recent announcement of a collaboration between Espresso Systems and EigenLayer marks a major advancement in the realm of blockchain technology, particularly for the Ethereum ecosystem. This partnership aims to integrate restaking on the Espresso Sequencer network, a move that holds great promise for the future of decentralized finance and blockchain scalability.
By enabling restaking on the Espresso Sequencer, the network aligns more closely with Ethereum, fostering strong economic security through EigenLayer’s pooled security model. This integration is not just a technical feat but also a strategic alignment, ensuring that the Espresso Sequencer's architecture perfectly balances decentralization, security, and incentive alignment. The introduction of restaking on future Espresso Sequencer testnets and its eventual transition to the mainnet signify a crucial step toward enhancing the network’s robustness and efficiency.
The Espresso Sequencer, designed to support decentralized, scalable, and interoperable rollups, stands to gain significantly from the restaking capabilities of EigenLayer. Restaking allows Espresso Sequencer nodes to leverage Ethereum's staked capital base and decentralized validator set, optimizing node usage and enhancing capital efficiency.
This approach is particularly compatible with HotShot, the underlying consensus protocol of the Espresso Sequencer, which is scalable to thousands of nodes. The integration of restaking addresses the challenges of launching a decentralized proof-of-stake consensus protocol, such as acquiring a large sum of capital and a sufficient number of network participants. By allowing nodes to restake Ether, the Espresso Sequencer can tap into Ethereum’s high level of security and decentralization, thus fortifying its own network.
A key aspect of this collaboration is the alignment of incentives between Layer 1 (L1) validators and the Layer 2 (L2) ecosystems they support. In centralized sequencers, the rollup value, such as fees and MEV (Miner Extractable Value), is predominantly captured by the sequencer. This can lead to security concerns for the rollup, as L1 validators might be tempted to act dishonestly for greater profits. Decentralizing the sequencer and enabling L1 validators to participate in its operation mitigates this risk, fostering a more secure and stable environment for rollups. The Espresso Sequencer, through its collaboration with EigenLayer, intends to explore various design choices to effectively implement restaking, promising to keep the community updated on their progress.
The partnership between Espresso Systems and EigenLayer is a testament to the evolving landscape of Ethereum and blockchain technology. EigenLayer, with its innovative approach to restaking, and Espresso Systems, the developers behind the Espresso Sequencer, are pioneering new ways to enhance the scalability, security, and efficiency of decentralized networks. This collaboration not only benefits the individual entities but also contributes significantly to the broader blockchain ecosystem, promising exciting developments in the near future.
In conclusion, the integration of restaking into the Espresso Sequencer network, facilitated by the collaboration with EigenLayer, marks a transformative phase in blockchain technology. It paves the way for more secure, decentralized, and efficient blockchain networks, capable of supporting a wide range of applications and services in the Ethereum ecosystem and beyond.
Near:
The NEAR Foundation has made strides in blockchain technology with the introduction of the NEAR Data Availability (NEAR DA) layer, a part of the NEAR Open Web Stack. This innovative layer is designed to provide Ethereum rollups and developers with a robust, cost-effective solution for data availability. With NEAR DA, the cost of storing data is dramatically reduced — a striking difference highlighted by the comparison that 100kB of calldata costs only $0.0033 on NEAR, as opposed to $26.22 on Ethereum L1, making it about 8000 times cheaper.
NEAR DA's launch is accompanied by a notable roster of first users, including prominent projects like Madara by StarkNet, Caldera, Fluent, Vistara, Dymension RollApps, and Movement Labs. This development is not just a leap forward for NEAR but also represents a significant contribution to the Ethereum ecosystem, enhancing the affordability and reliability of rollup operations while maintaining Ethereum's security standards. Illia Polosukhin, co-founder of NEAR Protocol and CEO of NEAR Foundation, emphasizes the importance of this integration, noting NEAR’s robust track record and reliability, which is crucial for secure data availability.
Expanding on the Open Web Stack, NEAR DA is a testament to NEAR’s commitment to fostering modular blockchain development. It allows Web3 developers and founders to continue building on Ethereum while utilizing NEAR’s advanced technology for certain aspects of their projects.
This expansion enhances NEAR’s Open Web Stack, which serves as a gateway for developers and users to build, explore, and engage with Web3 products and platforms effortlessly. With offerings like FastAuth for seamless onboarding and a vast library for creating decentralized frontends, NEAR is setting a new standard in the blockchain landscape. For Ethereum rollup developers seeking to leverage NEAR DA, starting the process is straightforward and promises large reductions across operational costs, easy validation of proofs, and simple interaction protocols.
Layer N:
The launch of EigenDA on the testnet marks a pivotal moment in the Ethereum ecosystem, particularly with the introduction of the EigenDA Launch Partner Program. Among the first to join this program are eight notable rollup infrastructure providers, including AltLayer, Caldera, Celo, Layer N, Mantle, Movement, Polymer Labs, and Versatus. These partners are at the forefront of deploying EigenDA as a data availability option, showcasing its potential to revolutionize Ethereum's scalability and performance.
A prime example of this innovation is Layer N's Nord, a specialized exchange rollup designed for high-performance finance applications. Nord differentiates itself by delivering an exceptional processing capability of up to 100,000 requests per second with sub-millisecond latency. This is achieved through its hyper-efficient Rust orderbook execution environment, enabling it to support complex financial instruments while maintaining full composability with EVM smart contract layers. The integration of Nord with EigenDA is particularly noteworthy, as it addresses the critical limitations of existing decentralized exchange (DEX) infrastructures, such as slow transactions and high operational costs. Nord, combined with the capabilities of EigenDA, offers a solution that rivals, and potentially surpasses, the performance of centralized exchanges, bringing additional benefits like permissionlessness and customizability.
