Why make your own security system when you can just pay to use someone else’s.
This is the idea behind “restaking,” a new concept in the crypto world. It involves using the ether (ETH) tokens that are deposited or “staked” on Ethereum, the second-biggest blockchain, to provide security for smaller networks and applications.
The aim is to help blockchain developers start new projects without spending a lot of money to find people to make sure the new systems are safe.
Ethereum stakers can make extra money by staking their tokens in other projects. This means they can deposit their ETH tokens into different blockchain security mechanisms to help with transactions. Approximately 234 million ETH (valued at $43 billion) have been put into Ethereum, with around 730,000 people checking the blockchain on beaconcha.
EigenLayer was started in 2021 by Sreeram Kannan from the University of Washington. Many people see it as a leader in restaking. The protocol started its “Stage 1” launch on the main Ethereum network in June, after testing it for two months. In the month before now, the main developer for EigenLabs got $50 million in funding, after getting $14.
The EigenLayer protocol helps people start and create their own projects easily, when it used to be really hard to build trust networks. This was said by Brianna Montgomery, who works in the company’s strategy department.
One problem is that people who put their money into staking could be punished with penalties. This could cause disagreements among Ethereum users. In a blog post in May 2023, Ethereum co-founder Vitalik Buterin warned that there could be big risks for the ecosystem.
Buterin thinks we should keep the blockchain simple and not add too many extra features. He wants to support ways of using it that don’t make it become something else.
How does putting something back in place work.
EigenLayer’s restaking techniques make it possible for ETH stakers to increase the security of pooled Ethereum and extend trust to other systems. During Stage 1 launch, EigenLayer can help you stake Lido stETH, Rocket Pool ETH (rETH) and Coinbase Wrapped Staked ETH (cbETH).
Based on a whitepaper, people who stake their ETH can give permission to EigenLayer smart contracts to add more rules for penalizing them, which helps make the ETH more secure.
The process is similar to merged mining on the Bitcoin blockchain. It means using computational power to make another blockchain more secure. Syscoin is an example of a project that does this.
Bart Stephens, who is in charge at Blockchain Capital, said in a blog post in March that EigenLayer can be used to build a wide range of cryptoeconomic protocols, including things like middleware and new blockchains. Blockchain Capital was the main investor in EigenLayer’s recent fundraising.
According to Stephens, restaking makes it possible to create new systems and methods like data storage, verification, censorship resistance, connecting different blockchains, and other new ways of doing things.
On June 5th, Ben Wee wrote a post on Medium about EigenLayer. He explained that EigenLayer allows protocols to purchase security from validators, and for validators to sell security to protocols.
EigenLabs made a special way for networks to check if transaction data is real without needing to download all the data, which saves money.
It’s called EigenDA, and Wee says that people who want to use data on Ethereum can buy DA bandwidth for cheap.
EigenLayer is going to help make sure that data is available for Celo and Mantle, which are ways to make layer 2 of a computer system work better. They are also working with other groups in the cryptocurrency world, like Espresso Systems and Nethermind.
EigenLayer TVL is a type of technology.
The project keeps increasing the amount of staking people can do because there is a lot of interest in the protocol, and the maximum limits are reached quickly.
EigenLayer’s total value locked increased to about $90 million in just two days after announcing on July 12 that it can now restake up to 45,000 liquid staking tokens. This information comes from the DeFiLlama website.
On the first day, the maximum amount of stETH and rETH (Lido and RocketPool’s liquid staking tokens) that EigenLayer allows was used up. The next day, the maximum amount of cbETH (Coinbase’s staked ETH) was also reached. This shows that crypto users are really excited about EigenLayer.
Last week, EigenLabs said that the limits will go up again on August. Additional deposits of the liquid staking tokens will continue to be accepted until any of them reaches 100,000 tokens restaked.
According to Nansen’s senior analysts Osgur Murphy O Kane and Jake Kennis, new apps that use the pooled security from staked ether in EigenLayer add more rules for validators who have staked ETH. In exchange, the validators get more money for providing security and validation services.
This is what Buterin’s essay in May was about, asking not to put too much stress on Ethereum’s security system. He mentioned restaking and EigenLayer as examples.
He said using validator staked ETH for two purposes is okay, but using Ethereum community agreement for your own application is not okay.
Kannan, who started EigenLayer, wrote on X (formerly Twitter) on May 21 that he likes the analysis and agrees with the risk assessment.
After Buterin’s comment, people talked more carefully about EigenLayer and restaking. They focused on reducing risks and working together with Ethereum for the long-term. Steven Quinn, who leads research for P2P, said this.