6 min read
Eigenlayer: Restaking Your Ethereum
EigenLayer is a protocol built on Ethereum that introduces "restaking", a new way for users to re-use their staked ETH to extend security to additional applications on the Ethereum. It allows for the rehypothecation of ETH on the consensus layer and the aggregation of security through restaking.
Eigenlayer is a protocol built on Ethereum that aims to allow staked ETH to be reused to secure other services besides the Ethereum network's consensus mechanism. The key concept behind Eigenlayer is the introduction of a new primitive called “restaking,” which enables the rehypothecation of ETH on the consensus layer. This means that users who stake ETH can opt-in to Eigenlayer smart contracts to re-stake their ETH and extend security to additional applications on the network. By doing so, Eigenlayer's potential lies in its ability to aggregate and advance security through restaking and validating new applications built on Ethereum.
To understand Eigenlayer, it's essential to comprehend Ethereum staking and how it works. In a proof-of-stake (PoS) blockchain, a consensus mechanism is used to agree on the ledger's state. The core piece of infrastructure on these networks is called a validator. People who want to participate in the consensus by batching transactions into new blocks and checking the work of other validators can do so by staking their Ethereum with a validator in exchange for rewards. The more ETH that is staked, the more secure the network becomes.
On the other hand, if a validator breaks the rules of the protocol, the ETH on that node can be slashed, which means they lose their staked ETH. This creates a balance of incentives, with rewards for good behavior and penalties for bad behavior. This differs from proof-of-work (PoW), where the investment in the chain is represented by physical hardware, and there's no equivalent for “slashing” a malicious party's hardware investment.
EigenLayer breaks it down into three distinct aspects:
- Economic Trust
- Decentralized Trust
- Ethereum Validator Commits
EigenLayer's restaking feature enables the reuse of economic security without incurring additional costs to the staker. This level of economic trust is secured via slashing enforcement, which is a mechanism that penalizes validators who violate the protocol rules. Slashing may seem reminiscent of fraud proofs in the way network security is enforced, but the key difference is the result in latency. For instance, a light client bridge's input on EigenLayer would act without any latency, given enough amount is staked. The input claim would initially be assumed correct and be subject to slashing if violations are discovered. A low latency bridge enabled by EigenLayer is critical to the multichain future many foresee.
Decentralized trust is critical to ensuring collusion of nodes does not occur. In EigenLayer, decentralized trust is inherited from a subset of validators, creating a decentralized set of stakers on EigenLayer. In addition, services on EigenLayer can further restrict conditions by enabling a personal oracle only to allow maximally decentralized nodes.
Eigen Data Availability (EigenDA) is one of the services that can be created by combining economic and decentralized trust. EigenDA uses a dual quorum model, where one quorum is run by a subset of Ethereum stakers and the other by Liquid stakers. This model combines slashing with the idea that collaboration amongst nodes should not exist. EigenDA has a clear advantage over other data availability chains like Celestia by employing existing ETH validators and stakes. EigenDA is not a consensus layer; hence, it will be less expensive and have greater throughput than Celestia. By outsourcing consensus, EigenDA's use cases are specialized to rollup attestations, allowing for decentralized rollup sequencers.
Data availability is a crucial aspect of blockchain technology, as it ensures that data is made available for nodes to verify the validity of a proposed block. This process checks the power of block producers and is typically carried out by normal people with low requirements, resulting in a highly decentralized verification process. EigenDA uses erasure coding and polynomial commitments to spread out and verify data. EigenDA is unique in that it cleanly splits the data availability function, unlike other solutions such as Celestia, which combines the consensus and data availability layers.
Splitting out the data availability (DA) layer has several benefits. The first and most obvious is that the DA layer is built on Ethereum, which aligns the incentives of layer twos that wish to take advantage of it. Using EigenDA means that any fees for the service circulate back to Ethereum stakers, and since DA utilization is directly proportional to the number of transactions, this is where most fees are generated. By decoupling the DA function from consensus, there is no longer a resolution period for ordering events, allowing data to be made available in parallel. This leads to increased scalability and reduced latency, as DA guarantees can be provided outside of the slower Ethereum L1.
When allocating dedicated funds to EigenLayer, you also give control of your staked ETH to EigenLayer, which can raise security concerns over the validator. The EigenLayer protocol enables users to re-stake their ETH and extend security to additional applications on the network. However, this also means there is a risk of your staked ETH being slashed if there's any misbehaving.
An application could steal your stake if the smart contract has a security flaw. When EigenLayer communicates with the middleware to secure bridges and oracles, there is a chance your ETH could be slashed if there's any misbehaving. Additionally, there could be a delay in slashing.
This means that the role of validators in performing due diligence is paramount for the success of EigenLayer. Otherwise, when large numbers of ETH validators run an application, it could seriously impact Ethereum, leading to a considerable percentage of the ETH supply being lost. Therefore, users must do their research and due diligence on the validators and applications they choose to stake their ETH on the EigenLayer protocol.
In the cryptocurrency world, block space is considered one of the most valuable commodities. The value of block space is determined by its proximity to the block limit. As a result, stakers with more resources may choose to invest their capital in other ecosystems, creating a significant opportunity cost for the Ethereum network. This imbalance in resources within Ethereum is referred to as staker heterogeneity.
EigenLayer is a project that aims to address this issue of staker heterogeneity by leveraging the concept of restaking. Furthermore, by allowing for projects such as rollups to have significant performance boosts, EigenLayer has the potential to revolutionize the Ethereum network.
In addition to addressing staker heterogeneity, EigenLayer also has the potential to enable a more efficient form of governance for the Ethereum protocol. Traditional protocols often have to trade between agility and democracy when designing a governance model. EigenLayer addresses this challenge by creating a decentralized and democratically governed layer on Ethereum. This layer, known as EigenLayer, serves as an open market for stakers to compete for providing services such as restaking.
Eigenlayer is a new project that allows developers to innovate below the application layer while utilizing the Ethereum trust network. The founder, Sreeram, has appeared on podcasts and given conference presentations, but the project has yet to launch. The potential for Eigenlayer is to open up new possibilities for interacting with blockchains by providing a shared trust network, leading to the emergence of new dapps with a low cost of capital for existing stakers. The deployment of valuable services on Eigenlayer would increase the value of Ethereum, which would be used as a revenue-generating asset to support these services. Eth in the Ethereum consensus process is just the first use case for Eigenlayer.
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