Original author: Biteye core contributor Fishery
Original editor: Biteye core contributor Crush
Recently, EigenLayer launched the first phase of the Eigen airdrop activity, which has attracted great attention in the market and is regarded as the leader in the re-staking track in this bull market.
Currently, Eigen has only enabled the staking function, and transfer transactions are not yet possible. Therefore, whether to participate in staking Eigen is a hot topic in the market.
To help everyone understand, this article will clarify the mechanism of EigenLayer staking, as well as the possible rewards and potential risks of staking. At the end of the article, the author will also talk about his own views on whether EIGEN should be staked.
First of all, it should be made clear that the staking mechanism of EigenLayer is very different from the staking mechanism of PoS of the ETH mainnet. It is more like the staking logic of the Cosmos community. Whether it is the structure of the staking interface or the marketing of node airdrops, it is full of the shadow of Cosmos. Therefore, to a certain extent, you can refer to the gameplay strategy of Cosmos.
1. EigenLayer: Ethereum Re-staking
Restaking refers to the reuse of ETH that has been staked on the Ethereum mainnet to support the security of other projects. In this way, users can not only get returns from the original stake, but also increase potential rewards by supporting more projects.
Founded in 2021, EigenLayer is a pioneer in the concept of re-staking. It is a middleware platform that sits between the Ethereum mainnet and other applications. The platform deploys a mainnet smart contract to allow stakers to re-stake their ETH and ETH Staking Derivative Tokens (LST) on EigenLayer.
Since its launch in June 2023, EigenLayer has experienced rapid growth, with total staked value exceeding $10 billion, making it one of the largest blockchain protocols on the market, with total staked value even exceeding many major decentralized finance (DeFi) platforms such as Aave, Rocket Pool, and Uniswap.
Double Staking
Now that $Eigen tokens are available, the pledged assets accepted by EigenLayer are no longer limited to the re-staking business of ETH and ETH LSTs, but also include the pledge services of $Eigen and the native tokens issued by various AVS in the future.
This is the innovative dual staking concept of EigenLayer: the "re-staking" service of ETH series tokens and the "staking" service of Eigen series tokens are responsible for maintaining the security of EigenLayer as a whole.
To understand double staking, you must first understand Quorum.
In the context of EigenLayer, Quorum specifically refers to a set of assets (re-pledged/pledged assets) used for shared security adopted by AVS.
Node (Opreator) operators can choose to join the Quorum of one or more tokens based on the composition of the assets staked to their nodes and the design of AVS.
According to the official introduction, the AVS team can decide the numerical settings and asset composition in "Quorum", and the settings of Quorum are not static and can be changed after AVS goes online to adapt to the market environment in a timely manner.
The innovation of double staking effectively alleviates the network security problem caused by the large amount of local tokens in the traditional Proof of Stake (PoS) network by introducing more stable assets as security. Double staking provides continuous economic support for the network by introducing external tokens with relatively stable market conditions such as Ethereum, thereby maintaining the overall security and stability of the PoS network.
After the network runs smoothly, we can consider adjusting the staking ratio of the two tokens, that is, increasing the proportion of native tokens to enhance the autonomy and independence of the network.
Although double staking improves the network’s ability to resist risks and provides project owners with a richer economic toolbox, it also brings new challenges and risks.
First, this mechanism denies the sovereignty of project tokens to a certain extent and weakens the value and use of the network’s original tokens, so more empowerment may be needed to offset the negative impact of losing sovereignty.
In addition, this pledge mechanism that increases flexibility also introduces certain centralization risks, especially since quorum modification decisions may not be completely transparent or widely participated by the community, and may involve centralized decision-making.
As for the EigenLayer project itself, in the same double staking scenario, the unstaking time of the native token Eigen is also treated differently compared to the ETH-based tokens.
The EigenLayer mainnet contract sets a 7-day delayed withdrawal period for LST tokens and ETH re-staking, while the withdrawal window for EIGEN tokens is 24 days.
The team's explanation for the difference in withdrawal time is that EIGEN will be given more unique functions in the future (requiring longer unlocking time), but it is still unknown what specific functions will make the unlocking time of EIGEN three times that of the ETH system.
This mechanism of setting an extremely long unlocking time without being transparent will undoubtedly bring huge risks to EIGEN pledgers.
In short, there have been some achievements from an economic perspective, providing the project team with a high degree of flexibility and scalability, but retail investors need to carefully identify and guard against risks in actual operations, especially when it comes to changes in important protocol parameter settings and unlocking mechanisms, and they must pay more attention to centralization risks.
2. EigenDA
EigenDA is a data availability storage solution developed by EigenLabs and built on the EigenLayer platform. The system has been live on the mainnet since Q2 2024.
Since the EigenLayer documentation does not provide a detailed introduction to the avs pledge parameters, and EigenDA is the first avs, we can get a glimpse of the EigenLayer avs pledge parameter setting ideas through the parameters of EigenDA.
EigenDA's active operator nodes on the mainnet and Holesky testnet are limited to 200. According to the document, this limit is due to the cost of bridging EigenDA's availability proof to Ethereum L1. It is expected that as technology improves, this cost will decrease, which is expected to relax the limit on the number of operators.
