A complete analysis of the EigenLayer ecosystem: the prologue to re-staking and the rise of AVS

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HotcoinGlobal
1 months ago
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As more and more blockchain and crypto projects seek to reduce startup costs through shared security models, EigenLayers re-staking model may become an important direction for future blockchain network security architecture. In addition, it may also promote the emergence of new economic models and investment opportunities, especially in the fields of DeFi and cross-chain operations. It not only brings innovation and value to the Ethereum network, but also provides power and direction for the entire blockchain ecosystem.

EigenLayer, a re-staking protocol based on the Ethereum network, proposes to use ETH staked for Ethereum network verification to share security and capital efficiency with other protocols, while providing additional interest to protocol participants. Driven by concepts such as AVS, re-staking, and points system, a huge ecosystem has gradually formed. From the beginning of 2024 to now, EigenLayers TVL has increased 12 times, attracting about $160 million in investment from crypto VCs including a16z, and quickly rose to the second place in the total TVL ranking of DeFi protocols, second only to Lido. Recently, with the launch of the EigenLayer mainnet, it has aroused heated discussions and widespread attention in the industry.

1. EigenLayer Overview

EigenLayer is an Ethereum-based re-staking protocol that allows ETH that has been staked on the Ethereum network to increase the security of the network by re-staking. That is, users who have staked ETH can choose to join the EigenLayer smart contract to re-stake their ETH and extend cryptoeconomic security to other applications on the network. At the same time, it will provide additional benefits to network participants. This process not only improves the efficiency of capital utilization, but also enhances the overall security of the network.

EigenLayer supports the secure operation of other blockchain protocols and applications by leveraging ETH that has already been staked on Ethereum, a process called restaking. Restaking allows Ethereum validators to use some or all of their staked ETH to support other Active Validation Services (AVS), such as bridge protocols, sequencers, and oracles. These services usually require their own staking and verification mechanisms to ensure network security, but through EigenLayers restaking function, they can obtain Ethereum-level security without attracting a lot of capital themselves.

Through re-staking, the original single-purpose staked capital can support multiple networks at the same time, thereby improving the capital efficiency and security of the entire ecosystem. This mechanism does not require additional native tokens. You only need to use ETH or liquid staked tokens (LST), such as stETH, rETH, etc., to participate in the AVS stake verification process.

The features and advantages of EigenLayer are as follows:

1. Establish a new security sharing model: The innovation of EigenLayer is that it brings a new security sharing model to Ethereum, allowing different blockchain protocols to share Ethereums security infrastructure without having to build a huge network of verification nodes themselves, greatly reducing the startup cost of new blockchain protocols. In addition, re-staking also increases the anti-attack ability of the entire network, because attacking any protected protocol requires overcoming the security protection increased by re-staking.

2. Improve ETH capital efficiency: The re-staking mechanism introduced by EigenLayer improves the liquidity and efficiency of capital. Now the same ETH can serve multiple networks at the same time. While enjoying the original staking income, users can also get additional rewards for participating in other AVS protocols. It brings higher flexibility and scalability to the Ethereum network and the entire blockchain ecosystem.

3. Lower the threshold for participation: Through the re-staking mechanism, small stakers can also participate in the network security of Ethereum. Stakers do not have to have a full staking threshold of 32 ETH, and individual stakers can also participate in the form of Liquidity Staking Tokens (LST). EigenLayer supports LST, such as stETH, which represents the staking rights of the original ETH and can be freely circulated and used in DeFi projects.

4. Improve decentralization: By allowing small amounts of staking, EigenLayer further decentralizes the contributor base for network security and reduces reliance on large stakers, which helps prevent potential centralization risks and validator monopoly. In addition, EigenLayers design also encourages broader community participation and governance, making the blockchain network more democratic and decentralized.

2. Design principle of EigenLayer

1. Re-staking: In the EigenLayer ecosystem, re-staking provides security guarantees shared with Ethereum, which is the foundation of the entire EigenLayer. Participants re-stake their ETH on Ethereum to the EigenLayer network, which serves as security capital to support the security and operation of the network. Stakers will receive dual benefits from native Ethereum network verification and AVS.

