What on earth is EigenLayer? In-depth analysis in a ten-thousand-word article.

What Exactly is EigenLayer? A Comprehensive Analysis in a 10,000-Word Article.

Author: 0x00pluto Source: X (originally Twitter) @0x00pluto

In recent years, I have been deeply involved in the web3 field, so I conducted a research series on web3 projects called “WeMemo” under WeDAO. I hope to conduct in-depth research on projects and gain insights and inspiration from them.

While researching the LSD track, I couldn’t help but learn about the EigenLayer project. After studying this project, I found it very interesting. The way the experts think really impresses me.

Question: What exactly is EigenLayer?

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During the process of digging deeper, I found a lot of articles and resources online (I especially want to thank the authors of these articles). So, I organized these materials according to their structure.

On one hand, I hope it is useful for everyone, and on the other hand, it serves as a summary to enhance learning effectiveness.

Let me try to explain briefly what EigenLayer is.

Based on my understanding, let’s take an example~

First, let’s talk about ETH mainnet LSD staking.

Imagine in the real world we have courier companies that are responsible for delivering goods. How can we assure the sender? The courier company needs to stake (staking) a certain amount of money (ETH) as collateral (trust) for compensation in case of misconduct. The stakeholder (person providing collateral) could be the courier company or an individual… By paying the collateral, they receive a collateral receipt (stETH), which allows them to earn profits (LSD) from the courier company’s business.

Now, let’s talk about restaking.

Now, in the real world, we need some weather forecasting agencies to predict future weather. Weather can impact the income of the courier industry. So, obviously, anyone who wants to join the weather forecasting organization needs trust endorsement. There are currently two ways to achieve that, either by staking (staking) a certain amount of money (ETH) for the new business directly, or by restaking the collateral receipts (stETH) from the courier industry as a guarantee in the weather industry to obtain a new collateral receipt (re-stETH). Similarly, these re-staked collateral receipts (re-stETH) can also earn corresponding profits from the weather forecasting industry.

0. Project Overview

EigenLayer is an Ethereum-based middleware protocol that introduces the concept of restaking. It allows Ethereum nodes to restake their staked ETH or LSD tokens into other protocols or services that require security and trust, thereby gaining double profits and governance rights. It also enables the transfer of Ethereum consensus layer utility to various middleware, data availability layers, side chains, and other protocols, allowing them to enjoy Ethereum-level security at a lower cost.

With the help of EigenLayer, Ethereum stakers can restake their already staked ETH and choose from numerous services to provide collective security, helping to protect the security of multiple services. This not only reduces the financial cost for stakers to participate but also significantly increases the trust guarantee for individual services.

EigenLayer aims to address the fragmented security issues of decentralized applications built on Ethereum. It allows any service, regardless of its composition, to leverage the collective security provided by Ethereum stakeholders, creating an environment for permissionless innovation and decentralized market governance.

1. Key Research Points

1.1. Core Investment Logic

Team

EigenLayer has a blockchain team that focuses on technological innovation, with more than 30 members, over 80% of whom are engineers. The team, although young, has rich blockchain technology background and research experience, making it a vibrant and potential blockchain team worth attention and anticipation. Historically, projects built by pure technical teams have been mostly successful.

Funding

EigenLayer gained high recognition and support from the capital market early on. It has completed three rounds of financing, totaling over 64 million US dollars, with the latest Series A financing valuing it at 500 million US dollars. These data fully demonstrate EigenLayer’s leading position and immense potential in blockchain security and scalability. Sufficient funds also provide a strong guarantee for its future development, enabling it to better serve the Ethereum ecosystem and other protocols.

Technology

EigenLayer is a disruptive technological innovation protocol that addresses a tech pain point with strong real-world demand. It lowers the development threshold for other project parties, bringing higher security and scalability to the Ethereum ecosystem while enhancing the trust network of Ethereum. This allows any system to leverage the security of the Ethereum pool, thereby increasing the value and influence of Ethereum.

EigenLayer utilizes Ethereum’s consensus layer stakers as validators, providing high decentralization and security while avoiding the trust risks of centralized service providers or proprietary tokens.

Market

EigenLayer is the first project to introduce Restaking. Currently, there are no obvious competitors in this re-staking track. As an innovative concept, it is yet to be fully replicated or imitated by other protocols, and the market is still in its infancy with fewer participants.

EigenLayer introduces a new cryptographic economic security primitive of re-staking, allowing Ethereum’s consensus layer stakers to choose to validate other modules and obtain additional income and influence. This mechanism is unprecedented in the blockchain field and represents the future trend and direction of development.

1.2. Valuation

On March 28, 2023, EigenLayer completed a Series A financing of 50 million US dollars, led by Blockchain Capital, with participation from Coinbase Ventures, Polychain Capital, Bixin Ventures, Hack VC, Electric Capital, IOSG Ventures, and others. The valuation of this financing round is 500 million US dollars.

2. Project Overview

2.1. Basic Project Information

EigenLayer is a re-staking protocol based on the ETH staking market, developed by EigenLabs in 2021. The team is mainly located in the United States. The project currently has no issued tokens, but may introduce them in the future. EigenLayer is currently in the first phase of the mainnet and has attracted many validators and protocol participants.

EigenLayer’s business scope covers two aspects: allowing ETH stakers to re-stake ETH to provide security and a trusted layer for other protocols, and enabling new software modules in the ETH ecosystem to utilize stakers as validation nodes to enhance security and efficiency. EigenLayer supports multiple modules, such as consensus protocols, data availability layers, virtual machines, guardian networks, oracle networks, cross-chain bridges, threshold encryption schemes (a cryptographic technique that splits a key or data into multiple parts and distributes these parts among multiple participants. The original key or data can only be recovered when a certain number or proportion of participants cooperate.) and trusted execution environments.

