What is EigenLayer?
EigenLayer is a decentralized protocol on the Ethereum blockchain that introduces the concept of “restaking.” This allows users to repurpose their staked ETH or Liquid Staking Tokens (LSTs) to enhance security for other protocols. By restaking, users earn additional rewards while supporting the security of various decentralized applications (DApps), oracles, bridges, and other services on the Ethereum network.
Restaking on EigenLayer improves capital efficiency and security within the Ethereum ecosystem. Users can leverage their staked ETH to support multiple services simultaneously, reducing the need for each new protocol to establish its own security network. This shared security model not only enhances trust but also promotes the growth and scalability of the network.
EigenLayer enables pooled security, where restaked assets create a security pool that various protocols can utilize. This approach ensures higher security and trust across the network, enabling innovative services such as data availability layers, oracles, and bridges. EigenLayer's flexible staking options allow users to restake their assets either natively or through liquid staking, optimizing the use of their staked ETH and increasing yield potential.
A notable application of EigenLayer is EigenDA, a decentralized data availability layer that provides higher bandwidth and lower costs compared to Ethereum's base layer. This significantly reduces gas fees for Layer 2 solutions, making transactions more efficient and cost-effective.
Governance within EigenLayer operates on a free-market system where restakers and operators choose which services to support. This decentralized approach promotes permissionless innovation and ensures that security and governance are managed effectively through the EIGEN token, which incentivizes participation and secures the network.
EigenLayer offers enhanced yield opportunities by allowing stakers to earn higher rewards through supporting multiple protocols, while also improving overall network security. However, it also presents risks, such as slashing penalties for failing to meet security requirements and potential centralization if too much power accumulates with a few operators.