2. Active Verification Service (AVS): Active Verification Service (AVS) uses these re-staked ETH to enhance its service functions. AVS is a special service or application that runs on EigenLayer and directly uses these re-staked funds to provide enhanced network services. These services can include multiple functions such as computing, storage, and data processing. AVS can be likened to middleware or modules, such as new blockchains, DA layers, virtual machines, oracle networks, cross-chain bridges, and other projects. AVS can provide data services for DeFi, games, and wallets.

3. Rollups: In the EigenLayer ecosystem, Rollups, as a solution for Ethereum Layer 2, benefit from the modular services provided by AVS. For example, through services such as EigenDA (EigenLayers super data availability service), Rollups can achieve super-scaling of data processing, which greatly increases its ability to process large-scale data.

4. Operators: Operators play a key role in the EigenLayer ecosystem. They perform various verification tasks, which in turn rely on the staked ETH as a security guarantee, which is also the basis for AVS to rely on. Operators responsibilities include but are not limited to verifying transactions, executing smart contracts, maintaining network security, etc. Their work ensures that AVS can run reliably and provide support for upper-layer applications and services.

5. Safeguards: Considering the additional risks that re-staking may bring, EigenLayer has introduced a number of risk control mechanisms. For example, for security issues that may be caused by AVS, EigenLayer has designed a system called Distributed Validator Cluster (DVC) to disperse risks and ensure that even if some AVS have problems, it will not affect the security of the entire network. In order to ensure the normal operation of the network and the security of the pledged capital, EigenLayer implements a slashing mechanism for pledgers who operate improperly. Slashing refers to the method that EigenLayer will use to ensure the honesty of AVS operators. If the validator acts maliciously, he will face the risk of having his pledge revoked.

6. Points mechanism: EigenLayer has introduced an internal points system that awards one EigenLayer point every hour for each ETH deposited by each re-staker. The purpose of this method is to measure the users contribution to the network, and the number of points reflects the activity and duration of their staking. Although the EigenLayer team has not yet clearly specified the specific use of points, nor has it announced any details about the launch of EigenLayer tokens, many users continue to re-stake and look forward to possible token airdrops based on points in the future. This shows that users have expectations and confidence in the future development of EigenLayer.

A complete analysis of the EigenLayer ecosystem: the prologue to re-staking and the rise of AVS

3. EigenLayer re-staking method

Currently, EigenLayer supports two restaking methods: Liquid Restaking and Native Restaking.

1. Liquidity Re-Pledge

Allows staking of Liquid Staking Tokens (LST), which are staking certificates issued by LSP (Liquid Staking Protocol) that represent the rights to the original ETH stake and can be freely circulated and used in various decentralized finance (DeFi) protocols, without affecting the stakers staking status and reward collection on Ethereum. LSP solves certain limitations of Ethereum network staking, and users can participate in Ethereum network verification and collect verification rewards with less than 32 ETH of capital. At the same time, it allows the use of LST in DeFi protocols to generate additional income, or by selling LST on the market without waiting for the unstaking period, effectively providing the same benefits as unstaking. For example, Lido Finance is currently the most well-known LSP, and the LST issued by Lido Finance is stETH. EigenLayer accepts users to stake stETH, making it an infrastructure to ensure the security of AVS.

Currently, EigenLayer supports a total of 12 types of LST for liquid re-staking, including stETH, swETH, mETH, stETH, wbETH, rETH, sfrxETH, cbETH, osETH, oETH, lsETH, and ankrETH.

EigenLayer only accepts LST re-staking deposits during a specific time period, or limits the incentives and governance participation rights obtained by a single LST from EigenLayer to a maximum of 33%. To date, EigenLayers LST re-staking limit has been increased five times. On April 16, EigenLayer announced the cancellation of all LST deposit limits and reopened the deposit window, allowing ETH to be re-staked through EigenPod on the EigenLayer application.

2. Local re-staking

Local re-staking is a more direct method, where the staker uses the staked ETH directly for EigenLayers smart contract, that is, the Ethereum PoS node validator connects the ETH staked in the network to EigenLayer to participate in the AVS verification process. Performing local re-staking requires staking at least 32 ETH, and participants need to directly manage an Ethereum node, which provides a higher entry barrier than liquid re-staking.