The updates to Ethereum are currently progressing slowly through a robust off-chain democratic governance approach. EigenLayer allows innovations to be quickly deployed on the trusted layer of Ethereum, providing testing and experience for the Ethereum mainnet, like a testnet, thus avoiding the trade-off between rapid innovation and democratic governance.

2.2. Team Situation

2.2.1. Overall Situation

EigenLayer is a re-staking protocol developed by EigenLabs. EigenLabs is a laboratory that focuses on blockchain innovation and research, headquartered in Seattle, Washington, USA. Sreeram Kannan, the founder of EigenLabs, is an associate professor in the Department of Electrical and Computer Engineering at the University of Washington and also the head of the UW Blockchain Laboratory. EigenLabs’ team consists of 30 experts and enthusiasts from different fields and backgrounds, mostly engineers, as well as product managers, strategic directors, and legal advisors.

2.2.2. Core Members

Sreeram Kannan is the CEO of EigenLayer. He is an associate professor in the Department of Electrical and Computer Engineering at the University of Washington, USA. He primarily researches information theory and its applications in communication networks, machine learning, and blockchain systems. He holds a Ph.D. in Electrical Engineering and a Master’s degree in Mathematics from the University of Illinois at Urbana-Champaign and has worked as a postdoctoral researcher at the University of California, Berkeley, and Stanford University. He has received multiple awards and honors, such as the 2019 UW ECE Outstanding Teaching Award, the 2017 NSF CAREER Award, and the first prize in the 2013 Qualcomm Cognitive Radio Contest. He is also the head of the UW Blockchain Laboratory.

Robert Raynor is an engineer at EigenLayer. He is a doctoral student in Electrical and Computer Engineering at the University of Washington, and he used to be an Air Force officer with a background in applied physics. He is currently researching data-driven artificial intelligence, data economics, and causal reasoning. He is also a member of the UW Blockchain Lab.

Soubhik Deb is an engineer at EigenLayer. He is a junior doctoral student in Electrical and Computer Engineering at the University of Washington and is also a member of the UW Blockchain Lab. His goal is to design, develop, and deploy Web3.0-based systems to democratize trust, data, and control in digital platforms. He used to be an industrial researcher at NEC Corporation in Japan, working on 5G technology. He graduated from the Indian Institute of Technology, Bombay, with dual degrees in electrical engineering (bachelor’s and master’s).

Calvin Liu is the Chief Strategy Officer. He previously served as a strategic lead at Compound and is also an investment partner and angel investor. He has invested in several blockchain projects, such as Argus Labs, Catalyst, Liquity, and more. He graduated from Cornell University with a major in philosophy and economics.

Bowen Xue: Master of Electronic Engineering at the University of Washington, Assistant Researcher.

Jeffrey Commons: Architect of smart contracts at the University of Washington.

Gautham Anant: Developer majoring in computer science at the University of Washington.

Vyas Krishnan: Full-stack software development at the University of Illinois.

2.3. Financing Situation

According to data from Crunchbase and PitchBook, EigenLayer has completed three rounds of financing, as follows:

On May 24, 2022, EigenLayer completed an angel round of financing, with an undisclosed amount invested by dao5, cFund, Coinbase Ventures, and others;

On August 1, 2022, EigenLayer completed a $14.5 million seed round of financing, led by Polychain Capital and Ethereal Ventures.

On March 28, 2023, EigenLayer completed a Series A funding round of $50 million, led by Blockchain Capital, with participation from Coinbase Ventures, Polychain Capital, Bixin Ventures, Hack VC, Electric Capital, IOSG Ventures, and others. This financing round valued the company at $500 million.

2.4. Past Development and Roadmap

2.4.1. Past Development

In April 2022, EigenLayer started internal testing of the testnet and participated in Ethereum DevCon and ZK Summit roadshows.

2.4.2. Development Plans and Roadmap

EigenLayer plans to launch its Phase 2 protocol in the fourth quarter of 2023, introducing a governance mechanism for the free market, allowing stakers and the protocol to negotiate and reach consensus on re-staking terms such as fees, rewards, and forfeiture conditions.

At the same time, the Operator testnet is scheduled to go live in the third quarter of 2023, followed by the AVS (Actively Validated Service) testnet in the fourth quarter. The AVS mainnet is expected to launch in the first quarter of 2024.

3. Project Analysis

3.1. Project Background

Ethereum network was the first blockchain to introduce modular blockchain technology. The consensus layer provides trust, while the protocol layer offers innovative dApps.

However, this resulted in a disconnect between trust and innovation. Validators and stakers provide trust to ensure network security, but dApps consume this trust and pay a premium for the trust and security provided by the Ethereum consensus layer.

In 2009, the Bitcoin network introduced the concept of decentralized trust. Bitcoin was designed as a peer-to-peer digital currency system that uses UTXO and script language. However, it has limitations in building various programs on the network.

In 2015, Ethereum network emerged, allowing the development of various decentralized applications (dApps). However, its performance and programmability are limited, requiring reliance on Layer 2 and other middleware for scalability and innovation.

Layer 2, other middleware, and dApps cannot utilize the security of the Ethereum trust layer. They need to build their own independent AVS (Actively Validated Service) to be responsible for their own system security, which presents two main problems:

Increasing project complexity:

① Building a new AVS requires a significant amount of time, cost, and resources, making it difficult to implement.

② The new AVS incurs additional fees, leading to value loss and degraded user experience.

③ Middleware validators need to invest capital to guard the network, which incurs marginal costs. Due to token value capture considerations, validators are often required to stake native tokens of the middleware. Price fluctuations result in uncertain risk exposure.

Security concerns:

① For middleware: Since it operates independently from Ethereum itself and relies on staking native tokens to run the validator network, the security of the middleware depends on the overall value of the staked tokens. If the token price crashes, the cost of attacking the network also decreases.

