- Look in detail about what EigenLayer is providing to businesses built on the Ethereum network.
- Check out the various technological elements present in the EigenLayer protocol that make it a stronger candidate to unify Web3.
- Learn how tapping into EigenLayer’s technology can bring you increased advantages in the competitive Web3 business space.
As the blockchain industry evolves, the need for newer technologies to increase the market’s efficiency increases, too. Notably, Ethereum has experienced the bulk of such revolutionary techniques, with the concept of Restaking being the latest. The concept has been pioneered by EigenLayer, a crypto-economic security solution built on top of the Ethereum network. This Ethereum restaking protocol comes with several breakthrough elements that make things better for both stakers and businesses, which we will discuss later in this guide. We will also look into how utilizing this novel solution can bring about better times for your new Web3 venture.
EigenLayer: A New-Gen Ethereum Restaking Protocol
Launched in mid-2023, EigenLayer has become one of the centers of attraction in the Ethereum-native business space owing to its novel ambitions and the ways it plans to utilize to achieve them. The Ethereum restaking protocol has put everyone in awe, bringing in a new-generation concept that lets people reuse Ether ($ETH) staked on the blockchain to be reused for providing security to other on-chain decentralized applications.
- The solution allows people wishing to stake Ether to obtain a validator slot to become validators of applications built on the network. This is possible as EigenLayer primarily focuses on providing decentralized trust by opening opportunities for restaking staked ETH.
- Additionally, EigenLayer also permits users to participate with either Ether or Liquid Staked Tokens (LSTs). It is also further supported by an Opt-in Model that lets people restake cryptos, enhancing crypto-economic security for applications based on the Ethereum network.
- This novel solution not only enhances validation security for Ethereum-native decentralized applications (dApps) but also provides an additional avenue of passive income for people (especially those who staked Ether). Such multi-faceted and mutual benefits can lead to the blockchain gaining increased appeal in the mainstream market.
The Problem EigenLayer’s Technology Aims to Solve
With Ethereum becoming the topmost blockchain in terms of smart-contract-based transactions encompassing millions of fungible and non-fungible crypto tokens, multiple problems have surfaced. EigenLayer’s technological solution comes with the capability to resolve some of the most hard-hitting issues the Ethereum blockchain community faces.
- Once Ethereum’s developers came up with the EVM (Ethereum Virtual Machine), trust and innovation were separated. In this case, trust was provided by the blockchain, while innovation came from the applications built on top of the blockchain.
- Also, while applications utilize trust for processing transactions, stakers and validators provide it. Such fragmentation of trust in the network mandated the need for middleware and processing protocols to set up external trust systems that might or might not be fully decentralized.
- Also, the native redundancy of Ethereum (and other layer-1 networks) disallows protocols functioning on other non-EVM-compatible layer-1 blockchains to reap the benefits gained by their EVM-compatible counterparts. This means market exposure is meek for businesses running on such networks.
How EigenLayer’s Infrastructure Resolves Them?
The issues we had seen in the above section make us feel that EigenLayer is indeed a blessing for the entire Web3 space. The solution aims to make Ethereum’s foundational layer offer other functionality (primarily security to dApps across blockchains) apart from creating new transaction blocks.
- The EigenLayer restaking solution taps into Pooled Security to repurpose staked Ether to offer validation services for other applications. Note that EigenLayer provides an opt-in process, meaning once a user chooses to restake using the solution, they are subjected to the slashing rules of the protocols they choose to stake in.
- EigenLayer’s infrastructure also utilizes Free-market Governance, a model that ensures a competitive market exists for pooled security dictated by supply and demand. This allows validators to restake in platforms according to their wish (mostly platforms they expect to perform well), enhancing innovation levels in the Ethereum ecosystem.
- Alongside these, it enforces newer Slashing Conditions through smart contracts that manage the withdrawal credentials for staked ETH. In case any malicious activity occurs in the protocol protected by EigenLayer, slashing occurs, and the malicious actor will be severely penalized by slashing their staked Ether.
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Benefits of the EigenLayer Protocol
The EigenLayer protocol comes with a plethora of advantages that equally benefit businesses, users, and validators on Ethereum. Experts say that its comprehensive benefits could make it a breakthrough protocol for Ethereum.
- EigenLayer’s infrastructure provides higher bandwidths for data availability at economical costs for services like data oracles and blockchain bridges. The solution lets applications process at least 15 Mbps (Megabytes per second) compared to Ethereum’s 80kbps (kilobytes per second).
- Using EigenLayer makes Ethereum appeal better to other layer-1 networks (especially those not compatible with EVM) by enhancing interoperability for protocols on Ethereum. This is made possible by increasing the programmability of the Ethereum mainnet, increasing the rate of development and innovation.
- The infrastructure provided by EigenLayer also enables Ethereum to become more efficient by supplying the surplus resources present in stronger nodes to run smaller networks. Such moves can make app-specific networks built inside the Ethereum ecosystem run smoother than ever before.
- Using EigenLayer also costs incredibly less than other modular blockchain solutions, as it does not have a separate consensus layer, hence providing greater transaction throughput at cheaper costs. Also, businesses using its infrastructure can have a valued validator network in quick time as it spreads across the global Ethereum ecosystem.
Which Applications Can Benefit from EigenLayer’s Restaking Solution?
The main reason for the imminent rise of EigenLayer’s Ethereum restaking protocol is its nature of catering to diverse use cases (primarily blockchain infrastructure) that aim to bolster how Web3 technology will reach the world.
- Bridges: Blockchain bridges that run lighter clients off-chain to other networks and process transactions on Ethereum can have reinforced security with EigenLayer.
- Oracles: Data oracles can benefit from EigenLayer by only recording data supplied from highly trusted entities and slashing other claims.
- Settlement: Cryptocurrency settlement layers can use the protocol to ensure faster finality by verifying zero-knowledge proof and processing transactions in milliseconds.
- MPC: Multi-Party Computation (MPC) provisions can be made highly secure using EigenLayer, which offers decentralized trust by sharding secret codes.
- Data Availability Layer: Data Availability Layers like EigenDA can leverage the infrastructure to run dual quorum models, ensuring faster data processing.
- MEV Management: Managing Maximal Extractable Values (MEV) will become easy with EigenLayer as it allows block proposers to make trusted commitments to propose blocks.
- Single-Slot Finality: EigenLayer users can choose not to fork a block to attain single-slot finality quicker than the time taken normally.
Hence, we have seen what EigenLayer does and how it aids different use cases in depth in this comprehensive guide. The novel nature of the Ethereum restaking protocol makes it a powerful tool for the Ethereum network and the dependent ecosystem to make incredible strides in the blockchain industry. Using the infrastructure available properly can accelerate the mainstream adoption of Web3 technology as it ensures decentralization, security, and seamlessness without compromising. If you are looking to utilize EigenLayer’s infrastructure for your new Web3 business, our team is at your disposal anytime to realize your restaking platform development dreams. Connect with our experts to frame the development pathway to integrate your application with EigenLayer’s sophisticated solution.