Potential Issues in the EigenLayer Whitepaper: Non-native Staking and Its Security, NFT Positions, and AVS Activity
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Potential Issues in the EigenLayer Whitepaper: Non-native Staking and Its Security, NFT Positions, and AVS Activity
Crypto analyst ?kydo? raised several questions about the EigenLayer whitepaper, including non-native staking and its security, NFT positions, AVS activity, and more.
Navigating Web3 tides with focused insightsWritten by: kydo
Compiled by: TechFlow
Editor's note: EigenLayer's proposed re-staking mechanism allows users to stake ETH, lsdETH, and LP tokens on other blockchains, oracles, middleware, etc., as nodes to earn validation rewards. This enables third-party projects to leverage Ethereum's mainnet security, thereby unlocking the security of Ethereum's consensus layer.
EigenLayer is a fascinating concept. After reading its whitepaper, crypto analyst kydo raised several questions and thoughts, including non-native staking and its security implications, NFT positions, AVS activity, among others. Below are the detailed insights.
1. Non-Native Re-Staking
Native re-staking involves changing the `withdrawCredential` to an EigenLayer smart contract.
Non-native re-staking: deposit your LSD, LSD's LP tokens, or any type of token to contribute to EigenLayer’s economic security layer.
What are the security models for these different assets? Given the composability of underlying assets, how can security be formally proven?
2. NFT Positions
Unlike Lido, when you deposit into EigenLayer, you don’t receive a fungible token (like stETH); instead, you receive an NFT representing your position.
This makes sense because as a depositor, you may have different risk preferences and require operator nodes to provide different services.
However, NFTs significantly reduce overall system liquidity.
Will an entity similar to Lido emerge on top of EigenLayer (perhaps Lido itself)? Or will a market/aggregator arise that bundles these NFTs into ERC-20 tokens? What are the trade-offs across EL, protocols, and Ethereum’s various approaches? Many questions remain unanswered.
3. Ensuring Liveness
While slashing is a direct measure for ensuring security, the whitepaper discusses less about how the system ensures liveness.
You could use an optimistic model with bonds and fraud proofs, or actively monitor validators within the EigenLayer smart contract. However, these two systems operate under entirely different assumptions and require vastly different smart contract architectures.
What will EigenLayer choose?
4. Cryptoeconomic Security Is Sometimes Just a Meme
Chainlink doesn't have sound cryptoeconomic security, yet it secures all of DeFi. So, is active monitoring of cryptoeconomic security feasible for a given AVS?
Moreover, the amount of security required for a given AVS isn't determined by the TVL it secures, but rather by how much revenue it generates and the level of risk involved in running the service. How EigenLayer addresses these concerns will be interesting to observe.
5. Decentralized Sequencers
The idea proposed in the whitepaper is that when faced with sequencing issues, an L2 can offload this task to a set of EigenLayer validators running sequencing services. It sounds like using EigenLayer could bypass the need for “running a PoS-L2 for sequencing,” but can you really?
6. Event-Driven MEV
Event-driven MEV allows validators to enter agreements with MEV actors (e.g., builders), meaning if a liquidation event occurs in the validator’s proposed slot, they provide a "strong guarantee" to include the MEV actor’s transaction.
This is somewhat similar to private relays, but also distinct.
Why engage in such behavior? Perhaps to receive fees/bribes upfront? Could ETH block space even become a subscription service?
7. Parallel Ethereum
I'm not sure what to call it, so let's temporarily refer to it as parallel Ethereum. I might be confusing the concept here, but it could refer to one of two things:
1) Re-staking → another L1, but secured by ETH tokens.
2) Changing Casper FFG/LMD GHOST to something else.
The first scenario is plausible, but the second is extremely interesting—at least to say. My intuition is that (2) is impossible because ultimately you still need to agree on the chain finalized by Casper FFG, meaning your parallel chain would still inherit the same finality as the original Ethereum chain.
8. Does EigenLayer Lead to Centralization?
The decentralization argument goes: these AVSs are cheap/lightweight to run, so independent stakers can still operate them compared to centralized solutions.
I think this is an optimistic vision. If we look at the bandwidth requirements for validators currently running Mev-boost, they're already absurdly high—around 10TB/month.
Therefore, while these add-ons may not become massive centralizing forces, they don't do much to promote decentralization either.
9. Dual Staking Utility
A simple question: how do you reconcile the weight between the two?
Do you use another EL AVS as a price oracle? Or rely on native AMM LP weights? Or hardcode values and use governance to periodically adjust?
I'm not sure there's a correct answer, but I strongly believe the EigenLayer team and the broader ecosystem will figure it out.
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