② For dApps: For some dApps that rely on middleware (e.g., derivative products requiring price feeds from oracles), their security depends on both Ethereum and the trust assumptions of the middleware. The trust assumptions of the middleware are fundamentally derived from the trust in the distributed validator network. Numerous incidents of asset loss due to oracle feeding errors have occurred.

This can lead to a serious “bucket effect,” where the system’s security is determined by its weakest link. Seemingly insignificant weaknesses can trigger systemic risks.

Whenever someone builds a new decentralized network, whether it’s a Layer-1 or oracle network, they must establish their own security foundation, or what EigenLayer calls a “trust layer”. For example, the security and trust layer of Bitcoin comes from Proof of Work (PoW) mining, where anyone using the network can trust the information and state contained in the Bitcoin blockchain because they can trust that someone has performed the necessary calculations. And for Ethereum, this security and trust layer is accomplished through Proof of Stake (PoS), where any user or application on the network can trust every transaction because of the security incentives that come with PoS consensus (e.g. penalties). When applications use information from sources that have different protocols and data availability than Ethereum (e.g. a set of oracles), they need to adopt a different trust set for that specific network.

By running middleware and alternative Layer-1 on different trust networks, this creates a brand new layer of trust and security by increasing capital and labor costs, which slows down potential innovation. Additionally, these protocols must accumulate a significant amount of value to achieve enough security and trust, especially for PoS networks where security is directly related to token value. Finally, there is almost no incentive consistency between different networks, which paves the way for negative value extraction.

EigenLayer aims to address the problem of decentralized trust networks by offering a service where users who lock ETH in a staking protocol can “re-stake” their ETH in a separate smart contract. This essentially means committing the same capital for additional penalty risk. These re-staked funds are then used to provide security for any new application or middleware created using EigenLayer. Stakers will be able to choose the projects they want to re-stake on and provide security for, allowing them to take on the level of risk they are willing to bear, while incentivizing these projects to compensate stakers for the security they provide.

This system leads to zero marginal cost of capital, as none of these projects need to create new tokens as part of their trust layer; it can bootstrap off the already very strong security of ETH. It also creates value consistency between the emerging middleware and Ethereum protocols, as their fates are now linked through shared security. This creates a flywheel where the more valuable the services created through EigenLayer, the higher the returns for ETH stakers, thereby bringing higher value to ETH, which in turn brings higher security to each EigenLayer project, providing greater incentive for new projects to use EigenLayer. No need to bootstrap security and trust for middleware solutions, which can unlock a lot of innovation that was previously only possible at the application layer.

3.2. Project Principles

Essentially, EigenLayer allows Ethereum stakers to choose smart contracts and re-stake their native ETH or liquidity staking tokens (LST) to earn additional rewards. By contributing to the collective security, stakeholders can simultaneously help protect numerous services on the network, effectively addressing the decentralized security issues that plague the industry.

The protocol’s initial security design focuses on decentralization and platform trustworthiness, while also emphasizing the protection of user funds through rapid governance responses to emergencies. Control over contract upgrades and reductions is delegated to the “Community Multi-Signature” through a multi-signature method, while the “Security Multi-Signature” has the authority to suspend functionalities when necessary.

The idea behind EigenLayer is simple—to elevate middleware security to the level of Ethereum through the concept of “Restaking.”

By “Restaking,” the Ethereum trust layer is expanded, allowing developers to build their own consensus protocols and execution layers on EigenLayer without the need to develop a separate trust layer. Through “Trust Computing” on EigenLayer, DApps can rely on Ethereum’s powerful trust layer directly, without depending on middleware.

3.2.1. Slashing Mechanism Design

The security of a cryptographic network depends on the cost of attacking it, also known as “Cost-of-Corruption.” If the cost of corruption exceeds the attacker’s profit, known as “Profit-from-Corruption,” the network is considered secure.

The security of the ETH network consensus layer is guaranteed by the potential slashing risk of staked funds, commonly known as violence to maintain security.

L2 forwards transaction data to the mainnet for auditing to inherit security, while EigenLayer becomes a validating node by staking “ETH-like value assets” to borrow the “violence” of slashing from the mainnet’s security.

3.2.2. Restaking

Initially, validators stake assets on the Ethereum network to earn income, but any malicious behavior leads to a slash of their staked assets. Similarly, after Restaking, validators can earn staking income on the middleware network, but any malicious behavior results in the slash of their original ETH stake. In simpler terms, if validators on the Ethereum network engage in malicious behavior, they may lose half of their staked 32 ETH tokens, while EigenLayer allows for the confiscation of the remaining 50%.

The specific implementation of Restaking is as follows: when an Ethereum validator participates in validation through EigenLayer, their redemption address is set as the smart contract of EigenLayer, granting it the power to slash. If the node violates the rules of the application layer, EigenLayer can slash the ETH that it has redeemed through the slashing contract.

This penalty mechanism allows the application layer to confirm the rights and obligations of Ethereum trust layer nodes through smart contracts, enabling other applications or middleware to utilize the trust layer of Ethereum. Therefore, EigenLayer’s re-staking mechanism enhances security by significantly increasing the cost of malicious attacks.

3.2.3. Trustworthy Trading Market

EigenLayer will establish a public trust trading market, allowing Ethereum trust layer nodes and application layer protocols to determine transaction content through free market mechanisms. Nodes can choose whether to participate in the validation work of a particular application to earn additional income based on their preferred risk-return ratio and penalty conditions, avoiding rigid governance structures. Application layer protocols can conveniently purchase “trust” at market prices, allowing them to focus on protocol innovation and operation at the application layer while achieving a balance between security and performance.

