What is EigenLayer? Ethereum reset protocol explained.
EigenLayer, explained.
EigenLayer aims to remove the face of many new DApps by providing developers with an established security framework.
Ethereum was launched in 2015. It has come a long way since its inception in 2015. It has established itself as the most influential blockchain and has successfully transitioned from Proof-of-Work (PoW) to Proof-of-Stake (PoS) and is the basis for many innovations. crypto projects.
EigenLayer is a decentralized security pool for developers of the Ethereum staking protocol. This EigenLayer explanation details the Ethereum staking protocol stack and other important components.
The EigenLayer protocol is an Ethereum-based project that aims to improve the network's PoS protocol through a process called Ethereum Resuscitation. The EigenLayer team says it addresses many of Ethereum's existing security flaws, which require each protocol to manage its own security and scalability processes.
The network's token EIGEN will be ready for trading on October 1, 2024. The token launched in a price range of $3.50 to $4.50, with a total market capitalization of $6.5 billion. Market capitalization is the estimated value of a project if all tokens are issued. Think of it as the total cost of a project at any given time.
Such a launch puts EigenLayer in 94th place among 100 tokens by market capitalization. Interestingly, EigenLayer technically launched the token in May via an airdrop but prevented anyone from trading it until October.
Did you know this? Ethereum was launched as a PoW blockchain network. On December 1, 2020, it launched the Beacon Chain – a PoS network – with the launch of a common Ethereum consensus layer update.
What is replication, and how does EigenLayer support it?
Retention is EigenLayer's take on traditional amulets. It provides new ways for users to earn passive income while enhancing network security.
Repurposing on EigenLayer is taking stock Ethereum and repurposing it to add security to other protocols – essentially creating repurposed assets that other decentralized applications (DApps) can pull from. Users can opt-in to the EigenLayer smart contract via pre-allocated Ether (ETH) or Liquid Staking Token (LST).
When users share money on the Ethereum protocol, most projects offer liquid staking tokens to represent those held assets – a kind of receipt. These tokens allow them to continue to use their funds in other ways, such as through EigenLayer, without stripping them of their original assets in a process called LST repurposing.
Alternatively, users can allow EigenLayer's smart contracts to run with pre-allocated ETH. A reorder with pre-issued ETH is called a native reorder. If a user participates in a native reset, the network adds those properties to the protocol's security pool. How secure is EigenLayer? It is as safe as the size of the security pool.
EigenLayer supports remapping in two ways: native and LST remapping.
Native: Re-native means resetting the traditional Ethereum validator to EigenLayer operatorLST: Liquid Stock tokens are equivalent to the Ethereum you hold 1:1. While the original assets remain locked, they allow you to access and use the value of your stock tokens.
Applications built on top of EigenLayer are called Actively Authenticated Services (AVSs) and can be anything from Bridge to DAP to Oracle. Building on EigenLayer is cheaper and more efficient than developing on a separate protocol because EigenLayer has a proven network of trust through repeaters. Building elsewhere requires building a network of trust from scratch.
That said, AVs are not randomly using services from EigenLayer. Instead, there is an intermediary, called a node operator, who chooses to manage the network. Like an Ethereum validator, an operator can be a user or an organization.
Operators can build their own AVS or provide services to other existing AVSs while receiving rewards in return. However, operators are subject to AVS cut-off requirements if they are unable to perform their duties.
Moreover, operators can be re-claimers, or re-claimers can choose to give their re-claimed assets to an operator. Either way, remasters have full control over which services their assets go to. As a result, EigenLayer creates a free market management system. Developers build on EigenLayer to leverage its established security, while operators and resellers earn rewards for managing and delivering security.
Did you know this? While Ethereum validators focus on validating transactions and validating the Ethereum network, EigenLayer operators can pick and choose which AVS they support, making them even more unique than their Ethereum-based brethren. Think of operators as IT departments with specific company expertise, while verifiers are more general tech support.
How does EIGEN trade?
As mentioned above, EigenLayer officially launched its token EIGEN on October 1, 2024. EIGEN is available on many exchanges such as Binance, OKX, Coinbase and others.
To trade EIGEN, you must set up an account/wallet with one of these exchanges, fund your wallet with local currency or other cryptocurrencies, and purchase EIGEN. Check out this guide to learn how to register for a crypto exchange.
How do resectors manage their repossessed assets?
EigenLayer facilitates asset management with its EigenPod solution.
Wallet Linking: Users need to link their wallets to the EigenLayer app and select the tokens they want to withdraw. First-time resokers must approve the process before depositing their funds into EigenLayer's reking contract.Manage the Assets: A resoker manages their resoking assets through EigenPod, a smart contract created by the resoking process of the resoking process. The EigenPod is basically a hub for the remaster to manage restocking processes, extractions and more. There can only be one EigenPod per Ethereum wallet address. Earning Rewards: Through the points saved by the Re-Referrers, you can see your network contributions. Every time a block is confirmed, users will earn re-booked points. EigenLayer calculates a user's repossession points with a proprietary formula that indicates the amount of repossession assets and the length of time they have been locked. The formula considers native ETH and redeposited LST equally.
Did you know this? Liquid Stacking Solution Lido was the first group to introduce the concept of liquid stacking. Introduced in December 2020, Lido solved the problem of stakeholders losing access to their properties while they were closed.
Partial Reward Withdrawal: Users can withdraw their equity rewards on EigenLayer through a partial or full withdrawal process. Returnees who wish to withdraw their earned rewards but continue to provide services will go through a partial opt-out process. Partial withdrawals require approval on the chain, and their gas bill can be expensive. Restockers may request a partial withdrawal every four to five days and must pass an additional tournament period before withdrawn funds appear in the restocker's wallet.Full Reward Withdrawal: Full funds are for restockers who do not wish to serve. Otherwise, the process is similar to a partial withdrawal, requiring on-chain confirmations and an incubation period for withdrawn funds. If a restocker suddenly starts withdrawing full funds, you can reset their holdings via the EigenPod “Reposit” button. Backers can initiate the withdrawal process through the EigenPod “Unstake” section.
Advantages and disadvantages of EigenLayer
EigenLayer offers innovative solutions, although this upgrade to the Ethereum network introduces its own set of problems.
EigenLayer hopes to innovate on Ethereum's tried-and-true proof-of-stake feature. In some ways, it's doing just that. However, the inventions are not perfect and can lead to new problems.
Advantage
Additional passive income: Because resellers can use their assets in additional ways, they have the potential to earn more rewards than traditional savings methods.Improving developer success rates: EigenLayer's security pool removes a key barrier that many new projects struggle to overcome. Now, developers can focus on providing valuable services without worrying about building trust. By removing one of the most important barriers new projects face, EigenLayer can bring truly innovative Layer-2 projects to life.
Cons
High barrier to entry: While EigenLayer offers proven security for new DApps, the refactoring requirement can deter less technical users. Many crypto exchanges offer a simple token service, reducing the complexity of setup, but at the cost of user involvement in node management. Users comfortable with simple staking may not be attracted to the added complexity of re-staking. Increased risk: Re-staking on EigenLayer increases exposure to risks, as participants are subject to both traditional staking and re-staking obligations (Ethereum AVS). In addition, choosing poorly performing AVS can lead to a higher risk of losing their money, especially for users who do not actively manage their repo assets. Still, both systems are open source, which allows developers to review the code before committing.
Although the restructuring model introduces significant risks and technical barriers, it opens up new avenues for value creation and network participation. For developers and users willing to navigate these complexities, EigenLayer can drive the next evolution of blockchain, especially as the ecosystem evolves.
