The Ethereum network-based restaking protocol EigenLayer proposes leveraging ETH staked for Ethereum network validation to share security and capital efficiency with other protocols, providing additional interest to protocol participants. With the concepts of AVS, restaking, and point systems driving its growth, EigenLayer has gradually formed a vast ecosystem. From early 2024 to the present, EigenLayer's TVL has increased twelvefold, attracting around $160 million in investments from crypto VCs, including a16z. It has quickly risen to the second position in total TVL among DeFi protocols, second only to Lido. Recently, with the launch of EigenLayer's mainnet, it has sparked industry discussions and widespread attention.

I. Overview of EigenLayer

EigenLayer is an Ethereum-based restaking protocol that allows ETH staked on the Ethereum network to be restaked to enhance the network's security. Users who stake ETH can choose to join EigenLayer smart contracts to restake their ETH, extending cryptoeconomic security to other applications on the network. This process not only improves capital efficiency but also enhances the overall security of the network.

EigenLayer supports the secure operation of other blockchain protocols and applications by utilizing ETH already staked on Ethereum. This process is called restaking. Restaking allows Ethereum validators to use some or all of their staked ETH to support other Active Validation Services (AVS), such as bridge protocols, sequencers, and oracles. These services usually require their staking and validation mechanisms to ensure network security. However, with EigenLayer's restaking feature, they can gain Ethereum-level security without needing to attract substantial capital themselves.

Through restaking, originally single-use staked capital can support multiple networks simultaneously, enhancing the overall ecosystem's capital efficiency and security. This mechanism does not require additional native tokens; it only uses ETH or liquid staking tokens (LSTs), such as stETH, rETH, etc., to participate in AVS's staking and validation process.

Features and Advantages of EigenLayer:

1. New Security Sharing Model: EigenLayer introduces a new security sharing model for Ethereum, allowing different blockchain protocols to share Ethereum's security infrastructure without building extensive validator networks themselves, significantly reducing the startup costs for new blockchain protocols. Additionally, restaking increases the entire network's resistance to attacks, as any protected protocol would require overcoming the additional security provided by restaking.

2. Enhanced ETH Capital Efficiency: EigenLayer's restaking mechanism improves capital liquidity and usage efficiency. The same ETH can now serve multiple networks, allowing users to earn additional rewards from participating in other AVS protocols while enjoying the original staking yields. This brings greater flexibility and scalability to the Ethereum network and the broader blockchain ecosystem.

3. Lower Participation Threshold: The restaking mechanism allows small stakers to participate in Ethereum's network security. Stakers do not need the full 32 ETH staking threshold; individual stakers can participate through liquid staking tokens (LSTs). EigenLayer supports LSTs, such as stETH, representing staking rights to original ETH and can circulate and be used freely in DeFi projects.

4. Increased Decentralization: Allowing small stakers increases the contributor base for network security, reducing reliance on large stakers. This helps prevent potential centralization risks and validator monopolies. Additionally, EigenLayer's design encourages broader community participation and governance, making blockchain networks more democratic and decentralized.

II. Design Principles of EigenLayer

1. Restaking: In the EigenLayer ecosystem, restaking provides shared security with Ethereum, forming the foundation of EigenLayer. Participants restake their ETH from the Ethereum network into the EigenLayer network. These ETH serve as collateral capital, supporting the network's security and operation. Stakers receive dual rewards from native Ethereum network validation and AVS.

2. Active Validation Services (AVS): AVS utilize restaked ETH to enhance their service functions. AVS are special services or applications running on EigenLayer, directly using these restaked funds to provide enhanced network services. These services can include computing, storage, data processing, etc. AVS can be likened to middleware or modules, such as new blockchains, data availability (DA) layers, virtual machines, oracle networks, cross-chain bridges, etc. AVS can provide data services for DeFi, gaming, wallets, etc.

3. Rollups: In the EigenLayer ecosystem, rollups benefit from modular services provided by AVS. For example, through services like EigenDA (EigenLayer's super data availability service), rollups can achieve super-scale data processing, significantly increasing their ability to handle large-scale data.

4. Operators: Operators play a crucial role in the EigenLayer ecosystem, performing various validation tasks dependent on staked ETH for security, forming the foundation for AVS. Operators' responsibilities include validating transactions, executing smart contracts, maintaining network security, etc. Their work ensures the reliable operation of AVS, supporting upper-layer applications and services.

5. Safeguards: Considering the additional risks brought by restaking, EigenLayer introduces multiple risk control mechanisms. For example, EigenLayer has designed a system called "Decentralized Validator Cluster" (DVC) to distribute risks, ensuring that even if some AVS encounter issues, the network's overall security remains unaffected. To ensure proper operation and staked capital security, EigenLayer implements slashing mechanisms for improper behavior by stakers. Slashing involves confiscating staked assets to ensure AVS operators act honestly, with malicious actors facing the risk of having their stakes revoked.