3.2.4. Support for Various Staking Modes

EigenLayer provides multiple staking methods similar to Lido’s Liquid Staking and Superfluid Staking, where Superfluid Staking allows LP tokens for staking. Specifically:

1. Direct staking, directly staking ETH on Ethereum to EigenLayer;

2. LSD staking, restaking assets that have already been staked on Lido or Rocket Pool to EigenLayer;

3. ETH LP staking, restaking LP Tokens from DeFi protocols to EigenLayer;

4. LSD LP staking, restaking LP Tokens like Curve’s stETH-ETH to EigenLayer;

Middleware can choose to retain staking requirements for their native tokens while introducing EigenLayer to continue deriving value from their native tokens, thereby avoiding the “death spiral” caused by a decline in the price of a single token.

3.2.5. Delegators

For those interested in EigenLayer but do not want to operate as node operators, they can delegate their rights to other node operators, who then stake the tokens in Ethereum and distribute a portion of the profits to these delegators. EigenLayer provides two modes:

1. Individual staking mode: Stakers provide validation services and can directly join the AVS or delegate operations to other operators while continuing to validate for Ethereum.

2. Trust mode: Choose trusted operators for operations. If the chosen operator fails to execute as agreed, the interests of the delegators will be penalized. Additionally, the ratio of fees between delegators and operators needs to be considered. This is expected to create a new market, where each EigenLayer operator will establish a delegation contract on Ethereum that specifies how fees are allocated to delegators.

3.3. Project Ecosystem Applications

Eigenlayer is best used for protocols with low possibility of reduction. For example, protocols with liveness guarantees are not suitable for Eigenlayer because the possibility of server crashes and slashing is always high.

(Translator’s note: Liveness refers to the guarantee of continuous flow of transaction information without any centralized authority influence.)

The following services are suitable for using the Eigen protocol:

• Data availability services

• Oracles

• Cross-chain bridges

• Rollup sequencers (e.g. decentralized Optimism and Arbitrum)

• RPC nodes, such as Infura

• MEV management

Cross-chain bridges

Cross-chain bridges are a great use case for Eigenlayer, due to their design. Suppose I attack the @Hyperlane_xyz bridge, but Hyperlane is very flexible and has no liveness requirements for nodes, then the possibility of reducing the ETH staked by users is very low.

Architectures like the one shown above are very suitable for running on Eigenlayer. Other protocols that may be suitable include @SuccinctLabs, @axelarcore, @0xsquid_, and so on.

In addition to asset transfer type bridges, ZK messaging protocols like @HerodotusDev can also use Eigenlayer.

Rollup sequencer

Another important use case is running rollup sequencers on Eigenlayer. The centralized sequencer we currently use can review and reorder transactions.

If the rollup sequencer is run on Eigenlayer, rollup sequencers of L2 solutions like Optimism and Arbitrum can become more decentralized and secure.

Decentralized sequencers will be able to enable MEV auctions like Flashbots, or use fair/random ordering, like @project_shutter.

RPC nodes

Eigenlayer will enable true decentralized RPC nodes, like existing solutions such as @POKTnetwork, and even centralized providers like @infura_io can migrate to Eigenlayer.

Decentralized RPC is crucial for avoiding client-level censorship!

Appchains

Recently, the topic of appchains has sparked a lot of discussion in Web2. Use cases such as games and applications seem to benefit from running independently for scalability, and they will benefit from modular application chains that can run independently.

Appchain deployment protocols like @atlas_zk and @0xStacked will be able to use Eigenlayer to bootstrap the security of new appchains while returning value to secondary stakeholders, achieving a win-win situation.

Oracles

Oracles are perfect for Eigenlayer because they are protected by the value of tokens (such as LINK). By using more collateral to protect the oracle network, the security of oracles will increase exponentially, reducing the possibility of attacks.

EigenDA and Celestia

One of the flagship products of Eigenlayer is its internally built data availability module called EigenDA (Eigen Data Availability). The idea is to separate the execution layer, settlement layer, data, and consensus, making it easy to run execution layers like @fuelabs_.

Compared to Celestia, EigenDA has a clear advantage – it can more easily bootstrap a large validator network by leveraging existing ETH validators and staking. Unlike Celestia, EigenDA is not a consensus layer, so it has lower costs and higher throughput.

(Translator’s note: Celestia, formerly known as LazyLedger, is the first modular blockchain network. It is a pluggable consensus and data availability layer that allows anyone to quickly deploy decentralized blockchains without the cost of bootstrapping a new consensus network.)

3.3.1. Projects Built on EigenLayer

The following projects are pioneers in using EigenLayer to secure their infrastructure, aggregating, integrating, and expanding the security and decentralization of Ethereum’s cryptoeconomics through the EigenLayer protocol.

AltLayer

AltLayer is building a rollup-as-a-service tool to scale execution at a very low cost. AltLayer enables flash rollups by quickly verifying state transitions using EigenLayer validators without permission.

Blockless

Blockless is an infrastructure platform for launching and integrating full-stack decentralized applications, allowing them to surpass the limitations of smart contracts. With a globally distributed, trustless node infrastructure (protected and supported by EigenLayer’s builders and operators), applications can achieve high-performance trustless computing, automatic horizontal scaling, and advanced load balancing.

Explore Blockless collaboration on the EigenLayer forum.

Celo

Celo is migrating from a compatible EVM Layer 1 blockchain to Ethereum Layer 2 to achieve trustless liquidity sharing, decentralized ordering, and promote greater consistency with Ethereum.

Celo will leverage a data availability layer supported by EigenLayer and EigenDA, which inherits the architecture of Danksharding to improve throughput, reduce costs, and decrease latency.

Check out the official migration proposal, where Celo’s team expands on the role EigenLayer plays in this significant event for their ecosystem.