The document contains requirements for the minimum staked assets of the nodes:
Operators joining the Ethereum (ETH) group need to stake at least 96 ETH, while operators joining the EIGEN group need to stake at least 1 EIGEN.
Compared with the newly launched PoS public chains, EigenDA does not have many nodes. It is at the same order of magnitude as the Cosmos system and has set an upper limit on the number of nodes.
In contrast, other well-known PoS public chains do not limit the number of nodes, but choose to set a lower limit of staked assets. For example, Solana and Avalanche both have more than 1,700 nodes, while Ethereum has more than one million validators.
EigenDA restricts node groups from two aspects: assets and quantity. Under such strict conditions, it is not difficult to expect that there will be a situation where the number of nodes that meet the asset requirements is less than the upper limit of 200 set by AVS. For example, now, there are only 147 active nodes in EigenDA.
Of course, the number of nodes and network security are not completely correlated, and are only for your reference and horizontal comparison.
When the number of operators reaches the upper limit (200), the newly added operator must have a group weight that is 1.1 times greater than the current operator with the lowest weight in order to replace that operator.
There is a big problem hidden here, which is also one of the core problems that restakeing needs to solve:
Ordinary PoS chains can easily audit the status of native assets within the nodes and autonomously update the valid node set according to the rules, but EigenLayer is different because the re-staking assets are on the Ethereum mainnet, and EL nodes cannot directly obtain the dynamics of the Ethereum mainnet.
Therefore, a secure and decentralized method is needed to prove that the upper node meets the requirements.
If this step cannot be decentralized, then malicious actors may illegally replace regular nodes and attack the EL consensus.
The difficulty lies in the fact that it is unrealistic to consider using smart contracts to solve the above problem, because the computational cost and complexity of sorting or maintaining priority queues on the chain are very high.
To solve this problem, EigenLayer took the next best option and introduced a combination of off-chain personnel authorizer (Churn Approver) and on-chain smart contract check.
When the network reaches the operator cap, if a new operator wishes to join, the new operator can apply for a signature from the "personnel authorizer". The authorizer will check whether the new operator meets the funding requirements and then provide a signature. Finally, the signature and operator change information will be entered into the EigenDA smart contract on the main network.
Although this mechanism that relies on off-chain signatures provides convenience and flexibility in operation, it also introduces certain centralization risks.
The off-chain signing process may be affected by improper operation of the approver or system security vulnerabilities, thereby affecting the decentralization and security of the entire network.
In addition, the document does not mention the risk of the personnel authorizer going offline. If the off-chain validator does not respond to the online request of the new node, the EigenDA validator cannot be replaced according to the rules, and the validator that needs to be excluded can still participate in the verification, which is a very dangerous thing.
Therefore, users need to pay special attention to any link that introduces off-chain mechanisms.
3. Disappearing Slash & Reward Mechanism and Staking Strategy
The Slash & Reward mechanism is the core mechanism of all PoS networks, but due to the hasty launch of EigenLayer, the reward and punishment function has not yet been completed.
Everyone should be familiar with the reward part, which is the output of APR and the expected airdrop. The penalty (slashing) part is more complicated. If the operator fails to fulfill its obligations, such as the node is down/offline for a period of time, or the secondary signature, the user funds entrusted to this node will be deducted by a percentage, and the node APR emission may also be shut down.
Please note that EigenLayer has not yet released details. The above introduction to the reward and punishment mechanism is based on the summary of other PoS projects.
In my opinion, this operation is quite outrageous, because when users participate in re-staking, these rules have not yet been launched, and most of them do not know the existence of Slashing. One day in the future, if the node delegated by the user acts maliciously or fails, the user will lose funds without knowing it.
If the staking user considers the security of funds, he should try to spread the staking among different operators. This will disperse the risk, and if slashing occurs, only a part of the funds will be lost.
According to the marketing reward direction of the EigenLayer ecosystem, choosing the most well-known nodes with points airdrop plans for re-staking can obviously obtain the greatest expected returns, but this incentive is exactly contrary to the original intention of maintaining decentralization.
IV. Conclusion
As an emerging technology, restaking is attracting widespread attention from both inside and outside the industry. In particular, according to a report on March 15, the co-founder of Lido, the largest Ethereum mainnet staking protocol, and Paradigm are secretly funding a new project called Symbiotic to enter the restaking field, which is enough to confirm the trend of the industry.
However, despite the huge development potential of the re-staking market, the technical challenges faced by EigenLayer discussed in this article cannot be underestimated. Especially since the Ethereum mainnet has not included re-staking in the EIP.
Currently, the proposal on how to get EigenLayer to exit the validator on the mainnet has not been finalized, which brings some uncertainty. The imperfection of the technology increases the risk of participating in re-staking, especially in the scenario where assets may be cut (slashing).
At present, the design of EigenLayer is more inclined to economic benefits rather than technology. If the technical problems can be solved, the project specializing in economic benefits will inevitably bring significant returns.
In general, EigenLayer has shown great market potential and room for growth in the wave of re-staking. Although it currently faces some technical and standardization challenges, these are stepping stones on the road to growth.
As these issues are gradually resolved, we have reason to believe that EigenLayer will be able to achieve its long-term economic goals while accelerating innovation.
