What is EigenLayer and how does re-staking work?

EigenLayer is a protocol that aims to utilize staked Ethereum. Ethereum ETH

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Validators secure third-party protocols through a process called re-staking. It is designed to provide secure services built on top of the framework, and nodes are expected to receive payment for their services.

EigenLayer seeks to leverage the economic security provided by Ethereum’s roughly $380 billion market capitalization.

Economic security is the value of the financial resources required to take down a network. For example, to compromise the Ethereum network, the largest proof-of-stake chain, an attacker would need to control at least half of the stake value (more than $190 billion), making the attack economically unrealistic.

EigenLayer therefore plans to adopt a “shared security” system, a mechanism that allows protocols to participate in the network by leveraging a common pool of Ethereum stakes.

Protocols such as Lido (stETH), Rocket Pool (rETH), and Coinbase (cbETH) accept both native Ether deposits and liquid staked Ether directly from Ethereum validators.

Actively verified service

EigenLayer allows new proof-of-stake projects to quickly establish security by connecting to a broader trust network, thus avoiding homegrown challenges.

EigenLayer began accepting deposits in 2023 and has amassed over $15 billion in capital to secure a variety of protocols. These actively validated services range from consensus protocols to oracle networks and data availability platforms.

EigenLayer’s own data availability solution, EigenDA, is the first AVS, with six other solutions launched in April 2024, including AltLayer, Brevis, Eoracle, Lagrange, WitnessChain, and Xterio. These services provide a variety of functions to meet various needs within the Ethereum ecosystem.

What is Liquid Restaking?

Liquid re-staking allows holders to indirectly participate in EigenLayer transactions and use staked Ether for other DeFi activities.

Protocols such as EtherFi, Renzo, and Kelp offer liquid re-staking services where users deposit ether or liquid staking tokens and then stake them back to EigenLayer. In return, users receive Liquidity Receipt Tokens (LRT), which can be exchanged back to ETH at any time while maintaining liquidity.

The liquid re-staking protocol contributes over $10 billion of EigenLayer’s total locked value.

own token

The Eigen Foundation, an independent non-profit organization, plans to launch the Eigen token at the end of April 2024 with a total supply of 1.67 billion tokens. This introduces a flexible economic model where incentives can potentially be subject to inflation.

The initial token distribution includes 45% for community and ecosystem initiatives, 29.5% for investors, and 25.5% for early contributors, and includes a three-year lock-up period associated with a phased release schedule. A total of 15% of tokens are earmarked for airdrops, with 5% in the initial season targeting restakers.

subjective fork

The launch of the Eigen token also introduced intersubjective forks, a cryptocurrency economic feature that complements Ethereum re-staking. This feature allows you to make cuts based on misbehavior that cannot be objectively identified, such as withholding data.

Forks are designed to occur infrequently, requiring challengers to burn a significant number of Eigen tokens to get started. Users then decide on the correct fork, reflecting Ethereum’s social consensus process.

The subjective fork aims to avoid complicating the role of Ethereum validators, a concern highlighted by Ethereum co-founder Vitalik Buterin when discussing the risks of re-staking.

Disclaimer: This article was written with the help of OpenAI’s ChatGPT 3.5/4 and has been reviewed and edited by our editorial team.

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