Drosera

Drosera is a zero-knowledge automation protocol providing emergency response infrastructure for Ethereum. EigenLayer bootstraps Drosera with a native trust network, which over time becomes more decentralized.

Drosera aims to leverage the decentralized nature of Ethereum consensus to create a powerful and responsive collective of first responders. The protocol defines the emergency response logic and advanced validation checks that operators are required to execute. EigenLayer’s slashing and reward mechanisms ensure honesty and accountability. This secure approach extends monitoring and bug bounty programs into a dynamic model.

Espresso

Espresso is creating a shared sequencer solution that supports rollup decentralization, improved interoperability, and a robust, highly scalable data availability layer. It optimizes node utilization and capital efficiency through EigenLayer’s use of re-staking, while ensuring trusted neutrality, security, and fast pre-confirmations in transaction verification.

Re-staking allows for consistency between Layer-1 validators and the Layer-2 ecosystem. In a centralized sequencer, almost all rollup values (e.g., fees, MEV) can potentially be captured by the sequencer. If the rollup-generated values captured by Layer-1 validators are minimal or non-existent, it could compromise the security of the rollup, as Layer-1 may be tempted by malicious behavior. Decentralizing the sequencer and involving Layer-1 validators in its operation significantly mitigates these security concerns.

More details about this collaboration can be found in Espresso’s announcement.

EigenDA

EigenDA is a data availability service that provides high throughput and economic security through Ethereum operators and re-stakers. Based on danksharding principles, EigenDA aims to expand the programmable range of rollup while increasing the throughput ceiling. Horizontal scalability will eventually allow EigenDA to achieve up to 1TB/s of scaling at minimal costs and technical overhead. Flexible token economics, reserved bandwidth, modifiable signature schemes and elliptic curves, and other features enable EigenDA to support various projects and use cases.

Learn more about EigenDA from Sreeram Kannan’s presentation earlier this year.

Hyperlane

Hyperlane is developing a permissionless interoperability layer that supports composability between chains, including native rollup bridges, communication between rollups, and multi-chain application architecture. It brings modular security through EigenLayer re-staking, enabling permissionless and chain-agnostic application deployment in any environment.

You can see the scope of our collaboration with Hyperlane in this forum post.

Lagrange

Lagrange is building infrastructure for zk-based cross-chain state and storage proofs. It derives super-linear security through EigenLayer re-staking, providing a powerful primitive for dynamically scaling the underlying security of state proof generation, overcoming inherent security limitations faced by bridging.

The Lagrange State Committees, composed of EigenLayer re-staking validators, establish the finality of proposed block state transitions submitted by the sequencer of the Optimistic Rollup with Lagrange. Then, the Lagrange ZK MapReduce proof system is used to generate zero-knowledge state proofs. These proofs can be used by messaging or bridging protocols to create a shared, permissionless secure zone for cross-chain state.

To learn more details, please refer to Langrage’s Medium article and the complete announcement of their forum proposal.

Mantle

Mantle is building an Ethereum Layer-2 that achieves fast and cost-effective transactions through innovative rollup architecture and modular data availability. Mantle currently uses MantleDA, which is a modified version of EigenDA and will migrate to EigenDA upon release. This enables the Mantle ecosystem to provide high throughput and low gas costs for next-generation applications such as blockchain games and decentralized social networks.

Learn more about the collaboration in this blog post from the Mantle team.

Omni

Omni is creating an interoperability infrastructure as a unified layer for all rollups to enable the transfer of data. It is built on top of EigenLayer to provide security for future use cases, including stablecoins across rollups and primitives that can aggregate liquidity and facilitate fast and affordable communication between rollups.

You can see how EigenLayer is integrated into Omni’s technical stack in Omni’s release blog.

Polyhedra

Polyhedra is developing a new zk-proof-based infrastructure that achieves trustless and efficient cross-chain interoperability through parallel and distributed computing. It utilizes EigenLayer’s re-staking to enhance the security and efficiency of the first and second layer chains using zkBridge, thereby reducing the on-chain verification costs of EVM-compatible networks.

Read more on the official blog of the Polyhedra team.

WitnessChain

WitnessChain is building transparent middleware for blockchain. By utilizing EigenLayer’s decentralized network, WitnessChain is able to create a decentralized monitoring network for verifiable AVS monitoring, which will serve as the first line of defense for the optimistic rollup.

3.4. Project Interface

3.4.1. Homepage

3.4.2. Learn

3.4.3. ReStaking

3.5. Project Data

3.5.1. Re-staking Data

According to the EigenLayer official website, as of August 1, 2023, EigenLayer has 10 supported modules and 55,670.57 ETH has been staked again. These modules include EigenDA, The Graph, Chainlink, tBTC, API3, Gravity Bridge, Threshold ECDSA, iExec, etc. These modules cover various types such as data availability layer, oracle networks, bridges, threshold encryption schemes, trusted execution environments, demonstrating the wide applicability and compatibility of EigenLayer. These modules are also among the top and most well-known projects in the blockchain field, showcasing the high quality and standard of EigenLayer. This data indicates that EigenLayer has achieved certain achievements and influence, as well as great potential and room for development.

3.5.2. Social Media Data

As of August 1, 2023, EigenLayer has performed well on social media platforms, showing high project popularity. Currently, EigenLayer’s Discrod account has attracted over 126,000 followers, with daily online users exceeding 7,300, making it one of the most popular channels. Additionally, there is frequent interaction on Twitter.

4. Industry Space and Potential

4.1. Track Analysis

4.1.1. Project Classification

EigenLayer is a blockchain infrastructure platform focusing on the liquidity staking field of ETH, subdivided into the ETH re-staking track.

4.1.2. Market Size

According to Staking Rewards, as of August 1, 2023, the total value locked (TVL) in the global staking market is $12.2 trillion, with Ethereum occupying the largest share at $403 billion. Other major staking networks include Solana, Cardano, Polkadot, Avalanche, and Cosmos.

