EigenLayer operates as a decentralized Ethereum restaking and security-as-a-service ecosystem. Its unique structure empowers developers across blockchains in a decentralized manner, enabling market participants to secure passive rewards. Here’s everything you need to know about investing in EigenLayer (EIGEN) and how it continues to drive innovation in the DeFi sector.
What is Restaking?
At the core of EigenLayer is a restocking protocol. Restaking features have become more popular over the last 3 years due to their added liquidity. A restaking protocol will provide stakers with a liquidity token that can be staked again, driving capital efficiency higher. EigenLayer allows users to stake the same ETH on the mainnet and across other options.
What Problems Does EigenLayer Attempt to Fix?
There’s a long list of problems that EigenLayer helps to solve for traders and developers. For one, it helps developers save on startup costs and time. The security-as-a-service (SaaS) feature allows users to stake their tokens to leverage pooled security options.
Pooled security eliminates the need to spend time nurturing a validator community through incentives. Instead, developers can leverage Ethereum’s proven security and stability, creating more user confidence and reducing time and effort across the board.
Lack of Sovereignty
Another issue that EigenLayer’s developers sought to eliminate is a lack of sovereignty. Currently, most developers utilize the Ethereum blockchain. As such, they are limited by both the technical and community restraints the network has in place. Sadly, this structure also limits innovation as it makes it difficult to utilize the most advanced blockchains when needed.
EigenLayer enables developers to build using whatever network they feel best suits their application. This approach opens the door for future developments and more customization. This freedom also helps to drive innovation while retaining a reliable security service.
Lack of Interoperability
Interoperability remains a top concern for developers nowadays. It hurts the market when there are islands of data and liquidity that can’t be leveraged by the community. EigenLayer supports full interoperability with top-performing networks, including Ethereum. Users can restake their ETH, earn rewards from DeFi protocols, and validate applications on other blockchains using Ethereum’s security.
Locked Liquidity
In traditional skating programs, you lock your crypto up for a select period and receive rewards after the time completes. The problem with this approach is that you can’t access the funding if another, more lucrative, option emerges. Restocking protocols help to free up locked liquidity and improve capital efficiency. They accomplish this task by issuing Liquid Restaking Tokens.
High Gas Fees
Another problem that has plagued the crypto market since its early days is gas fees. Even as these fees are decreased, more complex Dapps will require more computational power, adding to the overall gas fee conundrum. EigenLayer provides a low-cost alternative that reduces costs for mainnet and L2 users.
Benefits of EigenLayer
There are several benefits that EigenLayer introduced to users and developers. For one, its decentralized structure prevents censorship and helps to drive innovation by empowering developers to utilize unique and new networks. Additionally, it provides a customizable, robust, and scalable security solution to the market that opens the door for incentivization via commoditized decentralized trust.
Source – EigenLayer (EIGEN) Homepage
Security
Among the top benefits that EigenLayer brings to the market is the ability to restake tokens and gain access to pooled security. This method of securing a dapp or platform eliminates the need to cultivate validators directly. Instead, users can leverage the Actively Validated Services (AVS) to gain access to Ethereum’s proven security protocols.
EigenLayer also provides users with a reliable and easy-to-use self-custody staking feature. As a self-custody restaking protocol, you retain control of your assets during the restaking process, preventing losses due to rug pulls, platform hacks, outages, and other risks.
Increased Capital Efficiency
Capital efficiency can be boosted using EigenLayer’s stacking options. The protocol encourages users to secure passive returns by staking their ETH directly. They can then restake their Liquid Staking Tokens to secure additional rewards. This structure allows you to secure passive income from multiple protocols using the same capital.
How Does EigenLayer Work?
There are several components to the EigenLayer ecosystem that work together to create a robust and incentivized security ecosystem. The project combines a decentralized marketplace, pooled security, multiple tokens, and an AVS system that empowers developers to build more efficiently.