6. Points System: EigenLayer introduces an internal points system, awarding one EigenLayer point per hour for each restaked ETH. This measures users' contributions to the network, reflecting their staking activity and duration through points. Although the EigenLayer team has not specified the exact use of points or announced details about launching EigenLayer tokens, many users continue restaking activities, anticipating potential future token airdrops based on points. This indicates users' expectations and confidence in EigenLayer's future development.

III. Methods of Restaking on EigenLayer

Currently, EigenLayer supports two restaking methods: Liquid Restaking and Native Restaking.

1.Liquid Restaking

This allows staking liquid staking tokens (LSTs), issued by LSPs (Liquid Staking Protocols), representing staking rights to original ETH. LSTs can freely circulate and be used in various decentralized finance (DeFi) protocols without affecting the staker's status and reward collection on Ethereum. LSPs address certain limitations of Ethereum network staking, allowing users to participate in network validation with less than 32 ETH and collect validation rewards. LSTs can be used to generate additional income in DeFi protocols or sold on the market without waiting for the unstaking period, effectively providing the benefits of unstaking. For example, Lido Finance is currently the most well-known LSP, issuing stETH as LST. EigenLayer accepts user staking of stETH, forming the foundation infrastructure for AVS security.
EigenLayer currently supports a total of 12 types of LSTs for liquid restaking, including stETH, swETH, mETH, stETH, wbETH, rETH, sfrxETH, cbETH, osETH, oETH, lsETH, and ankrETH. EigenLayer only accepts LST restaking deposits during specific time periods or limits the incentives and governance participation rights for a single LST to a maximum of 33%. To date, EigenLayer's LST restaking limit has increased five times. On April 16, EigenLayer announced the removal of all LST deposit limits and reopened the deposit window, allowing ETH to be restaked via EigenPod on the EigenLayer app.

2.Native Restaking

Native restaking is a more direct method where stakers directly stake their ETH into EigenLayer smart contracts. This involves Ethereum PoS validators connecting their staked ETH in the network to EigenLayer to participate in AVS validation. Native restaking requires staking at least 32 ETH, and participants must directly manage an Ethereum node, presenting a higher entry barrier than liquid restaking.
Since ETH is directly used in EigenLayer smart contracts, native restaking provides higher security. Staked assets are directly exposed to Ethereum and AVS penalty standards, enhancing capital protection. Unlike liquid restaking, native restaking does not involve any intermediary tokens, reducing risks from token volatility or mismanagement. However, its drawback is lower liquidity, with unlocking and transferring assets potentially requiring more time.

IV. Current State and Projects in the EigenLayer Ecosystem

Currently, the EigenLayer ecosystem supports various AVS and integrates with multiple well-known DeFi protocols and other blockchain services. It allows different types of staking proofs (e.g., LST and native ETH) to support these services, enabling more efficient capital utilization.

On April 10, EigenLayer announced the official launch of its blockchain mainnet, accompanied by the release of the EigenDA data availability (DA) service. In late February, a16z announced a $100 million investment in EigenLayer, making it a crypto unicorn with a billion-dollar valuation. As of April 18, according to DefiLlama data, EigenLayer's TVL exceeded $12.8 billion.

By April 18, EigenLayer had distributed about 4.2 billion points to all restakers. On the OTC market Whales Market, each EigenLayer point traded at $0.165.

1. Overview of EigenLayer Ecosystem AVS Projects

Currently, EigenLayer has announced 13 AVS. EigenDA, the first AVS to launch, developed by Eigen Labs, aims to help other blockchain protocols store transaction data and other information. AVS beyond EigenDA will be able to use the protocol to "register" but cannot fully deploy yet.

1. EigenDA: EigenDA is the first AVS on EigenLayer, providing high-efficiency, large-scale throughput data availability services for rollups. With shared cryptoeconomic security provided by EigenLayer restakers, EigenDA allows rollups to handle large-scale data more cost-effectively and efficiently. On April 18, EigenLayer announced lowering the staking threshold for EigenDA validator nodes from 320 ETH to 96 ETH. This change allows more new validator nodes to participate in EigenDA's AVS validation services.
   

2. Aethos: Aethos is a policy engine for smart contracts, abstracting pre-transaction computation while maintaining decentralization. Aethos simplifies pre-processing for smart contracts, making contract execution more efficient and secure.

3. AltLayer: AltLayer is a decentralized inter-layer network designed for rollups. It uses EigenLayer for rapid finality and EigenDA to ensure data availability, optimizing interoperability and performance between rollups.

