EigenLayer
EigenLayer, a protocol on the Ethereum blockchain, introduces the concept of restaking, a new element in crypto-economic security. This functionality allows users who stake ETH directly or through a liquid staking token (LST) to engage with EigenLayer smart contracts voluntarily. By opting in, users can restake their ETH or LST, extending crypto-economic security to additional applications on the network and earning supplementary rewards. [1][2][3]
Overview
EigenLayer was founded in July 2021 by Sreeram Kannan[4]. The platform provides a functionality where Ethereum stakers can enhance security for multiple services by opting to restake their ETH and participating in various services simultaneously, leading to pooled security via restaking. [1][5]
The reuse of ETH in securing different services reduces the capital costs for stakers and significantly improves trust guarantees for individual services. In the process of developing a new decentralized service on Ethereum, EigenLayer addresses the common challenge of establishing a new trust network for security, allowing any service, regardless of its composition (e.g., EVM-compatibility), to access the pooled security provided by Ethereum's stakers. This approach encourages an environment conducive to permissionless innovation and free-market governance. [1]
EigenLayer launched its Stage 1 mainnet on June 14, 2023. The Stage 1 Mainnet is built on the Ethereum mainnet and was a guarded launch with restaking limits. [11]
Funding
EigenLayer raised $14.5M in a seed round of funding in August 2022. The funding round was led by Polychain Capital and Ξthereal Ventures. [7][9]
On March 8, 2023, EigenLayer announced it had raised $50 million in a Series A round led by Blockchain Capital. Other firms in the round include Electric Capital, Polychain Capital, Hack VC, Finality Capital Partners, Coinbase Ventures, etc. [7][8]
"We are thrilled to work with such a stellar group of investors and individuals, led by Blockchain Capital. We could not have asked for a better group of supporters to help us carry out our mission.
The mission of EigenLabs is to build protocols and infrastructure that increase open innovation. One of the central bottlenecks to innovation today's crypto ecosystem is the requirement for projects to bootstrap trust, or cryptoeconomic security" - founder Sreeram Kannan commented [10]
On February 22, 2024, Eigen Labs, the developer behind EigenLayer, raised $100 million from venture capital investor a16z crypto. [13]
"We are thrilled to be partners with this incredible community of developers in the EigenLayer ecosystem. They are eager to experiment and build on Ethereum without the security and decentralization barriers that have gated them in the past. We are all here in the shared interest of maximizing open innovation for the benefit of the future of crypto. To further empower this mission we are excited to announce that Eigen Labs, the core development team contributing to EigenLayer and EigenDA, has raised $100 million from a16z crypto." - the team announced [14]
Technology
Pooled security via restaking
EigenLayer introduces a streamlined approach to pooled security known as "restaking." This involves Ethereum validators linking their beacon chain withdrawal credentials to EigenLayer smart contracts, opting into various modules on the EigenLayer platform. [6]
Validators run additional node software for these modules, allowing them to impose slashing conditions on staked ETH. In return, validators earn extra revenue for providing security to these modules. [6]
This restaking mechanism facilitates a robust transfer of cryptoeconomic security, extending beyond traditional smart contract-based DApps to include virtual machines, consensus protocols, and middleware. EigenLayer broadens the scope of open innovation by securing any AVS with an on-chain slashing contract. [6]
Open marketplace
EigenLayer establishes an open marketplace to regulate the supply of pooled security by validators and its consumption by AVSs. In this marketplace, validators can decide whether to participate in each module on EigenLayer. [6]
To attract restaked ETH, modules must offer adequate incentives to validators, who play a key role in determining the allocation of pooled security based on potential slashing risks. EigenLayer's opt-in dynamics bring two significant advantages: (1) it complements the stable governance of the core blockchain with a dynamic, efficient free-market governance structure for launching new auxiliary capabilities, and (2) the opt-in validation allows new blockchain modules to leverage diverse resources among validators, leading to well-balanced trade-offs between security and performance. [6]
Team
- Sreeram Kannan - CEO
- Robert Raynor - Engineering
- Soubhik Deb - Engineering
- Vyas Krishnan - Product
- Chris Dury - COO
- Calvin Liu - CSO
- Sid Sanyal - VP of Engineering
- Brianna Montgomery - Strategy
- Wes Floyd - Solutions Architect
- Tina Haibodi - Product
Introducing New LSTs
On January 24, 2023, EigenLayer announced the addition of restaking support for three new Liquid Staking Tokens (LSTs): Frax Ether (sfrxETH) - a decentralized staking derivative from the Frax Finance ecosystem, Mantle Staked Ether (mETH) - the receipt token for Mantle LSP, and Liquid Staked Ether (LsETH) - a part of Liquid Collective's decentralized staking protocol. In line with this, EigenLayer also reopened for restaking at the existing cap of 200k ETH for each LST. [12]
Airdrop Controversy
On April 29, 2024, Eigenlayer announced[16] plans to launch EIGEN and distribute 5% of the total supply to the community. The airdropped EIGEN was meant to reward early adopters participating in restaking activities. However, the initial rollout fell short of many users’ expectations, triggering widespread criticism. [15]
Community members complained that the 5% set aside for early adopters is insufficient. To address this, the EigenLayer Foundation added 28 million more EIGEN to the airdrop pool while advising stakers to distribute their EIGEN stakes evenly among operators to maintain a decentralized network balance. This strategy aims to preserve a balanced power dynamic within the network. [15][17][19]
Another complaint was the airdropping excluded restakers from 30 countries, including the United States, China, Russia, and Canada. Despite community dissatisfaction, in a podcast, Robert Drost, executive director at Eigen Foundation, emphasized the importance of complying with regulation.