According to DeFi Llama, as of August 1, 2023, the total value locked (TVL) in the global staking market is $20.14 billion, with Lido occupying the largest share at $14.74 billion. Lido is a liquidity staking protocol that allows users to stake ETH on the Ethereum 2.0 network and receive equivalent stETH tokens, which can be used in the DeFi market or staked again. Other major re-staking protocols include EigenLayer, Tenet, etc.

4.1.3. Core Competitiveness

1) Staking Size

Asset size refers to the total amount staked in the staking pool. We believe that an excellent staking platform should have a high asset size to demonstrate its stability and credibility.

2) Security

Protecting user assets is the most important goal of staking projects. Re-staking projects need to ensure that user assets are not lost due to smart contract vulnerabilities, improper validator behavior, or hacker attacks. Therefore, they need to adopt advanced security measures and risk management mechanisms such as multi-signature, firewall, insurance, penalties, etc.

3) Yield

Re-staking projects need to provide higher yields than single staking to attract user participation. Therefore, they need to optimize staking strategies, income and reward distributions, and utilize compounding effects to increase user capital efficiency and returns.

4) Liquidity

Re-staking projects need to address the liquidity issue of staked assets so that users can join or exit staking at any time or transfer staked assets to other protocols or platforms. Therefore, they need to provide services such as liquidity staking tokens, liquidity mining, and lending markets to enhance user liquidity and freedom.

5) Ecosystem

Re-staking projects need to establish a robust ecosystem to support validation services for multiple PoS networks and protocols, improving the network’s security and decentralization while providing users with more choices and opportunities. Therefore, collaboration and integration with other blockchain platforms, DeFi applications, Layer 2 protocols, etc., are necessary.

4.1.4. Competing Projects

In blockchain, there are two common types of staking: blockchain network node staking and liquidity staking. The former is for the normal secure operation of the network, while the latter is for increasing transaction liquidity.

When seeing re-staking platforms like EigenLayer, it easily brings to mind liquidity bootstrapping protocol Tokemak because they both have an “intermediary” nature. Tokemak attracts users to stake assets on its platform to create a comprehensive token pool and then directs the liquidity of the comprehensive token pool to other applications and protocols. There is some similarity in the logic, but the difference is that EigenLayer is focused on ETH re-staking and has a different purpose. EigenLayer allocates re-staked assets to other applications for node validation services. The attraction for stakers is also different. In EigenLayer, re-staking provides extra income for users, while Tokemak attracts stakers through reward token allocation or LP earnings. Additionally, many DeFi protocols also provide liquidity rewards, intensifying the competition for liquidity. Currently, the re-staking track still belongs to a blue ocean.

Lido allows users to earn profits in PoS staking and helps stETH obtain additional income from the DeFi ecosystem. The difference is that Lido is a one-time staking, while EigenLayer is a re-staking. The purposes are also different. Lido aims to apply staked ETH to the DeFi ecosystem for extra income, while EigenLayer re-stakes ETH and applies it to node consensus in different application protocols to generate additional profits. This creates a mismatched competitive relationship.

EigenLayer is a pioneer and innovator in the re-staking field, and there are currently no obvious competitors in its re-staking track. As an innovative concept, it has not been fully replicated or imitated by other protocols. The market is still in its early stages with fewer participants.

However, the EigenLayer re-staking track may face some potential competition or challenges, such as:

Other LSD protocols may develop their own re-staking features, such as Lido Finance, Rocket Pool, etc.

Other data availability and governance service protocols may develop their own LSD functionalities, such as The Graph, Aragon, etc.

Other Layer 2 or cross-chain protocols may develop their own security and trust networks, such as Polygon, Cosmos, etc.

Furthermore, since EigenLayer primarily uses LSD as collateral, LSDFi projects in the market may also take LSD’s market share. We consider projects in this track as competitors at the moment.

4.2. Token Economy Model Analysis

4.2.1. Token Total Supply and Distribution

EigenLayer currently does not have its own token, but it may be issued in the future. Stay tuned.

4.2.2. Token Value Capture

Based on the analysis of the EigenLayer project, if EigenLayer issues tokens, the token value could be captured through the following aspects:

① Governance: Allowing token holders to participate in the decision-making process of EigenLayer’s protocol parameters and direction.

② Revenue: Allowing token holders to share in EigenLayer’s protocol income and rewards, such as fees and rewards from re-staking protocols or services.

③ Collateral: Allowing token holders to use EigenLayer tokens as collateral to participate in the security and trust of other protocols or services.

4.2.3. Token Core Demand

Based on the analysis of the EigenLayer project, the core demand for EigenLayer’s tokens may come from the following categories:

• LSD holders: They can re-stake their LSD in other protocols or services through EigenLayer, thereby gaining double income and governance rights.

• Protocols or services in need of security and trust: They can utilize EigenLayer’s trust layer for ETH, thereby reducing their security costs and risks.

5. Preliminary Value Evaluation

5.1. Core Questions

5.1.1. What stage of operation is the project at? Is it in the mature stage or the early to mid stage of development?

EigenLayer is a relatively new project that was established in 2021 and completed its seed round of funding in May 2022, followed by a Series A round in February 2023. EigenLayer has currently launched its Phase 1 mainnet, and the next phase of EigenLayer will introduce Operators who will be responsible for executing verification tasks for AVS (Active Verification Services) built on the EigenLayer protocol, with support for 10 modules currently. EigenLayer targets a large market size and has great potential, but it also faces challenges and risks such as technical difficulty, ecosystem compatibility, and market competitiveness. EigenLayer needs continuous technological innovation, ecosystem development, and market promotion to achieve its project vision and goals. Therefore, EigenLayer is still in the early stage of development and has significant growth space and potential.