4. Blockless: Blockless is a verifiable computing engine incentivized by restaking. It provides a decentralized validation platform for complex computations, enhancing transparency and credibility of computation results.

5. Drosera Network: Drosera Network creates a powerful and responsive first responder collective through restaking, focusing on decentralized validation. This offers a new pathway for emergency response and security validation.

6. Espresso: Espresso is a decentralized sequencing service using restaking to align with Ethereum's economic security. It ensures the orderliness and consistency of transaction execution.

7. Ethos: Ethos is a security coordination layer leveraging restaked ETH for security support for Cosmos. It enhances the security and efficiency of cross-chain interactions.

8. Hyperlane: Hyperlane uses EigenLayer to enhance message security for cross-chain application developers through restaked economic security, ensuring secure inter-application communication.

9. Lagrange: Lagrange creates a secure and scalable light client for OP rollups through restaking, improving network accessibility and response speed.

10. Near: Near aims to build a rapid finality layer to improve composability and liquidity within the Ethereum rollup ecosystem, enhancing efficiency in cross-rollup operations.

11. Omni: Omni is a low-latency interoperability network connecting all Ethereum rollups through restaking, ensuring secure and efficient network operations.

12. Silence Laboratories: Silence Laboratories is building an authentication library and SDK based on multiparty computation (MPC), independent of technology stacks and devices, enhancing network security and flexibility.

13. Witness Chain: Witness Chain is a monitoring network using restaking for proof, focusing on rollup security and proof of location. It enhances network monitoring and validation capabilities through proof of diligence and location.

2. Overview of EigenLayer Ecosystem Rollups Projects

Rollups projects leverage EigenLayer technology for rapid finality and efficient data availability, further expanding their blockchain solutions. Currently integrated Layer2 solutions include 9 projects. Among them, AltLayer is both an AVS and a rollup project.

1. Caldera: Caldera is a modular blockchain platform allowing developers to deploy rollups with EigenDA services with one click. This platform greatly lowers the technical barrier for developers, enabling more innovation and applications to go live quickly.

2. Celo: Celo, originally an independent Layer1 network, is transitioning to an Ethereum Layer2 rollup using EigenDA. This transformation allows Celo to better integrate into the Ethereum ecosystem while enhancing its network performance and scalability.

3. Cyber: Cyber is a modular Layer2 network designed for social and mass adoption, using EigenDA to optimize data processing and user experience. Cyber aims to promote blockchain technology applications in social media through efficient data services.

4. Layer N: Layer N is a Layer2 network designed to accelerate decentralized finance (DeFi), also adopting EigenDA for enhanced data processing capability. This support aims to provide higher efficiency and better scalability for DeFi applications.

5. Mantle: Developed by BitDAO, Mantle is a modular rollup using EigenDA. Combining BitDAO's resources and EigenDA's technology, it provides users with an efficient and powerful blockchain platform.

6. Movement: The Movement network comprises a series of modular blockchains based on the Move language, also adopting EigenDA technology. This design ensures flexible service while guaranteeing efficient data processing and security.

7. Polymer Labs: Polymer Labs is a rollup combining the Cosmos SDK and OP stack, using EigenDA for data availability services and Ethereum for settlement. This multi-technology integration provides diverse application scenarios and robust network support.

8. Versatus: Versatus, in collaboration with EigenDA, aims to introduce the world's first stateless rollup to the Ethereum ecosystem. This innovative rollup design brings new development potential to the Ethereum ecosystem through efficient data processing and unique network structure.

3. Overview of EigenLayer Ecosystem LRP Related Projects

Liquid Restaking Protocol (LRP) is a key component of the EigenLayer ecosystem, aiming to attract and increase user participation flexibly and efficiently. LRP allows users to deposit ETH or LST, restaking on EigenLayer on their behalf, providing a more flexible way to participate in the EigenLayer ecosystem. Users can choose to participate through the LRP platform without directly engaging in complex staking processes, earning EigenLayer points and additional points provided by the platform.

To prove users' deposits and participation, LRP issues LRT tokens representing users' staked shares in LRP. LRT serves as a certificate of ownership and can be freely traded in DeFi markets, offering additional liquidity and income opportunities, further increasing returns on top of EigenLayer points. Representative LRT-related projects include Ether.fi, Kelp DAO, EigenPie, Pendle Finance, and Gearbox.

1. Ether.fi: Initially part of LSP, Ether.fi quickly demonstrated its application breadth in DeFi through its innovative eETH and weETH tokens. These tokens, with buyback mechanisms and reward designs, ensure compatibility with mainstream DeFi protocols and enhance user participation and staked asset liquidity through EigenLayer points farming.

2. Kelp DAO: Kelp DAO offers an attractive staking and restaking scenario through its unique restaking solution and Kelp Miles points system. Its development reflects efforts to improve user experience and reduce transaction costs, especially in high Gas fee and network congestion situations.

