In the LSD (Liquid Staking Derivatives) track, Lido is currently the largest provider of ETH liquid staking. It has carried out a lot of integration with the DeFi field, established sufficient liquidity, and Lido players can also obtain higher returns from it, which also allows Lido to occupy about 30% of the market share in this field. Rocket Pool is the second largest liquidity staking protocol after Lido, providing services to nodes through a decentralized staking method as much as possible. In addition, there are mainstream agreements such as Stakewise and Frax Finance. With the upgrade of Ethereum in Shanghai approaching in March, the currency prices of the above-mentioned projects have shown varying degrees of growth in the near future, and a new narrative has emerged around the LSD track, that is, "second pledge".
EigenLayer, which stands for "Second Pledge", is a protocol that "modifies the Ethereum chain" at the base client layer to allow validators to stake their ETH again while simultaneously validating other protocols. For example, after you pledge 32 ETHs to protect the Ethereum POS network, you can also use these pledged ETHs to pledge verification oracles or other Dapps such as bridges, which will also bring you the original APY of pledged ETH additional income above.
Workflow of EigenLayer
EigenLayer is positioned as a general market for decentralized trust built on Ethereum. Through a series of smart contracts, the continuous opt-in mechanism at the consensus layer allows users to use their locked tokens to forcibly verify other applications to realize the second pledge of ETH use case.
Specifically, validators and stakers earn income by re-staking these ETHs to the EigenLayer smart contract to support other projects by using Liquid Staking Derivatives (LSD) or setting the EigenLayer smart contract as their ETH withdrawal address . If the verifier provides wrong services or maliciously attacks EigenLayer, the EigenLayer network can also cut some or all of the 32 pledged ETH.
In this way, EigenLayer can use the existing trust network to protect other infrastructure and middleware layers, so as to significantly reduce security costs and system risks. Because compared to a protocol that does not support EigenLayer, an attacker not only needs to attack the security provider, but also needs to attack the ETH validator network that supports the protocol.
Developers will also benefit from having their middleware run and secured by Ethereum's validators, avoiding the time-consuming and labor-intensive launch of alternatives. For stakers, they can re-stake their initial capital on many different protocols outside of Ethereum and earn additional income in the process.
Of course, no protocol dares to say that it is absolutely safe. Since you hand over the control of the pledged ETH to EigenLayer, and EigenLayer communicates with middleware that does other things (such as bridges, oracles, data availability layers, etc.), if these two parties misbehave, your ETH will also be lost. May be accidentally cut.
Projects started on EigenLayer
EigenDA is a highly customizable and ultra-large-scale data availability (DA) service on EigenLayer. Since it is not a consensus layer, it has lower cost and higher throughput. It is specially designed for Optimistic and ZK Rollup and is expected to be launched this year.
Other advantages of EigenLayer
In addition to directly staking ETH, EigenLayer also provides two other staking options: WETH/USDC LP Token and stETH/USDC LP Token.
In addition, middleware can choose to retain the pledge requirements of its native tokens while introducing EigenLayer, so as to continue to obtain the value of middleware native tokens, thus avoiding the "death spiral" caused by the price drop of a single token.
EigenLayer Progress
The founder of EigenLayer is Sreeram Kannan, director of the Blockchain Lab at the University of Washington (UW). Chief Strategy Officer Calvin previously served as Head of Strategy at Compound. Other members of the team are mainly developers and researchers from the gigabrain Go project at the University of Washington.
Currently EigenLayer is running on the internal governance development network, the public test network is expected to be launched from February to March this year, and the main network is expected to be launched from May to July this year. It is reported that EigenLayer was established by Layr Labs and has raised $15.6 million in 3 rounds of financing.
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