Coinbase Report: A Comprehensive Overview of the EigenLayer AVS Ecosystem
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Coinbase Report: A Comprehensive Overview of the EigenLayer AVS Ecosystem
EigenLayer and its growing ecosystem of AVS unlock the "verifiable cloud" paradigm for Web3.
Navigating Web3 tides with focused insightsWritten by: JK and Coinbase Ventures
Translated by: TechFlow
Key Takeaways
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EigenLayer is an Ethereum-based protocol introducing a new cryptographic economic security primitive known as restaking.
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Through EigenLayer, developers can leverage Ethereum’s existing economic security infrastructure—namely its validator set and staked ETH—to launch new Active Validated Services (AVSs).
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Just as cloud platforms and SaaS solutions revolutionized Web2 development, EigenLayer and its growing AVS ecosystem unlock a “verifiable cloud” paradigm for Web3.
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As restaking and shared security models evolve, their impact on blockchain ecosystems will become increasingly significant, driven by demand from stakers and developers seeking to unlock new opportunities on-chain.
What is EigenLayer?
EigenLayer is an Ethereum-based protocol that introduces a new cryptographic economic security primitive—restaking. At its core, EigenLayer consists of a suite of smart contracts that allow users to opt into “restaking” their staked ETH or liquid staking tokens (LSTs), thereby enabling the launch of new Proof-of-Stake (PoS) networks and services within the Ethereum ecosystem and earning additional staking yields/rewards.
EigenLayer’s primary goal is to enable a new era of permissionless innovation and free-market governance by reducing the complexity for developers building and launching such networks, leveraging Ethereum’s established trust assurances and economic security infrastructure. Launched in 2023, EigenLayer allows users to restake their ETH or LSTs. As of May 14, 2024, over 4.9 million ETH (worth approximately $15 billion) has been restaked into the EigenLayer protocol.
Why does this matter?
The Ethereum network uses a Proof-of-Stake (PoS) consensus mechanism, where node operators stake their ETH and run validator software to secure the network (e.g., storing data, processing transactions, adding new blocks to the beacon chain) in return for rewards (i.e., a share of network fees). If node operators fail to perform their validation duties or act maliciously, they risk losing part or all of their staked ETH (i.e., slashing).
Currently, when developers build protocols on Ethereum that require external operators, they typically need to launch and secure their own PoS network. This is a challenging task requiring developers to design and launch a token, incentivize node operators to stake that token and run validator software, and implement fair reward distribution and slashing mechanisms. Furthermore, according to EigenLayer, forcing every new protocol to bootstrap its own PoS network fragments Ethereum’s security and drains value (in the form of staked tokens) away from the beacon chain.
How does EigenLayer work?
EigenLayer addresses these challenges by allowing developers to leverage Ethereum’s existing validator set and staked ETH from day one. This approach is referred to as “shared security.” The shared security and restaking mechanism not only promises to lower barriers to entry for developers and accelerate innovation within the Ethereum ecosystem but also aims to create new avenues for Ethereum stakers to actively participate in multiple networks that require cryptographic economic collateral and external operators, thus maximizing their reward potential.
EigenLayer’s protocol architecture consists of four key components: restakers, operators, active validated services (AVSs), and AVS consumers.
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Restakers: Individuals or entities who restake their staked ETH or LSTs to extend the security of services within the EigenLayer ecosystem, known as Active Validated Services (AVSs)
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Operators: Entities that run specialized node software and perform validation tasks for AVSs, receiving predefined rewards in return. Operators register with EigenLayer, allowing restakers to delegate to them, and then choose to provide validation services across various AVSs. Importantly, operators must adhere to the slashing conditions defined by each AVS
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Active Validated Services (AVS): Any system requiring a unique distributed validation method for verification. AVSs can take many forms, including data availability layers, shared sequencers, oracle networks, bridges, coprocessors, applied cryptography systems, and more
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AVS Consumers: End users or applications utilizing services provided through EigenLayer
The Verifiable Cloud
EigenLayer founder Sreeram Kannan often says: “EigenLayer is the verifiable cloud for crypto”—but what does that actually mean? In traditional cloud architectures, centralized entities provide computing, storage, and hosting services for various Web2 SaaS solutions. These SaaS offerings typically fall into two categories: horizontal SaaS (generalized software solutions targeting broad end-user markets regardless of industry) and vertical SaaS (software tailored to specific niches, use cases, or industry standards).
