What is EigenLayer and how does restaking work?

EigenLayer is a protocol that aims to leverage ether staked with Ethereum ETH +0.65% validators to secure third-party protocols through a process called restaking. It is designed to provide security services built on its framework, with nodes expected to receive service payments.

EigenLayer intends to capitalize on the economic security afforded by Ethereum’s $380 billion market cap.

Economic security is the value of financial resources needed to take down a network. For example, to compromise the Ethereum network, the largest proof of stake chain, an adversary must control at least half of the staked value, amounting to over $190 billion — making attacks economically impractical.

As such, EigenLayer plans to adopt a shared security model — a mechanism allowing protocols to join the network by leveraging a common pool of ether stakes.

It accepts both native ether deposits directly from Ethereum validators and liquid staked ether through protocols like Lido (stETH), Rocket Pool (rETH) and Coinbase (cbETH).

Actively validated services

EigenLayer enables new proof-of-stake projects to quickly establish security by connecting to a broader trust network — circumventing the challenges of developing their own.

EigenLayer began accepting deposits in 2023 and has accumulated over $15 billion in capital to secure various protocols. These actively validated services can range from consensus protocols to oracle networks and data availability platforms.

EigenLayer’s own data availability solution, EigenDA, is the first AVS, followed by six others introduced in April 2024, including AltLayer, Brevis, Eoracle, Lagrange, WitnessChain, and Xterio. These services provide various functions to meet diverse needs within the Ethereum ecosystem.

What is liquid restaking?

Liquid restaking allows owners to engage indirectly with EigenLayer transactions and use their staked ether in other DeFi activities.

Protocols such as EtherFi, Renzo, and Kelp offer liquid restaking services, where users deposit their ether or liquid staking tokens, which are then restaked in EigenLayer. In exchange, users receive liquid receipt tokens (LRTs) that can be exchanged back to ETH at any time, maintaining liquidity.

Liquid restaking protocols contribute over $10 billion of EigenLayer’s total value locked.

Eigen token

The Eigen Foundation, an independent non-profit, is set to launch the Eigen token at the end of April 2024 with a supply of 1.67 billion tokens at launch — introducing a flexible economic model potentially subject to inflation for incentives. 

The initial token distribution includes 45% for community and ecosystem initiatives, 29.5% for investors, and 25.5% for early contributors, with a three-year lockup period involving a phased release schedule. A total of 15% of tokens are designated for airdrops, with 5% in the initial season targeting restakers.

Inter-subjective forking

The rollout of the Eigen token also introduced inter-subjective forking, a crypto-economic feature complementing ether restaking. This feature allows for slashing based on non-objectively identifiable misbehavior, such as data withholding.

Forking is designed as a rare occurrence, requiring a challenger to burn a significant number of Eigen tokens to initiate. Users then determine the correct fork, echoing Ethereum’s social consensus process.

Inter-subjective forking aims to avoid complicating the role of Ethereum validators, a concern previously highlighted by Ethereum co-founder Vitalik Buterin in discussions about the risks of restaking.