EigenLayer

Staking

EigenLayer is a protocol built on Ethereum that introduces restaking, a new primitive in cryptoeconomic security. This primitive enables the reuse of ETH staked on the consensus layer.

Risk Rating
Good
Protocol Code Quality
Protocol Maturity
Protocol Design
Summary
What we like
EigenLayer's restaking mechanism extends Ethereum's base layer security and provides additional revenue opportunities for stakers, creating a competitive market for pooled security and mitigating the challenges of bootstrapping network security for new protocols.
What we like less
EigenLayer exposes the Ethereum network to greater centralization risks as stakers redirect their withdrawal credentials to the protocol. The governance layer is also controlled by a multisig with the ability to veto slashing decisions.
What it means for you
Restaking through EigenLayer allows your staked ETH to gain additional revenue streams and enables greater returns through increased diversification. However, it's important to note that users who opt-in to EigenLayer are at risk of slashing on the consensus layer, in addition to the new slashing conditions imposed by the protocol.
Information
Exploit/Hacks
None
Info
Key Metrics
  • TVL: $9.7B (Rank #2)
  • TVL Ranking by Staking: #0
  • Blockchain: Ethereum
  • Chain TVL
    • Ethereum: $9.68B
Risk Assessment
Good
Protocol Code Quality
  • Code reviewed by several experienced auditors including ConsenSys and Sigma Prime
  • Public team promotes accountability
  • No documented protocol hacks since launch
Protocol Maturity
  • Latest protocol version launched in 2023; maturity over nine months reduces technical risk as smart contracts are sufficiently battle-tested
  • Top 20% by total value locked slightly reduces risk
  • Multisig wallet controls protocol upgrades
  • Multisig consists of less than 4 signers, which makes the protocol more susceptible to centralization risks
  • Timelock is at least 48hrs, which provides users with sufficient time to exit if any malicious upgrades are approved
  • No governance token and/or contracts are fully immutable
Protocol Design
  • No death spiral concerns
  • This protocol is susceptible to risks related to staking a token to secure a network, such as slashing events
Things to know about EigenLayer

What is restaking?

Restaking is a new concept introduced by EigenLayer, a novel protocol built on Ethereum. The concept allows for the rehypothecation of staked Ethereum (ETH) on the consensus layer, extending the cryptoeconomic security to other applications on the Ethereum network. It involves a set of smart contracts that let users repurpose their staked ETH to provide validation services to other protocols that require their own actively validated system (AVS). This includes alternative consensus protocols and virtual machines, but also infrastructure critical to the Ethereum ecosystem such as bridges and data availability layers. Users who opt into EigenLayer's restaking mechanism grant the protocol additional enforcement rights on their staked ETH. This includes the ability to impose new slashing conditions, which persist above the consensus layer. The principle idea is to facilitate extensible security as new slashing conditions can be introduced to meet the demands of various projects built on top of Ethereum.

How restaking benefits Ethereum?

Restaking offers numerous benefits to Ethereum and its ecosystem. First, it introduces a pooled security system that repurposes staked ETH (otherwise locked into securing Ethereum) to provide validation services to other protocols, creating a more efficient use of capital. This system operates through free-market governance, allowing protocols to control the amount of pooled security consumed while enabling validators to determine their preferred set of risk and reward parameters before servicing a given protocol. This mechanism creates an open and competitive marketplace where protocols can purchase pooled security from ETH validators, and validators can sell pooled security to protocols. It accelerates innovation across Ethereum, increases profitability from staking, and mitigates the burden of bootstrapping network security for new protocols. Furthermore, restaking consolidates existing security into one place, enhancing the system's resilience against financial attacks and improving value accrual as stakers gain additional revenue streams by opting into EigenLayer to extend security.

What are the risks of restaking?

The primary risk associated with restaking lies in the new slashing conditions. Restaking involves taking locked staked ETH, and staking it on other services, which subjects it to greater slashing conditions. This means that users who opt into EigenLayer are still at risk of slashing on the consensus layer, in addition to the new slashing conditions imposed by the protocol. There are greater centralization risks as ETH stakers redirect their withdrawal credentials to EigenLayer, which creates a systemic risk for the Ethereum network. The protocol's governance layer is also controlled by a multisig with the ability to veto slashing decisions. Additionally, the system's security design success relies heavily on a rebalancing algorithm that accurately accounts for validators and their security capacity and usage. If this mechanism fails, EigenLayer could expose itself to various attack vectors, replicating the vulnerabilities it sought to solve. It is also important to note that the protocol initially launched with a maximum withdrawal delay of 7-days in order to manually review for any anomalies, but will decrease with time as this process is automated.