EigenLayer
Built on Ethereum, EigenLayer introduced restaking, a novel concept that enhances crypto-economic security. Restaking allows those who stake ETH, either directly on the beacon chain or through liquid staking tokens (LSTs), to repurpose their staked ETH via EigenLayer's smart contracts. By doing so, they can bolster the security of various applications on the network and receive additional rewards.
With EigenLayer, Ethereum participants can amplify the security of numerous services. They do this by reallocating their already staked ETH to specific node operators. These operators then commit to offering economic protection to several services at once. Through restaking, the same ETH ensures the safety of multiple services, leading to increased incentives for both the stakers and the node operators involved in the validation process.
The decentralization factor on Eigen Layer
The amount of native ETH restakers is projected to experience rapid growth in the upcoming years. EigenLayer offers native stakers the option to participate in securing services that prioritize high decentralization. This means these services can specify that only native stakers are eligible to take part. Examples of such services include those that enhance censorship resistance through multilateral ordering, secret sharing, and Multi-Party Computation (MPC) across multiple nodes.
To encourage maximum participation from native Ethereum stakers, it's crucial for services that place a premium on decentralization to keep their off-chain software container requirements lightweight. This approach ensures that stakers can engage without requiring a significant increase in their infrastructure capabilities.
Slashing on EigenLayer
EigenLayer's restaking mechanism significantly enhances security by raising the costs associated with malicious attacks. It achieves this by consolidating previously fragmented security pools. Instead of these pools operating independently, they converge onto EigenLayer. This convergence makes the financial cost of mounting an attack far greater than the potential financial gains.
To maintain this system, EigenLayer introduces new slashing conditions enforced through smart contracts. These contracts manage the withdrawal credentials for staked ETH when a user chooses to opt in (via EigenPod). If any malicious activity occurs, the slashing mechanism comes into play, resulting in the staker's inability to withdraw the original principal amount they deposited. Within the current Ethereum design, it is possible to slash up to 50% of the staked ETH. Consequently, when a withdrawal is initiated, at least 50% of the ETH remains accessible. EigenLayer goes further by enabling the slashing of the remaining 50% staked on the protocol.
Operator Delegation on EigenLayer
While some stakers may be interested in participating in EigenLayer, they might not want to handle the software containers of services themselves. EigenLayer provides a solution for these stakers by allowing them to delegate EigenLayer operations to operators. These operators undertake the responsibility of running actively validated service software modules on behalf of the stakers.
Stakers make their decisions to delegate to operators based on several factors:
Trustworthiness of the operator: Stakers need to conduct thorough due diligence on operators before entrusting their stake to them. If the delegated operator fails to fulfill its obligations within the services it engages in, the staker's assets become susceptible to slashing.
Rewards: Stakers may opt to delegate to operators who offer the highest rewards on their delegated stake.
Service preferences: Stakers might have preferences for specific services based on their personal interests, risk assessments regarding slashing, or potential rewards. Consequently, they may choose to delegate their stake exclusively to operators who have opted into those particular services.
For those stakers who prefer a trust-minimized approach, they always have the flexibility to act as their own operator.
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