Since ETH is directly used in EigenLayers smart contracts, local re-staking provides higher security. The pledged assets are directly exposed to Ethereum and AVSs penalty standards, increasing capital protection. Compared with liquid re-staking, local re-staking does not involve any intermediate tokens, which reduces the risk of token volatility or mismanagement. However, its disadvantage is that the liquidity of funds is lower, and it may take longer to unlock and transfer assets.

IV. EigenLayer Ecosystem Status and Project Inventory

At present, the EigenLayer ecosystem has begun to support multiple AVS and has been integrated with multiple well-known DeFi protocols and other blockchain services. It allows the use of different types of staking proofs (such as LST and local ETH) to support these services, allowing capital to be used more efficiently.

On April 10, EigenLayer announced the official launch of the blockchain mainnet. The launch was also accompanied by the launch of EigenDA, a data availability (DA) service launched by the EigenLayer team. At the end of February, a16z announced an investment of $100 million in EigenLayer, making it a crypto unicorn with a valuation of tens of billions. As of April 18, according to DefiLlama data, EigenLayer TVL has exceeded $12.8 billion.

As of April 18, EigenLayer has distributed approximately 4.2 billion points to all re-stakers. The trading price of each EigenLayer point on the over-the-counter market Whales Market is $0.165.

A complete analysis of the EigenLayer ecosystem: the prologue to re-staking and the rise of AVS

1. Inventory of Eigenlayer Ecosystem AVS Projects

Currently, there are 13 AVSs announced by EigenLayer. EigenDA, the first AVS launched, was developed by Eigen Labs to help other blockchain protocols store transaction data and other information. AVSs other than EigenDA will be able to register with the protocol, but they are not yet fully deployed.

A complete analysis of the EigenLayer ecosystem: the prologue to re-staking and the rise of AVS

1. EigenDA: EigenDA is the first AVS on EigenLayer, which provides efficient, ultra-large-scale throughput data availability services for Rollups. Through the shared cryptoeconomic security provided by EigenLayers re-stakers, EigenDA makes Rollups cheaper and more efficient when processing large-scale data. On April 18, EigenLayer announced that it had lowered the staking threshold for EigenDA validator nodes from 320 ETH to 96 ETH. EigenLayer said that the change will allow more new validator nodes to participate in EigenDAs AVS verification service.

2. Aethos: Aethos is a smart contract policy engine that abstracts pre-transaction calculations while maintaining decentralization. Aethos simplifies the pre-processing of smart contracts, making contract execution more efficient and secure.

3. AltLayer: AltLayer is a decentralized inter-layer network designed for Rollups. It uses EigenLayer to achieve fast finality and guarantees data availability through EigenDA, thereby optimizing interoperability and performance between Rollups.

4. Blockless: Blockless is a verifiable computing engine that uses economic incentives through a re-staking mechanism. It provides a decentralized verification platform for complex calculations, enhancing the transparency and credibility of the calculation results.

5. Drosera Network: Drosera Network creates a strong and responsive group of first responders through re-staking, focusing on decentralized verification. This provides a new way for emergency response and secure verification for the network.

6. Espresso: Espresso is a decentralized serialization service that uses re-staking to achieve alignment and strong economic security on Ethereum. It guarantees the order and consistency of transaction execution.

7. Ethos: Ethos is a security coordination layer that leverages the security of re-staked ETH to power Cosmos. It enhances the security and efficiency of cross-chain interactions.

8. Hyperlane: Hyperlane uses EigenLayer to enhance message security for inter-chain application developers and provides security for inter-application communication through the economic security of re-staking.

9. Lagrange: Lagrange creates a secure and scalable light client dedicated to OP Rollups through re-staking. It improves the accessibility and responsiveness of the network through light clients.

10. Near: Near aims to build a fast finality layer to improve composability and liquidity in the Ethereum Rollup ecosystem. This helps improve the efficiency of cross-Rollup operations.

11. Omni: Omni is a low-latency interoperable network that connects all Ethereum Rollups through re-staking, ensuring the security and efficient operation of the entire network.

12. Silence Laboratories: Silence Laboratories is building multi-party computation (MPC)-based authentication libraries and SDKs that are agnostic to technology stacks and devices, improving the security and flexibility of the network.

