ReStaking is a fairly new mechanism that was introduced recently. Today, let us learn about EigenLayer, the first ReStaking project on Ethereum.
What is EigenLayer?
EigenLayer is a solution that allows users who stake ETH (stakers) to re-stake their ETH into smart contracts to ensure the security of other protocols.
This ReStaking solution will benefit both the protocol and restakers:
The protocol benefits from Ethereum’s security because collateral is pledged to maintain the security of Ethereum and the protocol.
Re-stakers will receive staking rewards from two sources, namely from Ethereum and from the security protocol.
Re-hypothecaters receive additional incentives for securing other protocols, but are also exposed to the risk of the protocol's cutback conditions.
What problem was EigenLayer created to solve?
A current challenge in blockchain design is decentralized security. This is especially true on the Ethereum network. Middleware applications and non-EVM applications built on the Ethereum network will be responsible for creating separate trust networks. However, building security systems is expensive and resource-intensive. Additionally, once a security system is established, resources are required to maintain and expand it. As more applications are built, security will become increasingly fragmented.
EigenLayer is the first project to launch a new mechanism "ReStaking" aimed at solving decentralized security issues. The ReStaking feature is a set of smart contracts where ETH stakers can reuse their locked ETH to extend the security of other protocols. EigenLayer creates an intermediary layer in which stakers agree to grant additional execution rights to their staked ETH and allow them to effectively reoccupy other protocols.
An important aspect of the EigenLayer ReStaking feature is that it will create additional penalty conditions for ETH staking at the consensus layer. This extends security as new penalty conditions can be introduced to satisfy the needs of other protocols such as bridges and data availability layers built on top of Ethereum. As a result, EigenLayer is free to deploy ETH ReStaking for other protocols while leveraging penalty conditions to incentivize validators to act honestly. EigenLayer is designed so that the project can provide authentication services outside of Ethereum.
ReStaking mechanism
The ReStaking mechanism provides two basic ideas: centralized security and free market governance.
ReStaking creates an optimal security system called centralized security. This system allows protocols to exploit the security of the Ethereum network and significantly increases the cost of attacking the protocol. Staked Ether is used as collateral to secure Ethereum and is also used to provide verification services for other protocols. With centralized security, participating validators will have to agree to new cutting conditions for their stakes.
Free market governance allows protocols to actively control the amount of centralized security consumed. EigenLayer creates a competitive market for centralized security determined by supply and demand. The key here is that validators do not have to provide any centralized security. Instead, they have the ability to define their own risk and return parameters before servicing a given protocol. This allows validators to selectively choose which protocols to provide services to.
This results in an open and competitive market that eliminates many of the inefficiencies present in existing security models. More specifically, the burden of building a security system is eased, as the new protocol makes it possible to simply purchase security on the EigenLayer open marketplace rather than having to create and maintain it yourself. ReStaking also reduces the marginal cost of validator services because restakers can reuse their initial capital on various protocols outside of Ethereum to earn more profits.
Application of EigenLayer
The first application built on EigenLayer: EigenDA.
EigenDA is a data availability layer that brings a new paradigm to the current world of data availability. In short, EigenDA allows Ethereum to offload data availability within the security of the ecosystem, rather than moving it off-chain.
This is achieved through a dual governance model consisting of: Ethereum stakers (Ethereum’s staking economic governance) and the remainder run by RocketPool ETH stakers (or other liquid staking platforms). In order to achieve data availability, approval from both representatives must be obtained. This can be seen as a combination of economic trust and decentralized trust.
EigenDA is a pure data availability layer, so even in its current state it can achieve up to 15 MB/s throughput, which is 176 times higher than Ethereum’s current throughput without danksharding. The founders of EigenDA basically took advantage of EigenLayer's higher degree of freedom while using danksharding's core cryptographic architecture to build it. Therefore, EigenDA's expected throughput in the future will be 1 GB/s.
In addition, EigenLayer can be applied in many other fields, such as:
Mev Boost
Oracle
Bridge
EigenLayer’s remortgage method
EigenLayer allows users to participate in rehypothecation using different asset classes:
Native Staking: Validators re-stake their staked ETH.
LSD remortgage: The verifier remortgages the mortgaged assets through Lido or Rocket Pool.
ETH LP re-mortgage: The validator re-mortgages the LP tokens of a token pair consisting of ETH.
LSD LP re-mortgage: Validators re-mortgage LP tokens of token pairs containing ETH.
There are two ways to participate in EigenLayer remortgage:
Single-person staking: Re-stakers can choose to provide verification services for the protocol or delegate operations to other operators, while continuing to serve as a validator on the Ethereum network.
Trust model: The remortgager selects a trusted operator for authorization. If the chosen operator does not comply with the agreement, there will be certain penalties.
Advantages of EigenLayer
Using EigenLayer, developers can take full advantage of Ethereum’s security without having to invest in the cost of operating their own security system. When leveraging Ethereum's security, the protocol simultaneously controls underlying mechanisms such as consensus mechanisms and penalty conditions. So this will give protocols control over the elements they want to prioritize, whether it's decentralization, scalability or any other factor.
EigenLayer risks to consider
EigenLayer grants access to its staked ether through other stakers. If a certain amount of Ether is staked through EigenLayer and the protocol is hacked/mined, this will severely impact the Ethereum network.
in conclusion
Through this article, you may already have a certain understanding of information related to the EigenLayer project.
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