What is EigenLayer?

Key Aspects

• EigenLayer is a protocol that enhances Ethereum's Proof of Stake system by allowing users to reuse their ETH for staking through a process called restaking.

• EigenLayer employs modular security, which improves the flexibility and functionality of staked ETH through a concept known as the "restaking collective."

• Challenges include increased complexity, potential centralization risks due to dominant staking pools, and collusion threats within the module-based design.

Introduction

Ethereum transitioned from a Proof of Work (PoW) model to a Proof of Stake (PoS) system through a series of upgrades. In PoS, users stake their ETH tokens to secure the network. Essentially, they become validators who verify transactions and ensure network integrity. In return for their contribution, participants receive rewards.

However, staked ETH is temporarily locked, which limits its accessibility and utility. This is where EigenLayer introduces its innovative approach. This article provides a comprehensive overview of EigenLayer, its airdrops, core functionalities, advantages and disadvantages, and the key differences between traditional staking and EigenLayer staking.

What is EigenLayer?

EigenLayer is a protocol built on the Ethereum blockchain. It introduced a concept called the "restaking collective" that allows ETH participants to support applications within the Ethereum ecosystem.

EigenLayer creates a dynamic space for decentralized trust. Developers can benefit from the security provided by the collective pool of stakers, while stakers can support the development of projects they believe in.

How EigenLayer Works

Modules

EigenLayer presents a modular security approach. It enables stakers to contribute their ETH to protect specific functionalities within the network. These functionalities are generally known as modules.

For example, a module could be dedicated to securing decentralized storage solutions. Some modules could secure elements within blockchain-based games. Others could foster trust within DeFi applications.

Smart Contracts

Ethereum stakers can restake their already-staked ETH through EigenLayer's smart contracts and thereby offer a new set of security and validation services to specific modules on the network. This is achieved by granting EigenLayer contracts the ability to establish certain conditions on staked assets.

Restaking

EigenLayer restaking can be done in two different ways:

1. Solo Staking. Users can operate their own nodes and actively validate transactions for modules. This method is more suitable for advanced users.

2. Delegation. EigenLayer also allows delegating node operation to other participants on the network. This is a convenient option for users who want to contribute to EigenLayer but avoid the technical aspects.

Diversity of Stakers

EigenLayer recognizes that stakers may have different preferences and capabilities. Some may have powerful computers suitable for solo staking, while others may prioritize convenience through delegation.

Additionally, stakers may have different risk tolerances. EigenLayer allows modules to adjust their requirements to match specific stakers, enabling a more flexible network.

Actively Validated Services (AVS)

EigenLayer adopts Actively Validated Services (AVS) as specific services within the Ethereum ecosystem that require active validation and enhanced security. AVS can include applications requiring greater stake, such as decentralized finance (DeFi) platforms, cross-chain bridges, and other critical infrastructure. By leveraging AVS, developers can ensure their applications receive the necessary security and validation from a dedicated group of restakers, improving the overall trustworthiness of their services.

Traditional Staking vs. EigenLayer Staking

EigenLayer transforms traditional Ethereum staking by offering a unique approach through its "restaking collective" concept. Let's examine the key differences between traditional staking and EigenLayer staking.

Liquidity

In traditional staking, staked ETH is locked temporarily. While staked ETH remains locked, stakers cannot use it for other purposes. In contrast, while the underlying ETH remains in stake, EigenLayer allows users to leverage it for other purposes. For example, stakers can use it to enhance the security of various applications built on Ethereum.

Participation and Rewards

With traditional staking, participation is relatively straightforward. Essentially, users lock their ETH and earn rewards according to the staking protocol they choose.

EigenLayer, on the other hand, offers a broader range of participation options. Users can choose between solo staking or delegation. Delegation could be a better option for users without advanced technical knowledge in the crypto field.

Moreover, EigenLayer staking can potentially be more rewarding. Modules with greater security needs could offer higher rewards to stakers protecting them.

Security Focus

In traditional staking, staked ETH directly contributes to the security of the Ethereum blockchain. In EigenLayer staking, security becomes modular. Users can contribute to the security of specific modules within the Ethereum ecosystem. The overall security of a module typically depends on the collective staking power directed toward it.

EigenLayer Airdrop

EigenLayer airdrops are structured to occur across multiple seasons, each containing one or more phases. In total, EigenLayer allocated 15% of the total EIGEN token supply for distribution across all seasons.

Season 1, Phase 1

Season 1 of the EigenLayer airdrop campaign began with 6.7% of the total token supply. The token claim period extended over several months, providing eligible participants with a window to claim their tokens.

The initial snapshot occurred in March 2024, with extra airdrops allocated to users who performed ETH or LST restaking on EigenLayer during the designated period.

To participate in the first phase of the airdrop, users had to meet specific criteria:

• Maintain or stake LRT tokens during a determined period.

• Active participation in EigenLayer governance processes.

• Contribute to the development or testing of EigenLayer modules.

• Participate in community activities, such as forums or social media discussions related to EigenLayer.

Season 1, Phase 2

DeFi users who participated in platforms such as Kelp, Pendle, Equilibrium, and others before the initial snapshot date could be eligible for the Season 1 Phase 2 airdrop. This phase aims to reward long-standing followers and early participants in the network, encouraging greater community engagement and participation.