“This is about adhering to regulatory frameworks while trying to innovate responsibly,” Robert Drost said. [17]
However, the Eigen Foundation – the developer entity behind EigenLayer – released a note on May 3, 2024, announcing an additional 100 EIGEN tokens to all the stakers. It also clarified that the locking unlocking period for teams and investors is one year after community-allocated tokens become transferable. The airdrop kicked off on May 10, 2024. [18]
EIGEN Token
The EIGEN token is a universal intersubjective work token. A work token is one that can be staked to perform some work within a blockchain platform. This work could be an execution task or validation task. [20]
The four key features in EIGEN staking include universality, isolation, metering, and compensation. [21]
Universality
The setup phase of EIGEN stipulates that EIGEN can be universally used for resolving any intersubjectively attributable fault, not just one specific fault. Any AVS that wants to use the cryptoeconomic benefits of EIGEN must encode the rules of coordination that they have agreed on in their respective setup phase.
These AVS-specific rules, such as slashing conditions, are akin to amendments to EIGEN. Furthermore, these slashing conditions of the AVSs must ensure that any intersubjectively attributable fault is self-verifiable beyond a reasonable doubt. [20]
Isolation
The second core feature of EIGEN is isolation. To appreciate this feature, consider an alternate design where any fork in the token would require DeFi markets to be aware of the fork, and the token is no longer usable for going into long-term DeFi positions. To avoid this undesirable externality on DeFi, EIGEN has a two-token model. The first token, bEIGEN, is used for staking and can be subjected to forking. As for the other token, EIGEN, our design offers the benefit of remaining unaware of forks in bEIGEN to any holder of EIGEN who is using it for DeFi or any non-staking applications. [20]
Metering
Resolving any intersubjective fault incurs a cost to social consensus for switching from one token to another, or rejecting a malicious fork. Therefore, any claim to fork the token should require depositing a bond in bEIGEN to deter malicious challenges. This bond needs to be higher than the cost incurred by the social consensus (users and AVSs) to consider and reject a malicious fork.
Additionally, any successful challenge results in a significant cost to the broader ecosystem in the form of contract upgrades for incorporating the new fork in daily operations. A challenge, therefore, should only be raised if a sufficient amount of staked EIGEN can be considered malicious and burnt, resulting in a lower token supply for the remaining EIGEN. [20]
Compensation
The protocol for intersubjective staking ensures that if an AVS is attacked due to a malicious quorum of EIGEN stakers, that AVS is able to slash and redistribute the malicious stake back to the AVS users. If the AVS ensures that this “attributable security” is greater than the harm done to its users, then it achieves “strong cryptoeconomic security,” which specifies that no honest user suffers any harm.
Strong cryptoeconomic security is a user-centric characterization and does not need to make any assumptions on the adversary or even the other users’ incentive structure. For example, when there are multiple AVSs, as long as a given AVS ensures that it has enough attributable security, this particular AVS is protected even if the system is, in sum total, not secure because other AVSs do not have enough security. Furthermore, using EIGEN for resolving intersubjectively attributable fault ensures that Ethereum’s social consensus is not overloaded. [20]