3. EigenPie: As part of the MagPie ecosystem, EigenPie focuses on aggregating governance tokens and influencing DeFi protocol decisions. Its strategy involves independent restaking methods to diversify risk and optimize token liquidity and usability, crucial for long-term sustainable protocol development.

4. Pendle Finance: In collaboration with Ether.fi, Pendle Finance launched Ether.fi's eETH as the first available LRT on its platform. Ether.fi designed a system allocating EigenLayer points and Ether.fi loyalty points to YT-eETH token holders. Users can purchase nearly expired YT-eETH (at increasingly lower prices), accumulating interest and points until maturity.

5. Gearbox: Gearbox is a leverage yield protocol where borrowers leverage their positions by depositing staked assets and borrowed assets in credit accounts. Gearbox introduced leverage points strategies in collaboration with LRP protocols. Gearbox allows accumulating EigenLayer points and LRP native points in credit accounts and sending them to borrowers' wallets, offering up to 9x leverage points.

V. Risks and Challenges of the EigenLayer Ecosystem

As a restaking layer built on Ethereum, EigenLayer provides innovative blockchain solutions but also comes with several risks and challenges.

1. Technical Implementation Risk: EigenLayer's implementation relies heavily on complex technical solutions, including the stability and security of smart contracts. Smart contract vulnerabilities or protocol-level security issues could lead to significant financial losses. Since EigenLayer directly integrates with Ethereum's node ecosystem, any technical shortcomings could impact its overall security and efficiency.

2. Market Acceptance: While EigenLayer offers an innovative restaking solution, market acceptance remains an important uncertainty. The volatility of the crypto market could affect the value of staked assets, and market reception of this emerging technology will directly impact EigenLayer's liquidity and widespread application.

3. Centralization Risk: The restaking model may lead to capital concentration among a few efficient validators, potentially exacerbating centralization trends and creating market monopolies, threatening Ethereum's decentralization principles.

4. Consensus Split Potential: EigenLayer's operational model, if directly intervening in Ethereum's node ecosystem, could impact Ethereum's social consensus. Improper handling could lead to community splits or even chain forks.

5. AVS Risks: EigenLayer provides additional functions and services through its AVS (Active Validation Services), but these services' security and efficiency rely on operators' reliability and technical implementation. Any operational failures could affect the staked ETH. For AVS requiring high network security, restaking might not offer sufficient protection, potentially impacting trust and adoption of these services.

VI. Prospects of the EigenLayer Ecosystem

EigenLayer has evolved from a concept of sharing Ethereum network security and generating additional income into a vast ecosystem meeting the needs of infrastructure builders and investors, generating significant interest and high expectations in the infrastructure industry and the crypto market.

1. Expansion of AVS: Following the launch of EigenDA, EigenLayer will introduce more AVS, offering more customized services like enhanced data processing capabilities and more efficient transaction validation, expanding its service range and influence.

2. Security Enhancement: Implementing advanced security measures and audit mechanisms, such as slashing mechanisms, ensures AVS operations remain unaffected by malicious attacks or vulnerabilities.

3. Cross-Chain Integration: Developing cross-chain solutions allows EigenLayer to serve not only Ethereum but also interoperably with other major blockchains, enhancing its market applicability and user base. Collaborating with more blockchain and crypto projects to achieve technical interoperability and improve overall network efficiency.

4. Ecosystem Expansion: Establishing partnerships with more ecosystem projects like DeFi, DAO, and NFT platforms, providing high-efficient restaking solutions to bring value to these platforms.

5. Integration of Emerging Technologies: Exploring the potential of combining emerging technologies like artificial intelligence and the Internet of Things with EigenLayer technology, creating new application models.

6. Competition and Cooperation: Lido, the largest liquid staking protocol in the Ethereum ecosystem, stakes the most ETH and has many node operators. The direct interest conflicts between EigenLayer and Lido might prompt Lido to rethink its business model and sustainability, while EigenLayer will need time to gradually complete its missing modules.

As more blockchain and crypto projects seek to reduce startup costs through a shared security model, EigenLayer's restaking model could become an important direction for future blockchain network security architecture. Additionally, it could drive the emergence of new economic models and investment opportunities, especially in the DeFi and cross-chain operations fields. Not only does it bring innovation and value to the Ethereum network, but it also provides impetus and direction for the entire blockchain ecosystem.

Hotcoin closely monitors the development dynamics of the EigenLayer ecosystem and restaking track, having listed quality assets such as ALT, ETHFI, OMNI, NEAR, CYBER, and PENDLE. Invest in Hotcoin for the hottest quality assets, reaching first, ahead of the curve!

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