5.1.2. Does the project have a reliable competitive advantage? Where does this competitive advantage come from?

• Innovation: EigenLayer introduces re-staking as a new cryptographic economic security primitive, allowing Ethereum consensus layer stakers to choose to validate other modules and earn additional income and influence. This mechanism is unprecedented in the blockchain field and is a future trend and direction.

• Technological advantage: EigenLayer utilizes Ethereum consensus layer stakers as validators, providing high decentralization and security, avoiding trust risks associated with centralized service providers or proprietary tokens.

• EigenLayer provides a free market mechanism for stakers and modules, allowing them to make choices and payments based on risk and return, improving efficiency and flexibility, and avoiding rigid governance structures.

• Scalability: EigenLayer supports various types and layers of blockchain technologies, including consensus protocols, data availability layers, virtual machines, guardian networks, oracle networks, bridges, threshold encryption schemes, trusted execution environments, etc. These technologies are among the most important and active in the blockchain field and hold great potential and prospects for future development. EigenLayer can provide foundational services such as security, scalability, and interoperability for these technologies, fostering innovation and diversity in blockchain applications.

• Influence: EigenLayer expands Ethereum’s trust network, allowing any system to absorb Ethereum’s pool security, thereby increasing Ethereum’s value and influence. EigenLayer has also attracted some of the most excellent and well-known projects in the blockchain field as its supported modules, such as The Graph, Chainlink, tBTC, API3, Gravity Bridge, etc. EigenLayer has also gained support and recognition from some of the most authoritative and influential investment institutions and individuals in the blockchain industry, such as Blockchain Capital, Coinbase Ventures, Spencer Bogart, etc.

5.1.3. What are the main variables affecting the operation of the project? Are these factors easily quantifiable and measurable?

• Re-staking amount: The re-staking amount refers to the quantity of ETH or liquidity tokens staked again through EigenLayer. It reflects the trust and participation of stakers in EigenLayer, as well as the market share and revenue scale of EigenLayer. A higher re-staking amount indicates that EigenLayer is more popular and supported by stakers, and it also indicates that EigenLayer is more competitive and influential. Re-staking amount is an easily quantifiable and measurable factor, which can be obtained through the EigenLayer official website or other data platforms.

• Supported module count: The supported module count refers to the number of software modules for obtaining validation nodes and interfaces through EigenLayer. It reflects the demand and level of choice of modules for EigenLayer, as well as the ecological compatibility and service scope of EigenLayer. The more supported modules, the better EigenLayer can meet the needs and expectations of modules, and it also indicates that EigenLayer has more scalability and diversity. Supported module count is an easily quantifiable and measurable factor, which can be obtained through the EigenLayer official website or other data platforms.

• Validation service quality: Validation service quality refers to the effectiveness and level of validation services provided by EigenLayer for modules. It reflects the technical capabilities and user experience of EigenLayer, as well as the value capture and creation of EigenLayer. The higher the validation service quality, the better EigenLayer can guarantee the security, scalability, and interoperability of modules, and it also indicates that EigenLayer can provide high-quality services and experiences. Validation service quality is a factor that is not very easily quantifiable and measurable, but it can be evaluated through some indicators or standards, such as the number of validation nodes, distribution, stability, response speed, accuracy, fee rate, reward rate, penalty rate, etc.

5.1.4. What is the management and governance mechanism of the project?

EigenLayer utilizes a reputation-based committee for governance, composed of well-known individuals from the Ethereum and EigenLayer communities. This committee will be responsible for upgrading EigenLayer contracts, reviewing and vetoing penalty events, and allowing new AVS to enter the penalty review process.

AVS can use this committee to assure re-stakers in EigenLayer that they will not be subject to malicious or incorrect penalties. At the same time, AVS developers can perform actual tests on the codebase related to AVS. Once matured and trusted by re-stakers, AVS can stop using the committee as a backup. When AVS is created on EigenLayer, a committee may be required for security audits and other due diligence, including checking the system requirements for validators serving AVS.

5.1.5. Risks and concerns

Generally, things have both positive and negative aspects. While EigenLayer provides security and economic benefits, it also brings some risks and concerns.

• Vulnerability security risk: Re-staking increases the risk exposure of staked assets. In addition to the risk of original staking, it is also subject to the security of the asset’s re-staking protocols, including data availability layer, middleware, sidechains, oracles, various bridges, etc. If there are security vulnerabilities in these protocols, it will result in losses for re-stakers.

• Diminishing value of native tokens: Relying solely on the staking validators provided by EigenLayer may reduce the value of the protocol’s native tokens. This is because part of the token’s value comes from its governance role in the staking network. Introducing ETH staking will weaken this aspect of the native token’s role and impact its value capture capability.

• High dependency: If the protocol adopts EigenLayer’s staking platform, its independence and security will be influenced by EigenLayer. The protocol will rely heavily on EigenLayer.

• Centralization risk: If EigenLayer becomes the main staking platform, similar concerns to those with Lido may arise. Currently, ETH staked on Lido accounts for 32% of the ETH in the Ethereum beacon chain, raising concerns about over-centralization. It is not safe to put all the eggs in one basket.

• However, the project team introduces that EigenLayer will not have centralization risk because it only serves as an intermediary, and the staked assets are actually at the application layer, not on its protocol. Although this cannot completely eliminate everyone’s worries, it at least demonstrates that the project team should consider how to avoid over-centralization issues.

5.2. Why Re-Staking is important

5.2.1. For ETH holders:

EigenLayer can bring more profits to users through re-staking. Besides earning staking rewards on the Ethereum mainnet, users can also gain additional profits from the re-staking protocol.

