EigenLayer: Sharing The Security Of Ethereum
The decentralized Smart Contract middleware protocol lets users restake their ETH, contribute to further security, and earn increased rewards
After months of eager anticipation EigenLayer has officially launched its mainnet. For those in the Web3 space it has been almost impossible not to hear about the exciting new project… but it still has left some wondering what EigenLayer is all about.
So, what is EigenLayer?
Created by EigenLabs, EigenLayer is a Smart Contract middleware protocol built on Ethereum that is introducing opt-in LST “restaking”. It does this by allowing Ethereum users to leverage their liquid staked Ethereum tokens for additional rewards and security contributions. In doing so… EigenLayer “borrows” programmable trust from the Ethereum trust network, to secure multiple other networks.
This means that people who want to run a decentralized program don’t need to bootstrap a decentralized network. They can instead borrow Ethereum security using EigenLayer.
TL;DR
Already staked Ethereum is used to lend security to other projects such as bridges, protocols, oracle networks, and more.
Benefits of using EigenLayer:
New protocols using EigenLayer have lower cost barriers when they start and won’t even need their own token as they will be using Ethereum security through EigenLayer and can distribute rewards from their protocol revenue.
Validator network maintenance fees are also lower as they do not need to pay for costly inflation. This is on top of overall higher throughput, and improved scalability.
ETH holders meanwhile have the option to restake their ETH and receive more staking rewards.
And for chains that want additional security, they can choose to make use of a dual quorum system by using both a sovereign validator set and that provided by EigenLayer.
How does EigenLayer work?
Put in the most simple terms… EigenLayer offers value in the form of locked ETH tokens. This value is used to provide security to an Active Validated Service (AVS), which is a protocol or service (dApp) that’s built on top of EigenLayer, with Ethereum as the primary base.
When a project wants to make use of ETH security, they launch an AVS that then relies on the existing restaking-powered trust network of Ethereum. This security comes from permissionless operators that provide nodes that validate the tasks performed by the AVS.
The AVS can also choose to cap the amount of nodes that it integrates to its protocol, how they are rewarded and which operators they come from.
Other applications such as rollups can then be deployed on the AVS. Much like what we see with L1 and L2 chains.
Put into more detail… the graph below is an overall visualization of how the shared security system works. It details the movement of ETH being staked to LSTs then restaked to LRTs, then being delegated to operators, before finally being used to secure AVSs.
But what are operators?
Operators are individuals or organizations who enable ETH stakers to delegate their staked assets, in the form of native ETH or LSTs. The operators help run a range of services to AVSs, and improve the overall security and functionality of these networks.
Operators are permissionless, which means that stakers can also be operators and simply delegate to themselves.
Where does Cosmostation fit into all of this?
Since 2018 Cosmostation has been validating on more than 70 chains with over 99% uptime and has provided essential infrastructure.
Cosmostation is also a node operator for ~3,000 validators on Ethereum and is actively securing and looking to further secure a number of AVSs including:
- EigenDA
- Aethos
- Altlayer
- Blockless
- Drosera Network
- Espresso
- Ethos
- Hyperlane
- Lagrange
- Near
- Omni Network
- Silence Laboratories
- Witness Chain
- Brevis Co-Chain
- Silent Shard AVS
EigenLayer Security:
EL offers chains 2 types of security:
Pooled Security: Here attacking a network backed by EigenLayer security becomes more expensive as adverse actors would need more than majority of the ETH restaked value from EigenLayer to take over a chain’s service. Meanwhile, a network with an independent validator may have lower security threshold, making such an attack more viable.
Attributable Security: This allows networks to reclaim lost assets and refund users. This works by paying once-off for a type of insurance (pre-buy) on AVS and the money that is given to affected networks comes from slashed funds. This protection applies to all AVS’ provided by EigenLayer. (Available from EigenLayer V2)
It’s worth noting that projects can use a hybrid of both as the security features are not mutually exclusive.
Use Cases:
A number of AVSs (Actively Validated Services) using EigenLayer are planned or have already been launched including:
- EigenDA:
This is EigenLayer’s data availability (DA) layer for Ethereum that offers an alternative off-chain data availability to L2s. Projects that use it can save expenses on data management while providing a similar level of security. In essence EigenDA ensures data is accessible for nodes.
