What Is EigenLayer?
Key Takeaways
EigenLayer is a protocol that enhances Ethereum's Proof-of-Stake system by allowing users to 'restake' their ETH.
EigenLayer's approach uses modular security, enhancing the flexibility and functionalities of staked ETH through a concept called "restaking collective".
Challenges include increased complexity, potential centralization risks due to staking pool dominance, and collusion threats within the module-based design.
Introduction
Ethereum transitioned from a Proof-of-Work (PoW) model to a Proof-of-Stake (PoS) system through a series of upgrades. In PoS, users stake their ETH tokens to secure the network. Essentially, they become validators who verify transactions and ensure network integrity. In return for their contribution, stakers earn rewards.
However, staked ETH is temporarily locked, limiting its accessibility. This is where EigenLayer steps in with its innovative approach. This article provides a quick overview of EigenLayer, its core functionalities, pros and cons, and the key differences between traditional staking and EigenLayer staking.
How Does EigenLayer Work?
Modules
EigenLayer introduces a modular security approach. It allows stakers to contribute their ETH to secure specific functionalities within the network. These functionalities are generally referred to as modules.
For example, a module might be dedicated to securing decentralized storage solutions like Arweave. Some modules could secure in-game items within blockchain-based games. Others could foster trust within DeFi applications like Aave.
Smart contracts
Ethereum stakers can restake their staked ETH via EigenLayer smart contracts, offering a new set of security and validation services to specific modules in the network. This is achieved by granting EigenLayer contracts the ability to set certain conditions on staked assets.
Restaking
EigenLayer restaking can be done in two different ways:
1. Solo staking. Users can operate their own nodes and actively validate transactions for the modules. This method is more suitable for advanced users.
2. Delegation. EigenLayer also allows delegating the node operation to other participants within the network. This is a convenient option for users who want to contribute to EigenLayer while avoiding the technical aspects.
