EigenLayer: The Future of Crypto-Economic Security on Ethereum

EigenLayer is a protocol built on Ethereum that introduces restaking, a probable “new basic feature” in crypto-economic security. This feature enables the reuse of ETH or liquid staking tokens (LST) on the consensus layer, extending security and trust to multiple services and applications on the network. In this article, we will explain what restaking is, how it works, and why it is a game-changer for Ethereum and its ecosystem.

What is EigenLayer?

EigenLayer is an innovative protocol that allows Ethereum stakers to opt into smart contracts and restake their native ETH or LST (e.g fxsETH, rETH, or stETH) for additional rewards. By contributing to pooled security, stakers help secure numerous services on the network at once, effectively combatting fragmented security concerns that have plagued the industry.

With EigenLayer, Ethereum stakers can help secure multiple services by restaking their already staked ETH, opting into numerous services at once, and providing pooled security. This not only reduces the capital costs for a staker to participate but also significantly increases the trust guarantees for individual services.

EigenLayer aims to solve the problem of fragmented security in decentralized applications built on Ethereum. It enables any service, regardless of its composition, to tap into the pooled security provided by Ethereum’s stakers, fostering an environment for permissionless innovation and free-market governance.

What is restaking?

Restaking is the process of rehypothecating staked ETH or LST on the consensus layer. This means that stakers can opt into EigenLayer smart contracts and restake their already staked ETH or LST (e.g. fxsETH, rETH or stETH), providing pooled security for various services and earning extra rewards in the process.

Restaking allows stakers to secure multiple services simultaneously by using their staked ETH or LST as collateral. This reduces the capital costs for stakers participation in different services and increases the trust guarantees for individual services. Restaking also fosters an environment for permissionless innovation and free-market governance, as any service can tap into the pooled security provided by Ethereum’s stakers.

With EigenLayer, Ethereum stakers can help secure multiple services by restaking their already staked ETH, opting into numerous services at once, and providing pooled security. This not only reduces the capital costs for a staker to participate but also significantly increases the trust guarantees for individual services.

EigenLayer aims to solve the problem of fragmented security in decentralized applications built on Ethereum. It enables any service, regardless of its composition, to tap into the pooled security provided by Ethereum’s stakers, fostering an environment for permissionless innovation and free-market governance.

How does EigenLayer work?

EigenLayer is a protocol that enables restaking on Ethereum. It consists of two main components: operators and restakers. Operators are entities that run nodes and execute transactions on behalf of restakers. Restakers are users who stake their ETH or LST on EigenLayer smart contracts and delegate their voting rights to operators.

Operators are responsible for providing security and functionality to the services that use EigenLayer. They receive fees and rewards from these services as well as from EigenLayer itself. Operators are also subject to slashing if they misbehave or fail to perform their duties.

Restakers are able to choose which services they want to support with their staked ETH or LST. They can also switch between services at any time, without having to unstake or withdraw their funds. Restakers receive rewards from the services they support as well as from EigenLayer itself. Restakers are also protected by EigenLayer’s safety design, which ensures that their funds are not at risk of being slashed or lost.

At its core, EigenLayer allows Ethereum stakers to opt into smart contracts and restake their native ETH or LST for additional rewards. By doing so, they extend crypto-economic security to a variety of applications on the network, such as:

• Data Availability: Restaking can enable a hyperscale Data Availability (DA) layer, with a high DA rate and low cost. EigenLabs is building the first DA layer on EigenLayer, called EigenDA.
• Decentralized Sequencers: ETH restakers can form a single decentralized sequencer quorum that serves many rollups, enabling MEV management and censorship resistance.
• Light Node Bridges: Restakers can verify off-chain whether bridge inputs are correct, and if a strong quorum signs off, then the inputs are accepted. If someone challenges, then the input can be verified and EigenLayer operators can be slashed in the slow mode.
• Fast-Mode Bridges: Restakers can participate in ZK proof verification off-chain, and certify that proofs are correct on-chain. If incorrect, they can be slashed in slow mode. For optimistic rollups, EigenLayer enables a larger collateral pool to certify state roots.
• Oracles: Oracles that enshrine price feeds into Ethereum can be built via EigenLayer if they require majority trust on restaked ETH, and are opt-in layers.
• Opt-In Event-Driven Activation: In EigenLayer, Ethereum validators who are block proposers and opted in to restaking can provide strong guarantees on inclusion of event-driven actions, at the risk of getting slashed.
• MEV Management: A variety of MEV management methods are feasible under EigenLayer, including PBS, MEV smoothing, and threshold encryption for transaction inclusion. Read about MEV-Boost++ for more details.
• Low-Latency Settlement Chains: EigenLayer allows restaked sidechains where ETH restakers can participate in new consensus protocols that have low latency and high throughput.
• Single-Slot Finality: Restaked nodes can attest they will not build on a chain that does not include a testified block, creating a finality pathway. Designing this to be opt-in and compatible with the consensus protocol is an important direction of research.
• Your Use Case Here: Contribute your research and ideas to the EigenLayer Discussion Forum. Let’s build the future of blockchains together! We look forward to meeting you.

The protocol’s initial safety design focuses on decentralization and platform credibility, while also emphasizing user funds protection through rapid governance response to emergencies. With a multi-sig approach, control over contract upgradeability and slashing are handed to a “community multi-sig,” while a “safety multi-sig” is empowered to pause functionality as deemed necessary.

Why is EigenLayer important?

EigenLayer is important because it solves the problem of fragmented security in decentralized applications built on Ethereum. Fragmented security refers to the fact that different services have different levels of security and trust, depending on their design and adoption. This creates inefficiencies and risks for users and developers, who have to choose between security and functionality.

EigenLayer addresses this problem by allowing stakers to reuse their staked ETH or LST on the consensus layer, providing pooled security for multiple services at once. This way, EigenLayer enhances the security and trust of the entire Ethereum ecosystem, while also enabling innovation and experimentation with new services and applications.

Some of the use cases that EigenLayer enables include:

• Data availability layers: Restaking can enable a hyperscale data availability layer, with a high data availability rate and low cost.
• Decentralized sequencers: ETH restakers can form a single decentralized sequencer quorum that serves many rollups, enabling MEV management and censorship resistance.
• Light node bridges: Restakers can verify off-chain whether bridge inputs are correct, and if a strong quorum signs off, then the inputs are accepted. If someone challenges, then the input can be verified and EigenLayer operators can be slashed in slow mode.
• Fast-mode bridges: Restakers can participate in ZK proof verification off-chain, and certify that proofs are correct on-chain. If incorrect, they can be slashed in slow mode. For optimistic rollups, EigenLayer enables a larger collateral pool to certify state roots.
• Oracles: Oracles that enshrine price feeds into Ethereum can be built via EigenLayer if they require majority trust on restaked ETH, and are opt-in layers.
• Opt-in event-driven activation: In EigenLayer, Ethereum validators who are block proposers and opted in to restaking can provide strong guarantees on inclusion of event-driven actions, at the risk of getting slashed.

In conclusion, EigenLayer is a protocol built on Ethereum that introduces a new feature called restaking. This feature allows for the reuse of ETH or liquid staking tokens on the consensus layer, providing increased security and trust for multiple services and applications on the network. Restaking is a game-changer for Ethereum and its ecosystem and has the potential to become a new basic feature in crypto-economic security.