EigenDA, developed by EigenLabs, is a high throughput and decentralized data availability service that uses the restaking primitive of EigenLayer. This service is critical in Ethereum's scaling roadmap, building upon foundational ideas like Danksharding to establish a new standard for high throughput and low-cost data availability. The significance of EigenDA extends beyond just technical prowess; it enables the growth of diverse on-chain applications, from gaming to social networks, by providing a scalable and cost-effective data availability solution.
The collaboration between Layer N's Nord and EigenDA exemplifies the technical and practical value that such integrations can bring. EigenDA’s integration of multi-quorum and dual staking models enhances network security and reliability. It also offers essential performance metrics like low latency and high throughput, critical for DEXs and other applications requiring seamless user experiences. Furthermore, EigenDA's support for horizontal scaling ensures that the ecosystem can handle increased amounts of transaction and user growth without sacrificing performance. This scalability is crucial for Nord, as it allows the platform to offer predictable and stable transaction costs, drastically improving the accessibility and user-friendliness of decentralized financial services in the process.
In summary, the partnership between Layer N and EigenDA underlines the transformative potential of EigenDA's hyperscale data availability layer in scaling Ethereum applications. It showcases how innovative infrastructure, like Nord, can leverage EigenDA to overcome traditional limitations and open up new possibilities for decentralized finance. This collaboration is a testament to the evolving landscape of Ethereum, where scalability, efficiency, and user experience are continuously enhanced through cutting-edge technological integrations.
What opportunities are enabled by Eigenlayer?
As we conclude our exploration of EigenLayer, it becomes clear that this innovative protocol is more than just a technological advancement; it's a paradigm shift in how we approach the development and security of decentralized systems. EigenLayer empowers builders to create a diverse range of actively validated services (AVSs) without the burden of constructing underlying trust networks. These services can be broadly categorized into Rollup Services, Applied Cryptography, General Decentralized Networks, MEV Management, and AI Inference, each leveraging different aspects of trust inherited from Ethereum through EigenLayer.
Rollup Services represent a foundational category in EigenLayer's ecosystem. They aim to augment the Ethereum rollup ecosystem by inheriting aspects of Ethereum's trust network. This includes services like decentralized sequencing, data availability, fast finality, keepers, watchers, and reorg-resistance. Each of these services addresses specific challenges within the rollup ecosystem, such as transaction ordering, data integrity, and swift finality. By leveraging EigenLayer, Rollup Services can offer enhanced security and efficiency, thus strengthening the overall Ethereum network.
EigenLayer's impact extends into the realm of applied cryptography, where it can facilitate robust threshold cryptographic systems and trusted execution environment (TEE) committees. These systems can efficiently manage encrypted messages, ensuring both privacy and security. This aspect of EigenLayer is particularly crucial for applications requiring high levels of confidentiality and integrity in data processing and storage.
General Decentralized Networks built on EigenLayer can range from prover markets to security monitoring councils. This diversity allows for the rapid bootstrapping of various decentralized networks, each tailored to specific needs within the blockchain ecosystem. EigenLayer's ability to provide a decentralized trust foundation is instrumental in enabling these networks to function securely and efficiently.
MEV Management is another crucial area where EigenLayer can make a major impact. It allows proposers to make additional credible commitments on block inclusion and ordering, thereby addressing some of the current challenges in the miner extractable value (MEV) landscape. This shift could lead to a more equitable and transparent blockchain environment, mitigating some of the exploitative practices currently prevalent.
The integration of AI Inference within EigenLayer’s framework opens up new possibilities for on-chain AI applications. From ensuring program integrity to maintaining session privacy in AI operations, EigenLayer's infrastructure can support complex AI tasks in a decentralized and secure manner. This convergence of blockchain and AI technologies could lead to innovative applications that were previously not feasible.
EigenLayer's true strength lies in its ability to offer programmable trust. This concept allows for the customization of trust according to the needs of various AVSs, whether it's economic trust, decentralized trust, or Ethereum inclusion trust. This flexibility empowers developers to design and implement AVSs that are not only secure and efficient but also tailored to the unique requirements of different blockchain applications.
It's evident that the possibilities with EigenLayer are vast and largely untapped. The protocol serves as a versatile toolkit for crafting new protocols and services by programming trust in various forms. The outlined use cases represent just the beginning of what can be achieved with EigenLayer. The platform invites innovators and builders to join in this journey of exploration and creation, to conceive and develop the next wave of groundbreaking applications in the blockchain space.
EigenLayer is not just a technological innovation; it's a catalyst for a new era of blockchain development. By providing a strong foundation for programmable trust, EigenLayer paves the way for a more secure, efficient, and diverse blockchain ecosystem. Its impact is set to extend far beyond the current applications, inspiring a new generation of developers to reimagine what’s possible in the world of decentralized systems.
Disclaimer: This research report is exactly that — a research report. It is not intended to serve as financial advice, nor should you blindly assume that any of the information is accurate without confirming through your own research. Bitcoin, cryptocurrencies, and other digital assets are incredibly risky and nothing in this report should be considered an endorsement to buy or sell any asset. Never invest more than you are willing to lose and understand the risk that you are taking. Do your own research. All information in this report is for educational purposes only and should not be the basis for any investment decisions that you make.
