What are AVSs and Operators?
As staking evolves, like every blockchain innovation, restaking emerges with formidable potential to shift the staking ecosystem’s paradigm. It is an innovative concept birthed by EigenLayer, merging Ethereum’s security layer with blockchain-based applications functioning outside the Ethereum Virtual Machine (EVM).
All About AVSs on EigenLayer
The blockchain-based applications, called Actively Validated Services (AVSs), can take advantage of Ethereum’s vast security and decentralization capabilities, making bootstrapping them secure and convenient. A lot of innovation occurs beyond the EVM, with AVSs like layer-2 chains, data availability layers, sequencers, dApps, cross-chain bridges, and virtual machines providing a whole host of utilities to the blockchain ecosystem.
Essentially, AVSs are blockchain applications using decentralized consensus mechanisms like Proof-of-Stake (PoS) and Proof-of-Work (PoW) to validate their transactions with the primary distinction of taking the consensus into their own hands, outside the scope of the Ethereum consensus layer.
Until recently, AVSs had no option but to set up independent consensus mechanisms to validate transactions. The validated data would then get sent to Ethereum for storage on its immutable ledger. However, AVSs have been exposed to several flaws and redundancies for the longest time due to the fracture between the security they provide and that provided by Ethereum.
Newly erected AVS validation mechanisms are vulnerable to malicious takeovers; they consist of small numbers of validators and small amounts of stakes as opposed to well-established networks like Ethereum. Ergo, they are prone to exploits as their validation processes are isolated from Ethereum, although they store their data on the blockchain.
Moreover, validators securing AVSs must invest in computing setups and acquire large amounts of AVS-related tokens for staking purposes. AVSs must then offer highly appealing staking rewards to attract node operators to secure their networks, which amounts to the most significant cost of operations for the applications.
AVSs deployed on EigenLayer overcome these problems as the restaking protocol creates a path to channel into Ethereum’s validation mechanism. Resultantly, newly launched AVSs can do without the tumultuous process of setting up their sole validation operations. With that, they gain access to the same level of security that Ethereum layer-1 transactions are validated with while simultaneously skirting the high costs of creating and overseeing their separate validation operations.
AVSs can access cost-efficient security from Ethereum thanks to how EigenLayer connects them with node operators — the next important element of EigenLayer.
Another Component of EigenLayer’s Innovation — Operators
Operators, or node operators, secure AVS transactions on EigenLayer by restaking their ETH on the novel protocol. At the most basic form, operators are Ethereum validators securing AVS applications for an added layer of validation rewards on top of what they receive from Ethereum.
Otherwise, operators can act as service providers on EigenLayer, validating AVS-related transactions for fees, while Ethereum validators delegate their entire ETH stakes to them. That way, Ethereum validators can collect a share of the AVS validation rewards and not indulge in the validation process themselves. Furthermore, users who hold ETH or ETH-related tokens like ETH LSTs, LPs, and LST LPs and do not validate on Ethereum can delegate their assets to operators on EigenLayer for a portion of AVS-related rewards.
AVS operators on EigenLayer get subjected to slashing mechanisms when the ETH they own are restaked through EigenLayer’s contracts. The slashing conditions are imposed by AVSs on operators to enforce crypto-economic security and breed good behavior, preventing coordinated attacks launched by operators to take over the applications. Therefore, delegators must be wary about the operators their assets get entrusted with. Bad behavior on the operators’ part can lead to delegators losing their deposits and rewards.
Additionally, EigenLayer fosters a free market for AVSs and operators. Operators can choose the AVSs they want to secure by analyzing the incentives offered and the risks involved. AVSs can also pick operators by considering factors like their experience validating similar applications and their reputation from validating other AVSs.
EigenLayer Can Go Beyond Restaking — Ask GenesisLST
EigenLayer’s restaking protocol furthers staking utility, spreading Ethereum’s security to more applications than before while enabling better reward generation for staking participants. If that was not enough, EigenLayer is gaining traction with developers who want to build on its potential.
The protocol’s restaking capabilities get employed by cutting-edge protocols like GenesisLST, which offers Liquid Restaking Tokens (LRTs) based on restaked ETH and LSTs. The protocol unlocks liquid positions, which is unfeasible with EigenLayer, allowing restakers to make additional profits by employing their LRTs in DeFi protocols.
Learn more about restaking on GenesisLST here.
