A Deep Dive into EigenLayer: Expanding Ethereum's Base Layer and Competing in Blockchain Modular Services
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A Deep Dive into EigenLayer: Expanding Ethereum's Base Layer and Competing in Blockchain Modular Services
Believe EigenLayer is the most important protocol since Ethereum's launch, and it will reshape Web3 from the ground up in its own way, while accumulating long-term value for Ethereum.
Navigating Web3 tides with focused insights
Author: Meir Bank
Compiled by: TechFlow
I believe EigenLayer is the most important protocol since Ethereum’s launch, one that will reshape Web3 from the ground up in its own way while accumulating long-term value for Ethereum.
EigenLayer is a protocol that modifies the Ethereum base client to allow validators to re-stake their ETH stake and simultaneously validate other protocols in parallel. This means you can reuse the ETH already staked to secure Ethereum to validate other protocols, such as oracles and data availability modules.
EigenLayer represents an expansion attempt on Ethereum’s base layer, something we haven’t seen since Flashbots modified Ethereum clients to support off-chain MEV transactions.
Imagine you’ve staked 32 ETH to run an Ethereum validator. In the future, you could browse various applications in an "app store." You’d be able to see who’s building what, how many people are running it, potential slashing conditions, and what compensation you’d receive for running the application. Then, you could conduct a risk/reward analysis to determine whether running the app makes sense, and seamlessly run multiple apps in parallel.
Security is a serious concern for validators running EigenLayer. If there’s a security vulnerability, applications could potentially steal your stake. Therefore, EigenLayer may eventually establish insurance markets to protect validators.
Additionally, EigenLayer might delay slashing to wait for governance processes to confirm or overturn a slash before finalization (especially in early stages). Validators choose their own security level by selecting which applications to run.
Critically, validators must perform due diligence on the applications they run. If a large number of validators all run one application, a vulnerability in that app could severely impact Ethereum, potentially leading to the loss of a significant portion of the ETH supply.
In particular, governance review of slashes for these applications may be a long-term necessity to prevent systemic network risks.
EigenLayer’s best use cases are protocols with very low probability of being slashed. For example, protocols with validity guarantees are not well-suited for EigenLayer because server crashes and slashing risks are high.
Cross-chain bridges are a strong use case for EigenLayer, depending on their design. At ETH Mexico, I hacked a cross-chain bridge called Hyperlane. Hyperlane is highly flexible because it has no liveness requirements for nodes and a very low chance of slashing.
This type of architecture would be highly beneficial to run on EigenLayer—other potentially good fits include Succinct, Axelar, and Squid. Beyond asset-transfer bridges, ZK message transmission protocols like Herodotus could also leverage EigenLayer.
A key use case is running Rollup sequencers on EigenLayer. This would help keep L2 Rollup sequencers, such as those of Optimism and Arbitrum, decentralized and secure.
Moreover, EigenLayer will enable truly decentralized RPC nodes. Existing solutions like the POKT network, or even centralized providers such as Infura, could migrate to EigenLayer. Decentralized RPC is crucial for avoiding censorship at the client level.
Recently, appchains have also sparked considerable discussion in the Web2 space. It appears certain use cases, such as gaming applications, could benefit from isolation and scalability by operating independent modular appchains.
Appchain deployment protocols like Atlas and Stacked will be able to use EigenLayer behind the scenes to bootstrap security for new appchains, leveraging ETH as foundational security collateral to return enhanced value.
Oracles are also well-suited for EigenLayer, as they are protected by token value. By securing oracle networks with substantial staking, oracles could achieve tenfold greater security, reducing the likelihood of oracle attacks by DeFi arbitrageurs.
One of EigenLayer’s flagship products is its internally built Data Availability (DA) module. The idea is to separate execution and settlement layers from data and consensus, enabling you to run execution layers like Fuel.
Compared to Celestia, EigenDA holds a clear advantage—it can more easily bootstrap a large validator network by leveraging existing ETH validators and staking. Unlike Celestia, EigenDA is not a consensus layer, so it will have lower costs and higher throughput.
By eliminating consensus, EigenDA will serve specialized use cases—particularly, it is ideal for publishing Rollup proofs, thereby enabling decentralized Rollup sequencers.
A lesser-known product is EigenSettlement. Settlement layers are critically important for the operation of modular blockchain ecosystems. They can allow different execution environments to coexist on the same layer.
Sreeram Kannan, founder of EigenLayer, is the director of the University of Washington (UW) Blockchain Lab. Calvin, EigenLayer’s Chief Strategy Officer, previously led strategy at Compound. Other team members also primarily come from UW.
By allowing ETH staking to secure all other layers and protocols, EigenLayer accumulates immense value for ETH. Rollups and L2s represent ETH’s future; EIP-4844 essentially transforms Ethereum into a DA, settlement, and consensus platform for Rollups.
For new application developers, launching a validator network is difficult. Relying on token price to secure network safety is risky and vulnerable to market manipulation. EigenLayer changes this status quo—developers can now leverage the existing ETH validator set to secure their protocols.
Many applications on Ethereum already have native tokens used to secure their protocols. But it’s not too late to benefit from EigenLayer. Protocols can adopt a dual-staking model, using both their native tokens and ETH staked on EigenLayer for protection.
EigenLayer is still in early development, and over time we can expect to see many more exciting innovations emerge.
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