ETH holders can re-stake in EigenLayer through three methods. The first is directly re-staking ETH staked on the PoS chain through EigenLayer, the second is re-staking LP tokens containing ETH through EigenLayer, and the third is re-staking LP tokens containing stETH through EigenLayer.

5.2.2. For application protocols:

Security: EigenLayer brings more governance security to protocols. In blockchains that adopt PoS protocols, staking is the core mechanism. The more assets staked, the less likely the protocol is to be attacked, as the cost of attacking increases. These protocols can include middleware, side chains, oracles, and layer 2 networks. For example, in EigenLayer, there must be over 50% of re-staked ETH and protocol native tokens for a node to validate a valid block.

Additionally, the dual token staking model (ETH + protocol native tokens) effectively reduces the risk of death spiral. When the price of protocol native tokens falls, the re-staked ETH can provide effective value support, thus protecting the protocol’s security.

Economics: EigenLayer provides blockchain node validation services through re-staking, eliminating the need for protocols to establish their own validation platforms and pools. This allows protocols to focus more on developing core functionality and improving user experience. It is similar to how early internet companies had to build their own server rooms, but with professional cloud services, they can now focus on function development, saving costs and improving efficiency.

The modular blockchain concept separates the consensus layer, data availability layer, and transaction execution layer. Specifically for Ethereum, it provides security at the consensus layer, allowing innovative applications to be built on the execution layer.

However, the problem is that if you want to create a new consensus protocol on Ethereum, such as a data availability protocol or other middleware, oracles, layer 2 networks, etc., you still need to build your own node validation service.

EigenLayer solves this problem by providing a unified staking platform. This allows other protocols to directly adopt it without needing to establish their own validation platforms. Protocols no longer have to build their own validators and pools, allowing them to focus more on developing core functionality and improving user experience.

6. SWOT Analysis
6.1. Project Advantages (Strengths)
Trinity of profits: Through the re-staking plan proposed by Eigen layer, the liquidity token not only captures profits within the Ethereum system but also earns profits from other cross-chain bridges, oracles, and more. If the lsdETH LP staking is introduced in the future, it can achieve trinity of profits: staking Ethereum for earnings, rewards from collaborating project’s node construction and verification tokens, and rewards from staking DeFi LP with liquidity tokens.

For users, this is also an additional opportunity for value addition. When combined with liquidity staking derivatives, it significantly improves the capital efficiency of the network.

Increased market efficiency: Unlocking liquidity for LSD and LP tokens provides the DeFi industry with more asset options and combinations. By renting Ethereum security on the EigenLayer public market, the new protocol can save costs on internal guidance and maintenance.

Enhanced network security: Increasing the security of networks that use liquidity staking encourages more assets to be staked, thereby increasing the value and resistance to attacks. It promotes economic security for Ethereum and provides security to application protocols, resulting in a positive feedback loop.

Lowering the barriers for project partners: New blockchain projects need to establish their own trust layers to ensure the security of data and funds. This requires a lot of time and money, increasing the difficulty of going live. If the Ethereum Beacon Chain staking can be used as a trust layer, it can reduce costs and barriers, improving the core functionality and user experience.

6.2. Project Disadvantages (Weaknesses)
Asset loss risk: If nodes or networks suffer attacks, forks, or improper behavior, the assets of re-stakers may be confiscated, resulting in partial or permanent losses.

Asset bubble risk: If there are too many tokens or stablecoins in the market, it may cause the value of assets to inflate or deviate from their true value, increasing market instability and investor confusion.

Value capture risk: If the security and incentives provided by EigenLayer are not sufficient to attract protocols and validators, it may result in the loss of protocol sovereignty, decreased value of collaborative projects, or slow ecosystem development.

Cancellation staking period risk: If re-staked ETH requires a waiting period for unlocking, users may face risks of liquidity and price fluctuations.

Trust leverage risk caused by re-staking: In the public trust transaction market, trust layer nodes can provide verification services to different protocols through re-staking, earning additional profits. When the funds of the trust layer are used to provide verification services to highly valued applications/middleware layers to earn more profits, it may lead to extremely leveraged trust and make the cost of disruption lower than the high returns, thus reducing the economic security of the trust layer.

6.3. Project Opportunities

Leaders and Innovators: Restaking is a unique concept with no direct competitors on the track, and it has not been completely replicated or imitated by other protocols. Additionally, the market is still in its early stages with few participants.

Market Share: Currently, the largest market in the DeFi industry is Staking, with a total value of approximately $20 billion (TVL). Especially now, as many blockchain platforms are under development, the cryptocurrency market is expanding. Therefore, the ReStaking market will have numerous growth opportunities.

6.4. Project Threats

Tokenomics Issues: If users can earn profit by restaking ETH without the need for the native tokens of other protocols, the native token of EigenLayer may lack value and demand.

Reward Allocation Issues: If the protocol cannot balance incentives for existing participants and restaking participants when adopting EigenLayer, it may result in unfair token distribution and low user participation.

Security Event Risk: If restaked ETH represents a significant portion of locked ETH in the Ethereum network, any security vulnerability in a protocol could lead to a large amount of ETH being confiscated, thereby affecting the security of the Ethereum network.

Technical Risks: EigenLayer involves multiple types and levels of blockchain technology, which may have technical flaws or vulnerabilities that can cause system crashes or attacks. These technical risks can result in asset losses or trust issues for stakers and modules, impacting the project’s reputation and development. EigenLayer needs to mitigate technical risks through rigorous code audits, testnet deployments, and security rewards.

References

https://www.panewslab.com/zh/articledetails/494x55dz.html

https://www.datawallet.com/crypto/eigenlayer-explained

https://www.panewslab.com/zh/articledetails/5402965u1dvj.html

https://www.163.com/dy/article/I9UML1RM05560MYZ.html

https://www.defidaonews.com/article/6783918

https://foresightnews.pro/article/detail/22729

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