To participate in the airdrop, users must have participated in the initial phase of the EigenLayer restaking program or been followers of the protocol for an extended period. Specific eligibility criteria may include holding or staking LRT tokens, participating in network activities, or engaging in governance processes.

How to Claim EigenLayer Airdrops

Be cautious of fraudulent websites and phishing attacks. Ensure you are using official websites and channels.

Eligible users can claim their airdrop tokens through the EigenLayer platform. The process involves connecting your wallet, verifying eligibility, and following the indicated steps.

Following the initial distribution, EIGEN tokens from the early phases became usable for staking or delegation after being claimed, though transfer restrictions applied during the initial period.

Season 2

According to the EigenLayer Foundation, Season 2 has been launched, and any participation in the ecosystem beyond the initial snapshot date is considered for Season 2 airdrops. However, specific distribution details for Season 2 have not been fully outlined.

Enhanced Security for EigenDA

In recent developments, EigenLayer enhanced the security of EigenDA (its decentralized applications platform) to counter Sybil attacks and DDoS attacks.

Sybil Attack Prevention: In Sybil attacks, a malicious actor creates multiple identities to gain disproportionate influence on the network. EigenLayer's enhanced security measures include stricter identity verification processes and mechanisms to detect and prevent malicious activities.

DDoS Attack Mitigation: Distributed Denial of Service (DDoS) attacks aim to overwhelm the network with an avalanche of traffic, causing service disruptions. To counter this, EigenLayer has implemented robust traffic filtering mechanisms and rate limiting. These measures ensure that legitimate traffic is prioritized and malicious traffic is effectively blocked, maintaining the availability and performance of the EigenDA platform.

Continuous Monitoring: EigenLayer has also introduced continuous monitoring systems and threat detection to proactively identify and respond to potential security threats. This involves real-time analysis of network traffic, anomaly detection, and rapid incident response to address any emerging security issues.

Advantages and Disadvantages of EigenLayer

Advantages

1. Enhanced Security for dApps. By leveraging a pool of validators for multiple modules, EigenLayer strengthens the overall security of decentralized applications (dApps) built on those modules. This fosters a more trustworthy environment for users interacting with dApps.

2. Testing Environment. EigenLayer acts as a platform for testing and validating new Ethereum functionalities before integrating them into the main network. This allows developers to experiment with innovative ideas and features in a controlled environment.

3. Permissionless Innovation. Developers no longer need to create their own validator sets to secure their applications. Instead, they can leverage the existing pool of secure validators offered by EigenLayer through restaking. This generally reduces the barrier to entry for developers and encourages more innovation on Ethereum.

Disadvantages

1. Complexity. EigenLayer introduces a new layer of complexity to the Ethereum ecosystem. Understanding how restaking works, choosing the right modules to participate in, and managing technical aspects (in the case of solo stakers) can be challenging for some users.

2. Centralization Risks. While EigenLayer promotes decentralized trust, dominant staking pools may emerge, leading to a degree of centralization within the restaking collective.

3. Module Collusion Risks. The modular design of EigenLayer offers flexibility but also presents a potential risk of collusion between malicious actors controlling multiple modules.

Conclusion

The "restaking collective" of EigenLayer serves as a potential revolutionary factor for decentralized trust on Ethereum. By enabling permissionless innovation and providing a testing ground for Ethereum functionalities, EigenLayer can play a crucial role in shaping a future of robust, secure, and scalable decentralized applications.

FAQ

What is EigenLayer? What are its core functions?

EigenLayer is an Ethereum-based protocol enabling re-staking of staked ETH or LSD tokens to provide security for various services. Its core functions are facilitating collective security for decentralized applications at lower costs and enabling Ethereum stakers to earn additional yields while supporting multiple protocols simultaneously.

How to restake on EigenLayer? What are the steps?

Convert your staked tokens to Liquid Staking Tokens (LST), then deposit them into EigenLayer smart contracts. You will receive derivative tokens like eETH for staked ETH, eADA for ADA, eDOT for DOT, or eXTZ for XTZ. The exchange rate depends on market supply and demand.

What are the risks of restaking on EigenLayer? How are returns calculated?

EigenLayer restaking risks include smart contract vulnerabilities, operator reliability issues, and slashing risks. Returns are generated by sharing staking security with other protocols. Note that most restaking protocols lack withdrawal mechanisms, requiring secondary market liquidity for exit.

What is the difference between EigenLayer and other staking protocols like Lido?

EigenLayer focuses on ETH restaking and liquid staking tokens, enabling validators to earn additional rewards. Lido is a liquid staking protocol for ETH. EigenLayer offers broader validator participation and higher yield opportunities through restaking infrastructure.

What validators and operators does EigenLayer support?

EigenLayer supports restakers and operators. Operators register on EigenLayer and allow restakers to delegate to them. Restakers can restake through operators to participate in active validation services.

How does restaking impact Ethereum network security?

Restaking enhances Ethereum's security by leveraging its consensus mechanism. It increases the overall network stability and resistance to attacks, while allowing AVS services to borrow Ethereum's proven security guarantees, strengthening the entire ecosystem.