Just as cloud platforms and SaaS solutions transformed Web2 development, we believe the emergence of EigenLayer and AVSs offers a similar paradigm shift for blockchain ecosystems. EigenLayer aims to provide cryptoeconomic security services for AVSs—essentially, “Web3 SaaS.” Similar to how SaaS solutions emerged and gained widespread adoption in Web2, we see AVSs following a comparable trajectory driven by demand from protocols and dApps.
Overall, EigenLayer’s “shared security system” aims to accelerate innovation on-chain while delivering enhanced decentralization, trust, and transparency—redefining the future of verifiable cloud computing.
The EigenLayer AVS Ecosystem (Current State)
On April 9, 2024, EigenLayer launched its operator and AVS modules on mainnet, currently hosting a vibrant operator ecosystem (over 200 as of May 14, 2024) and a pipeline of AVSs expected to roll out in the coming months (11 live today). Analogous to the traditional SaaS landscape, we expect AVSs to naturally segment into different categories—horizontal and vertical-specific.
Under this framework, the current EigenLayer AVS ecosystem looks as follows:
“Horizontal” AVSs
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Developer Services: Frameworks and tools helping developers build and deploy PoS networks requiring shared security infrastructure (e.g., AVSs, L1s/L2s) (e.g., Othentic, Blockless, Ethos)
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Operator Services: Services helping AVS operators manage their node infrastructure, validator tasks, and/or staking operations (e.g., Supermeta)
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Payment Services: Services managing the delivery of payments (i.e., AVS rewards) to restakers and operators (e.g., Anzen)
“Vertical” AVSs
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Rollup Services: Foundational services extending Ethereum while inheriting its trust network security (e.g., rollups). Examples include: data availability (e.g., EigenDA, NearDA), shared sequencing (e.g., Espresso, Radius), rollup-as-a-service (e.g., Caldera, AltLayer), interoperability (e.g., Omni, Polymer, Hyperlane, Polyhedra)
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Decentralized Networks: Networks requiring distributed validation mechanisms. Examples include oracles (e.g., eOracle), proof verification (e.g., Aligned Layer), decentralized physical infrastructure networks (DePIN) (e.g., WitnessChain, OpenLayer), security monitoring (e.g., Drosera), or smart contract policy engines (e.g., Aethos)
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Coprocessors: Services offering developers cost-effective and verifiable off-chain computation. Examples include database coprocessors (e.g., OpenDB), ZK coprocessors (e.g., Automata, Fairblock), trusted execution environments and encrypted coprocessors (e.g., Automata, Fairblock), or AI inference (e.g., Ritual)
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Applied Cryptography: Services used to build robust cryptographic systems. Examples include fully homomorphic encryption (e.g., Fhenix), multi-party computation (e.g., Silence Laboratories), or threshold cryptography (e.g., Mishti Network)
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MEV Management: Emerging services allowing block proposers to make additional credible commitments around block inclusion and ordering
Application Layer
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Above AVSs, we expect new on-chain applications to emerge, leveraging EigenLayer’s unique economic security properties.
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Emerging examples include rollups, liquid restaking tokens (LRTs) and associated LRTFi applications (i.e., DeFi protocols using LRTs as underlying collateral), social and gaming apps, decentralized physical infrastructure networks (DePIN), and identity/privacy-preserving applications.
Outlook
As restaking and shared security models continue to evolve, their impact on blockchain ecosystems will become increasingly evident. Growing demand from stakers/validators seeking to maximize yield potential and developers aiming to accelerate infrastructure-level innovation could unlock new on-chain opportunities. Moreover, although EigenLayer was the first project to launch a restaking protocol, we are seeing similar mechanisms emerge across other ecosystems: Bitcoin (e.g., Babylon Chain), Solana (e.g., Solayer, Cambrian, Fragmetric), IBC (e.g., Picasso Network), omnichain restaking (e.g., Exocore), and multi-asset restaking (e.g., Karak).
Nevertheless, while restaking and shared security models open up many exciting possibilities on-chain, restakers must remain aware of potential risks, such as smart contract vulnerabilities or unexpected slashing events. Notably, as of this writing, EigenLayer’s slashing and payment (i.e., AVS reward) mechanisms have not yet gone live but are expected to launch later this year. Overall, Coinbase Ventures is excited about the potential of restaking and shared cryptoeconomic security.
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