It does this by breaking up the Ethereum calldata into small pieces, after which zero knowledge proofs are used to allow the nodes to download the small pieces of data. EigenDA is the first officially launched AVS with others set to follow shortly. - Ethos:
A portmanteau of “Ethereum” & “Cosmos”; Ethos aims to be the “ETH Restake Hub for Cosmos”. It plans to do this by using EigenLayer to replicate the Cosmos “Mesh Security” concept. EigenLayer will handle Native Staking and Ethos will enable the Communication Layer into Cosmos. - Hyperlane:
Built to be chain-agnostic, Hyperlane is developing a permissionless interoperability layer that enables interchain composability. It’s development comes as more and more rollups seem likely, and these will need to be able to communicate easily and securely with each other. In a nutshell Hyperlane aims to enable connection and communication to any blockchain project where it has been deployed. It does this by using restaked ETH on EigenLayer for validation functions. Hyperlane also has a modular security stack which lets developers customize their interchain security.
EigenLayer Risks & Mitigations:
No blockchain project is without risks and these are some of the concerns facing EigenLayer…
- Increased slashing exposure: Restakers expose themselves to a higher chance of slashing, or losing part of their staked ETH, if they fail to secure one of the networks.
Mitigation: This is a risk that restakers take on themselves and is best mitigated by thorough due diligience on where they decide to restake. - Unintended slashing risk: ETH restakers and honest nodes could be slashed from both Ethereum and the AVSs they secure due to vulnerabilities.
Mitigation: EigenLayer has a slashing veto committee that can vote to reject an unintentional slash, should one occur. - Collusion risk: A number of operators could collude to attack a set of AVSs simultaneously thereby compromising the security of these services.
Mitigation: EigenLayer is building a mechanism to anticipate the likelihood of collusion among operators and will also allow AVSs to add parameters related to hacking prevention. - Single point of failure risk: EigenLayer receives the withdrawal credentials from ETH stakers. If it is exploited and has a significant amount of ETH staked, this creates a systemic risk for the mainnet.
Mitigation: One way this could be stopped is by reducing reliance on a single module. This could be done by connecting to multiple, independent modules that provide similar functionality.
Recent Developments:
- There is speculation of a potential airdrop of EigenLayer tokens in the near future for users restaking on EigenLayer’s Stage 1 mainnet.
- This may be why restaked ETH deposits on EigenLayer have topped US$ 14.7bil ($ETH 4.118 mil.).
- For users interested in putting their ETH into EigenLayer… there are a number of ways to do so…
- One is by running your own node (Native Staking of 32 ETH) and creating an EigenPod.
- The other method is to visit Etherfi, for which Cosmostation is an Ethereum node operator partner. There participants can swap ETH for eETH which means they are automatically natively restaking on EigenLayer. (Other LRTs are also available).
- This happens because Ether.fi has a mechanism that mints an NFT for every validator that is launched via the protocol.
- The eETH given to ETH stakers is minted from a liquidity pool that contains these NFTs.
- These NFTs control the 32 ETH staked and store metadata related to the validator — the client it runs, the geography it is in, the node operator, and any node services it is running. These NFTs can be used to create a programmable layer on top of staking infrastructure (made more powerful with integration with EigenLayer eventually.)
- The withdrawal credentials of these NFT validators are then set to EigenPods which allows stakers to receive a receipt token and thus accumulate EigenLayer restaking points.
- Other LRTs approved by EigenLayer that are still accepting liquid staking through their platforms include: Renzo, Stader (through Kelp), and more…
Other benefits for chains using EigenLayer:
- Chains that are secured through EigenLayer won’t have staking exposure risks where security and uptime could be compromised by bad validators.
- There are no token price pressure for rewards, so no need for costly inflation.
- And if chain is not adopted by large number of users, chain security still remains strong because of EigenLayer’s pooled security.
EigenLayer Backers:
The project has raised a total of US$ 64.5 mil. across two rounds of funding, with support coming from the likes of Blockchain Capital, Polychain, dao5, Robot Ventures, Figment Capital, Breyer Capital, Coinbase Ventures, and Zaki Manian (Sommelier).
EigenLayer Roadmap:
The project’s road map includes three stages, each with a new service addition.
- EigenLayer Stage 1: Stakers, Restakers
- EigenLayer Stage 2 (Current): Stakers, Operators, AVS launch (mainnet in first half of 2024)
- EigenLayer Stage 3: Payments, Slashing, more AVS (mainnet latter of 2024)
What is Cosmostation?
Cosmostation empowers blockchain businesses by providing secure solutions. Securing blockchain networks requires continuous operational oversight. Since 2018, Cosmostation has been providing a suite of robust solutions that enables businesses to contribute to blockchain network security and visibility without the overhead of managing infrastructure. Cosmostation is also an Ethereum operator and Cosmos genesis validator, providing invaluable infrastructure legos essential for scaling and onboarding users onto blockchain networks.
Mintscan
Moreover, Cosmostation offers its own blockchain explorer, Mintscan. It provides insightful interactions with chain data across various networks and also features a user-centric design, with transparency placed at the core of its ethos.