Actively Validated Services (AVS),
Actively Validated Services are offered by nodes in exchange for rewards. These services can include providing support for features like new execution environments, virtual machines, sidechains, data availability layers, oracle networks, bridges, and much more. Notably, stakers select AVSs to delegate their tokens in exchange for rewards. Interestingly, restaked ETH can provide security to multiple AVSs at once.
reStaking
Restakign is a core feature of EigenLayer. To restake, users first stake their ETH and receive LSTs that equal the value of the staked asset. This token can then be restaked via the AVS marketplace. The staker then receives LRTs. From there, they can select AVSs to back and continue to restake, securing additional rewards from multiple protocols with the same capital.
Increased Slashing Risk
The main thing to consider when retaking on EigenLayer is that stakers assume the added risk of slashing. Slashing refers to penalties charged for AVS malicious behavior or inactivity. The more AVS you delegate tokens to, the higher your slashing risks. As such, restakers should seek out the most trusted and reputable AVS options.
EigenLayer Marketplace
The EigenLayer Market connects stakers and those seeking security, creating a competitive security market. Notably, these protocols make it easy for those seeking crypto economic security features to find the best rates and save on bootstrapping costs. Also, the marketplace is non-custodial, adding to its security.
EigenDA
EigenLayer introduced a Data Availability (DA) layer designed to help L2s reduce their costs. Layer 2 protocols were built to alleviate congestion on the mainnet. They function by removing part, or all of the computations from the blockchain. Today, L2 serves a vital role in keeping gas prices low.
Interestingly, L2s can leverage the alternative off-chain data availability options to reduce congestion and provide near-endless storage options to developers at reduced rates. Interestingly, EigenLayer operates similarly, providing a data availability layer that has near-limitless storage.
EigenLabs
EigenLabs is the team behind the EigenLayer ecosystem. The group has multiple responsibilities, including building the developer community, enticing new users, and introducing features that enhance security, innovation, and rewards.
EIGEN Token
The EIGEN token is a versatile digital asset that serves multiple roles within the economy. It can be used to send and receive value internationally in a permissionless manner. Additionally, you can stake these tokens to gain access to passive returns and restocking tokens. EIGEN is crucial to EigenLayer ‘s validation and incentivization features.
Liquid Staking Tokens (LSTs)
Liquid stacking tokens enable users to free up the locked liquidity of previous staking options. When you stake ETH on EigenLayer, you receive LSTs with the equivalent value of the staked asset. Notably, this value will fluctuate to show the real-time value of the asset staked.
Liquid Restaking Token (LRT)
The liquid restaking token is issued to you when you stake your LST on EigenLayer. This token operates similarly to the LST in that it shares the value in real-time. Impressively, LRTs can be restaked multiple times. However, each AVS you back increases your risk.
EigenLayer Governance
The community governance provided to users by EigenLayer makes it easy for anyone to get their voice heard. You can stake your EIGEN tokens and gain immediate access to voting and proposal rights. Hear suggestions from other community members and vote on if they are a good addition to the platform. You can also put forth ideas to a community vote.
How to Buy EigenLayer (EIGEN)
Currently, EigenLayer (EIGEN) is available for purchase on the following exchanges.
Coinbase – A publicly traded exchange listed on the NASDAQ. Coinbase accepts residents from 100+ countries, including Australia, Canada, France, Germany, Netherlands, Singapore, the United Kingdom, and the United States (excluding Hawaii).
Kraken – Founded in 2011, Kraken is one of the most trusted names in the industry and offers trading access to over 190 countries, including Australia, Canada, Europe, and the United States (excluding Maine, New York, and Washington state).
Binance – Accepts Australia, Singapore, the UK, and most of the world. Canadian & USA residents are prohibited. Use Discount Code: EE59L0QP for 10% cashback on all trading fees.
EigenLayer (EIGEN) – Capital Efficiency on A New Level
EigenLayer opens the door for some cool innovations in the future. The ability to forgo developing a strong validator set versus just purchasing the best option makes this platform an instant stand out. Additionally, restaking provides a new level of capital efficiency that makes the most of your crypto staking time. For these reasons, EigenLayer is a smart project to watch moving forward.
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