13. Witness Chain: Witness Chain is a monitoring network that uses re-staking for proof, focusing on the security and proof of position of Rollup. By providing the ability to prove diligence and position, it enhances the monitoring and verification capabilities of the network.

(II) Inventory of Eigenlayer Ecosystem Rollups Projects

The Rollups project uses EigenLayer technology to achieve fast finality and efficient data availability, further expanding its blockchain solutions. Currently, there are 9 integrated Layer 2 solutions. AltLayer is both AVS and Rollup project.

A complete analysis of the EigenLayer ecosystem: the prologue to re-staking and the rise of AVS

1. Caldera: Caldera is a modular blockchain platform that allows developers to deploy Rollups with EigenDA services in one click. This platform greatly reduces the technical threshold for developers by simplifying the deployment process, allowing more innovations and applications to be launched quickly.

2. Celo: Celo was originally an independent layer 1 network, and is now using EigenDA to transform into Ethereum’s layer 2 Rollup. Through this transformation, Celo can better integrate into the Ethereum ecosystem while improving the performance and scalability of its network.

3. Cyber: Cyber is a modular layer-2 network designed for social and mass adoption, using EigenDA to optimize data processing and user experience. Cyber aims to promote the application of blockchain technology in the field of social media through efficient data services.

4. Layer N: Layer N is a second-layer network designed to accelerate decentralized finance (DeFi), and also uses EigenDA to improve data processing capabilities. Through this technical support, Layer N aims to provide higher efficiency and better scalability for DeFi applications.

5. Mantle: Developed by BitDAO, Mantle is a modular Rollup using EigenDA. This project provides users with an efficient and powerful blockchain platform by combining BitDAOs resources and EigenDAs technology.

6. Movement: The Movement network consists of a series of modular blockchains based on the Move language, also using EigenDA technology. This design enables Movement to provide flexibility while ensuring efficient data processing and security.

7. Polymer Labs: Polymer Labs is a Rollup that combines the Cosmos SDK and the OP stack, uses EigenDA for data availability services, and settles in Ethereum. This multi-technology integrated solution provides its users with diverse application scenarios and strong network support.

8. Versatus: Versatus is a project in collaboration with EigenDA that aims to introduce the world’s first stateless Rollup to the Ethereum ecosystem. This innovative Rollup design brings new development potential to the Ethereum ecosystem through efficient data processing and unique network structure.

(III) Inventory of Eigenlayer Ecosystem LRP-related Projects

The Liquid Restaking Protocol (LRP) is a key component in the EigenLayer ecosystem, designed to attract and increase user participation in a flexible and efficient manner. LRP allows users to deposit ETH or LST (liquid staking tokens) and re-stake on EigenLayer on behalf of the user, which provides users with a more flexible way to participate in the EigenLayer ecosystem. Users can choose to re-stake through the LRP platform without directly participating in the complex staking process, including earning EigenLayer points and additional points provided by the platform.

To prove the users deposit and participation, LRP will issue LRT, which represents the users staked share in LRP. LRT not only serves as a certificate of the holders assets, but can also be freely traded on the DeFi market, providing additional liquidity and income opportunities, thereby further increasing income on the basis of EigenLayer points. Representative LRT-related projects include Ether.fi , Kelp DAO, EigenPie, Pendle Finance, and Gearbox.

1. Ether.fi : As a member of the EigenLayer ecosystem, Ether.fi initially started as part of the LSP, but soon demonstrated its breadth of application in the DeFi field through its innovative eETH and weETH tokens. These two tokens not only ensure compatibility with mainstream DeFi protocols through the repurchase mechanism and reward nature of the design, but also enhance user participation and the liquidity of pledged assets through the EigenLayer points farm.

2. Kelp DAO: Kelp DAO provides users with an attractive staking and restaking scenario through its unique restaking solution and Kelp Miles points system. Its development reflects the efforts of the LRP ecosystem in improving user experience and reducing transaction costs, especially when high gas fees and network congestion often hinder user experience.

3. EigenPie: As part of the MagPie ecosystem, EigenPie focuses on aggregating governance tokens and influencing DeFi protocol decisions. Its strategy is to diversify risks and optimize the liquidity and usability of tokens through independent re-staking methods. This is particularly critical to promoting the long-term sustainable development of the protocol.

