What is EigenLayer?
EigenLayer is a protocol built on Ethereum that introduces restaking, a new primitive in cryptoeconomic security. This primitive enables the reuse of ETH on the consensus layer. Users that stake ETH natively or with a liquid staking token (LST) can opt-in to EigenLayer smart contracts to restake their ETH or LST and extend cryptoeconomic security to additional applications on the network to earn additional rewards.
So, in short, EigenLayer aims to secure all applications running on Ethereum without users needing to use the native Ethereum coin, ETH, to secure the network. Users can use the LST token, or Liquid Staking Token, to secure the application network using EigenLayer’s services. This Re-Staking system is still relatively new and requires further experimentation and testing.
EigenLayer brings a new innovation to the Ethereum blockchain by allowing Ethereum coin holders to secure protocols built on top of the Ethereum blockchain. This is because EigenLayer recognizes that protocols running on top of the Ethereum blockchain do not have the same level of security as Ethereum itself. Therefore, these protocols often need to create their own coins to secure their protocols. However, this approach has its drawbacks, as coins created by a protocol typically have a small market cap, making them vulnerable to attacks by individuals or groups who could buy up large amounts of the coin to disrupt the protocol’s system. This vulnerability arises because if a coin with a small market cap is used to secure a network, a group of people could buy it at a low price to achieve certain objectives that benefit them. Hence, EigenLayer sees this as a weakness and aims to utilize Ethereum itself to secure protocols built on top of it.
What Protocol does EigenLayer have?
- Custom Decentralization
The number of native ETH restakers is expected to grow exponentially over time. With EigenLayer, native stakers can opt in to securing services that specifically want high decentralization, such as by specifying that only native stakers can participate. Examples of services that may optimize for decentralization are those that enable censorship resistance via multilateral ordering and secret sharing, and MPC over several nodes.
- Custom Slashing
EigenLayer provisions cryptoeconomic security through various slashing mechanisms, which levy a high cost of corruption. The terms and conditions of slashing are all specified in the slashing contract deployed by each service. By opting to restake with a particular service, stakers accept the risk of being subjected to slashing according to the rules in the slashing contract.
Evil contracts aimed at harming EigenLayer will be slashed as punishment for those who dare to do so. This is certainly a good practice to implement, considering that there are many malicious actors who use various methods to profit in ways that are not in line with the rules of a protocol.
- Operator Delegation
Stakers may be interested in participating in EigenLayer, but may not want to run software containers of services themselves. EigenLayer provides an avenue for these stakers to delegate EigenLayer operations to operators, who offer to run actively validated services software modules on their behalf.
How About Security on EigenLayer?
EigenLayer is designed using a smart contract developed by expert developers in the field, making the smart contracts on EigenLayer more flexible compared to others.
Some of the smart contract features owned by EigenLayer include:
- Liquid Staking: Allows users to stake their tokens (LST) to secure the network and earn rewards.
- Security Measures: Implements measures to detect and penalize malicious contracts or activities aimed at harming EigenLayer.
- Flexibility: Offers flexibility in terms of functionality and customization to accommodate various decentralized applications (DApps) built on top of EigenLayer.
- Interoperability: Facilitates interoperability with other blockchain networks, enhancing the connectivity and usability of EigenLayer-based applications.
- Governance Mechanisms: Incorporates mechanisms for decentralized governance, enabling token holders to participate in decision-making processes regarding network upgrades, parameter adjustments, and protocol changes.
- Upgradeability: Supports upgradability to adapt to evolving technology and community needs, ensuring that EigenLayer remains innovative and competitive in the blockchain ecosystem.
- These features contribute to EigenLayer’s robustness, security, and adaptability, making it an attractive platform for developers and users alike.
What is the Risk of EigenLayer?
The risk of EigenLayer primarily revolves around potential vulnerabilities or weaknesses in its smart contracts and network security. In simpler terms, this means there’s a chance that hackers or malicious actors could find ways to exploit loopholes or flaws in EigenLayer’s code, leading to theft of funds, disruption of services, or other harmful activities.
To mitigate this risk, EigenLayer needs to conduct thorough security audits and regularly update its protocols to address any identified vulnerabilities. Additionally, implementing robust authentication and authorization mechanisms can help prevent unauthorized access to the network and sensitive data.
In summary, while EigenLayer offers many benefits, such as liquidity staking and interoperability, it’s essential to be aware of the potential risks associated with cybersecurity and take proactive measures to safeguard the platform and its users.
