The EigenLayer protocol uses the concept of re-staking to allow new protocols to leverage the security of the Ethereum blockchain.
Maintaining robust cryptoeconomic security on the Ethereum blockchain network has always been a major challenge. A newly launched protocol, EigenLayer, introduced the concept of “restaking” to enhance the cryptoeconomic security of Ethereum.
This middleware allows Ethereum stakers to re-stake their ETH and secure new protocols built on the Ethereum ecosystem. This will commercialize decentralized trust and allow protocols integrated with it to leverage Ethereum’s security layers without forming their own set of validators.
What is Eigenlayer?
The most prominent feature of the Ethereum network is its security. The Ethereum Virtual Machine (EVM) allows decentralized applications (dApps) to leverage base layer security without building their own network of trust. However, dApps that require their own Active Verified System (AVS) cannot be deployed on EVM. Therefore, you cannot take advantage of the secure network of Ethereum’s payment layer.
Each new dApp’s AVS pushes cryptoeconomic security into the system contained within itself, rather than into the base layer of Ethereum. This creates an ecosystem with smaller and fragmented security pools. These fragmented trust networks are highly vulnerable to attacks and can ultimately nullify the power of Ethereum’s base layer.
EigenLayer is a highly innovative protocol recently introduced to the Ethereum mainnet. EigenLayer founder Sreeram Kannan proposed the effort to solve a major problem with the Ethereum blockchain design, such as fragmented security.
EigenLayer’s “Re-staking” primitive allows you to reuse ETH or Liquid Staking Tokens (LST) staked in the consensus layer. Staker and validator nodes can opt-in to EigenLayer smart contracts and re-stake ETH or LST (e.g. rETH, stETH, fxsETH). These assets will be reused to validate and secure other new networks on Ethereum such as oracles, virtual machines, sidechains, keeper networks, bridges, consensus protocols and data availability layers.
EigenLayer reconstruction mechanism
The EigenLayer protocol introduces two basic ideas: pooled security through restaking and free market governance. Using these combinations, EigenLayer extends the security of Ethereum’s base layer to other protocols built on top of it, regardless of EVM compatibility.
EigenLayer’s re-staking mechanism creates a pooled, security-optimized system. In this system, new modules on the network are secured by re-staked ETH instead of tokens. The staked and locked ETH, which was originally collateral to protect Ethereum, will be staked again in this scheme to ensure verification and security of other protocols.
By choosing EigenLayer’s new protocol, Ethereum validators agree to new slash terms to earn rewards in return. The protocol enforces this when stakers entitle their staked ETH withdrawal credentials to the EigenLayer smart contract. This enhances cryptoeconomic security while allowing the protocol to deter malicious behavior and enforce honest user behavior.
The EigenLayer protocol’s open market governance mechanism works by governing how pooled security is provided by validators and received by AVS. EigenLayer allows validators to select specific projects they wish to re-stake capital and provide security for.
This allows stakers and validators to decide how much additional slash risk is acceptable. On the other hand, the new module should incentivize validators enough to re-stake her ETH in the module. Additionally, Ethereum stakers will be able to re-stake staked funds to secure multiple protocols at once. This reduces the staker’s cost of participation capital and at the same time strengthens the reliability assurance of individual services.
In summary, EigenLayer uses a re-staking mechanism to allow new protocols to take advantage of Ethereum’s base layer security. This improves security, provides a large set of validators, and provides a higher level of sovereignty to customize the architecture and manage these new projects. Additionally, the protocol also allows market participants to better leverage their stakes to earn more rewards. Therefore, it is quite possible that EigenLayer will bring even more innovation and robustness to the blockchain environment in the near future.