4.Pendle Finance: Pendle Finance has partnered with Ether.fi to launch Ether.fi s eETH as the first LRT available on its platform. Ether.fi has designed a system to distribute EigenLayer points and Ether.fi loyalty points to users who hold YT tokens for eETH (YT-eETH). This enables users to buy YT-eETH that is close to expiration (its price is getting cheaper) and accumulate interest and points until that date.

5. Gearbox: Gearbox is a leveraged yield protocol where borrowers leverage their positions by depositing collateralized assets in a credit account and assets borrowed from the protocol. Gearbox launched a leveraged points strategy through cooperation with the LRP protocol. Gearbox allows EigenLayer points and LRP local points to be accumulated in a credit account and sent to the borrowers wallet, providing users with up to 9x leverage points.

5. EigenLayer Ecosystem Risks and Challenges

As a re-staking layer built on Ethereum, EigenLayer provides innovative solutions for blockchain technology, but it is also accompanied by many risks and challenges.

1. Technical implementation risk: The implementation of EigenLayer is highly dependent on complex technical solutions, including the stability and security of smart contracts. Smart contract vulnerabilities or security issues at the protocol level may lead to serious financial losses. In addition, since EigenLayer is directly integrated with Ethereums node ecosystem, any imperfections in technical execution may affect its overall security and efficiency.

2. Market acceptance: Although EigenLayer provides an innovative re-staking solution, market acceptance remains an important uncertainty. The volatility of the crypto market may affect the value of the staked assets, and the markets acceptance of this emerging technology will directly affect the liquidity and widespread application of EigenLayer.

3. Centralization risk: The re-staking model may lead to the concentration of capital in a small number of efficient validators, which may further aggravate the centralization trend and form a market monopoly, thus posing a threat to the decentralized principle of the Ethereum ecosystem.

4. Possibility of consensus split: If the operation mode of EigenLayer directly intervenes in the node ecology of Ethereum, it may affect the social consensus of Ethereum. If not handled properly, it may lead to community split or even chain fork.

5. Risks of AVS: EigenLayer provides additional features and services through its AVS (Active Verification Service), but the security and efficiency of these services rely on the reliability and technical implementation of the operator. Any operational failure may result in a loss of staked ETH. For AVS, which requires very high network security, re-staking may not provide sufficient protection, which may affect the trust and adoption of these services.

6. EigenLayer Ecosystem Development Outlook

EigenLayer has gradually evolved from the concept of sharing the security of the Ethereum network and generating additional income to a large ecosystem to meet the needs of infrastructure builders and investors, sparking huge interest and high expectations in the infrastructure industry and crypto market.

1. Expansion of AVS: Following the launch of EigenDA, EigenLayer will introduce more AVS and provide more customized services, such as enhanced data processing capabilities, more efficient transaction verification, etc., thereby expanding its service scope and influence.

2. Enhanced security: By implementing advanced security measures and audit mechanisms such as penalty mechanisms, we ensure that the operation of AVS is not affected by malicious attacks or vulnerabilities.

3. Cross-chain integration: Develop cross-chain solutions to allow EigenLayer to not only serve Ethereum, but also interoperate with other major blockchains, improving its market applicability and user base. Cooperate with more blockchain and crypto projects to achieve technical interoperability and improve overall network performance.

4. Ecosystem expansion: Establish partnerships with more ecological projects such as DeFi, DAO and NFT platforms, and bring value to these platforms by providing efficient re-staking solutions.

5. Integration of emerging technologies: Explore the possibility of combining emerging technologies such as artificial intelligence and the Internet of Things with EigenLayer technology to create new application models.

6. Competition and cooperation: As the largest liquidity staking protocol in the Ethereum ecosystem, Lido not only stakes the most ETH, but also has many node operators. Perhaps these direct conflicts of interest between EigenLayer and Lido will also make Lido rethink its business model and sustainability, and EigenLayer will also need some time to gradually fill in the missing modules.

As more and more blockchain and crypto projects seek to reduce startup costs through shared security models, EigenLayers re-staking model may become an important direction for future blockchain network security architecture. In addition, it may also promote the emergence of new economic models and investment opportunities, especially in the fields of DeFi and cross-chain operations. It not only brings innovation and value to the Ethereum network, but also provides power and direction for the entire blockchain ecosystem.

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