EIGEN Eigenlayer

What is EigenLayer Used For?

EigenLayer is a protocol built on Ethereum that introduces a new concept called "restaking." This allows Ethereum stakers to reuse their staked ETH or Liquid Staking Tokens (LSTs) to secure additional decentralized applications (DApps) and services within the EigenLayer ecosystem.

Key Use Cases:

• Pooled Security: EigenLayer enables staked ETH to be used as cryptoeconomic security for protocols other than Ethereum, in exchange for protocol fees and rewards. This means validators can earn rewards from various sources without extra capital lockup, making the process more capital efficient.
• Decentralized Services: EigenLayer supports Actively Validated Services (AVSs), which include applications that require high levels of security, such as DeFi platforms, cross-chain bridges, or oracles. By restaking ETH, stakers can choose which AVSs to support, contributing to the security and functionality of the network while earning rewards.
• Data Availability Layers: EigenLayer can enable a hyperscale Data Availability (DA) layer, with a high DA rate and low cost. This is useful for building scalable and secure data storage solutions.
• Decentralized Sequencers: ETH restakers can form a single decentralized sequencer quorum that serves many rollups, enabling MEV management and censorship resistance.
• Light Node Bridges: Restakers can verify off-chain whether bridge inputs are correct, and if a strong quorum signs off, then the inputs are accepted. If someone challenges, then the input can be verified and EigenLayer operators can be slashed in the slow mode.
• Fast-Mode Bridges: Restakers can participate in ZK proof verification off-chain, and certify that proofs are correct on-chain. If incorrect, they can be slashed in slow mode. For optimistic rollups, EigenLayer enables a larger collateral pool to certify stateroots.
• Oracles: Oracles that enshrine price feeds into Ethereum can be built via EigenLayer if they require majority trust on restaked ETH, and are opt-in layers.
• Opt-In Event-Driven Activation: In EigenLayer, Ethereum validators who are block proposers and opted in to restaking can provide strong guarantees on inclusion of event-driven actions, at the risk of getting slashed.
• MEV Management: A variety of MEV management methods are feasible under EigenLayer, including PBS, MEV smoothing, and threshold encryption for transaction inclusion.
• Low-Latency Settlement Chains: EigenLayer allows restaked sidechains where ETH restakers can participate in new consensus protocols which have low latency and high throughput.
• Single-Slot Finality: Restaked nodes can attest they will not build on a chain that does not include a testified block, creating a finality pathway. Designing this to be opt-in and compatible with the consensus protocol is an important direction of research.

How It Works:

• Staking and Restaking: Users can stake ETH natively or use Liquid Staking Tokens (LSTs) like stETH, rETH, or cbETH to participate in restaking on EigenLayer.
• Delegation and Validation: Stakers can delegate their staked ETH to operators or act as operators themselves, running the software needed to secure AVSs.
• Marketplace: EigenLayer facilitates a marketplace between restakers and AVSs, where restakers can choose which services to support and earn rewards accordingly.

Benefits:

• Capital Efficiency: EigenLayer optimizes capital efficiency by reusing existing staked assets, reducing the barriers to security for new protocols.
• Pooled Security: EigenLayer enhances the trust and reliability of services built on Ethereum by providing a shared security pool.
• Innovation: EigenLayer encourages greater innovation and scalability within the blockchain ecosystem by enabling permissionless innovation and free-market governance.

Advantages of EigenLayer

• Increased Rewards: Users can earn additional rewards by restaking their ETH to secure other applications and protocols.
• Capital Efficiency: EigenLayer allows the same staked ETH to be used to secure multiple different protocols, improving scalability.
• Improved Ecosystem Security: It helps small projects gain access to Ethereum-level security and enhances the overall security of the Ethereum network.
• Innovation: EigenLayer opens opportunities for the development of various new services on top of Ethereum, promoting innovation and growth.
• Scalability: It enables the reuse of cryptoeconomic security, unlocking potential use cases and greater scalability.

Disadvantages of EigenLayer

• Complexity: The system is more complex than traditional staking, which can be an obstacle for novice users.
• Centralization Risk: If too much ETH is concentrated in EigenLayer, it could pose a centralization risk for the Ethereum network.
• Technical Challenges: Managing multiple Actively Validated Services (AVS) with varying requirements and rules requires sophisticated technical infrastructure.
• Dependence: The security of AVS depends on the health of EigenLayer and Ethereum.
• Learning Curve: It requires a deeper understanding of how the protocol works, which can be challenging for some users.

Key Features of EigenLayer

• Restaking: Users can restake their staked ETH or liquid staking tokens (LST) into the EigenLayer smart contract.
• Delegation: Users can delegate their assets to an operator or run their own validator.
• AVS Validation: Validators can choose to validate various AVS connected to EigenLayer.
• Open Market: EigenLayer operates as an open marketplace where AVS can offer incentives to attract validators, and validators can choose which AVS to support based on potential returns and risks.

Founders of EigenLayer

EigenLayer is led by its founder and CEO, Sreeram Kannan. He is a former professor at the University of Washington who holds a PhD in Information Theory from U.C. Berkeley. Sreeram Kannan is known for his work in applying Information Theory to communication networks, machine learning, and blockchain systems.

Investors in EigenLayer

EigenLayer has attracted significant funding from various investors, including:

• Blockchain Capital: A leading venture capital firm focused on blockchain and cryptocurrency investments.
• Polychain: A well-known investment firm specializing in blockchain and cryptocurrency projects.
• Coinbase Ventures: The investment arm of Coinbase, one of the largest cryptocurrency exchanges.
• Andreessen Horowitz (a16z): A prominent venture capital firm that has invested $100 million in EigenLayer, highlighting its potential to add new revenue streams to Ethereum's consensus mechanism.
• Fenbushi Capital: A major crypto investment firm that has shown confidence in EigenLayer's innovative restaking protocol.
• Justin Sun: A high-profile investor in the crypto space who has also invested in EigenLayer.

Halal Status of Eigenlayer

• Halal Status: Yes
• Reason: Eigenlayer is a token designed to enhance the security and decentralization of the Ethereum network. It does not inherently represent or depict anything haram, and its functionality aligns with the principles of fairness and transparency in Islamic finance. Therefore, it can be considered halal based on these criteria.

Key Considerations for Shariah Compliance

• Underlying Asset: The token represents a utility within the Ethereum ecosystem, which is generally considered halal.
• Functionality: Eigenlayer's restaking mechanism does not involve haram activities such as gambling or fraud.
• Compliance with Islamic Finance Principles: It adheres to principles of fairness, transparency, and profit/risk sharing, which are core to Islamic finance.

Additional Information

• Eigenlayer Overview: Eigenlayer is a platform that allows users to re-stake their ETH to earn additional rewards, enhancing the security of new blockchain projects on the Ethereum network.
• Shariah Compliance in Crypto: The halal status of a crypto token depends on its underlying assets, functionality, and adherence to Islamic finance principles.