How will EigenLayer connecting the Cosmos and Ethereum ecosystems complement each other to create more value?

The collateral protocol EigenLayer announced that it will provide services for application chains within the Cosmos ecosystem. In the future, new network projects will be able to enjoy the flexible architecture of Cosmos SDK as well as the security provided by Ethereum, contributing to the innovative development of both ecosystems.

Background: Cosmos and Ethereum Facing Similar Challenges

MEV

MEV has been an important issue for Ethereum since 2020, as evident in its roadmap. There are plans to introduce PBS design to minimize the negative impact of MEV in the future, with the current compromise being the use of the MEV-Boost external protocol created by Flashbots.

Ethereum has released its 2024 roadmap, continuing towards a world settlement layer direction.

In the Cosmos ecosystem, MEV is also a key issue. Due to the customizability of each Cosmos chain, various solutions are being explored. For example, Osmosis is experimenting with a block arbitrage profit-sharing method, Skip has proposed a decentralized builder and proposer commitment design using Block SDK, and Fairblock is experimenting with a new mempool design solution.

Interoperability

Due to its modular nature, Cosmos has placed interoperability as a primary development focus from the beginning. Its blockchain communication protocol IBC has been continuously evolving since 2016, aiming to address interoperability challenges through cross-chain lightweight client verification. It was enabled in 2021, ensuring the security of over 1000 IBC connections.

In contrast, Ethereum is facing obstacles in interoperability technology as the number of Layer2 and application chains continues to grow. Given its variable sequencer design, cross-Layer2 lightweight client verification design poses challenges. However, the deployment of decentralized sequencers like Espresso has begun to address the issue.

Perhaps Cosmos can provide assistance to Ethereum. In the past, directly applying the Cosmos stack to Ethereum has been technically challenging, but the Layer2 ecosystem now provides an opportunity for related experiments.

EigenLayer to Serve the Cosmos Ecosystem

It can be observed that Ethereum and Cosmos actually have similar goals. Is there an opportunity for them to complement each other and solve problems together?

Lowering the Barriers for Projects to Utilize Cosmos Innovations

Many of Cosmos' innovations involve using validators to perform additional work. However, maintaining validators with strong economic security for the ecosystem's application chains remains a major challenge, as network security is fragile due to low token market value.

EigenLayer excels in providing Ethereum's network security to external networks through ETH re-staking, showing that Cosmos and EigenLayer can complement each other perfectly, leading to this collaboration.

How will the re-staking project EigenLayer change the Web3 infrastructure ecosystem?

In the future, application chains created based on the Cosmos SDK can quickly enhance network security using EigenLayer, leveraging the former to build a solid blockchain foundation combined with the security provided by the latter, lowering the barrier to launching decentralized network projects.

Developers in the future will be able to use Ethereum's security to launch new PoS networks or PoA networks with budget constraints, separating network launch from token issuance without the need for issuance.

Enhancing the Competitiveness of Projects Based on Cosmos SDK

Projects like Lay3r and Ethos originally aimed to connect Ethereum's economic security and liquidity with Cosmos. Now, this can be achieved more easily, even without token issuance.

Maintaining projects like Binary Builders for the Cosmos SDK can further enhance value. By introducing liquidity and security into Cosmos through EigenLayer, any project wishing to build a network using the Cosmos SDK can succeed more easily without needing liquidity and with a good technical framework, making the Cosmos SDK more attractive.

Diverse Community Discussion and Evaluation

Ignas: Depreciation of ATOM Token Value

Crypto researcher Ignas believes that this collaboration will have a negative impact on the value of the native Cosmos token ATOM.

The key criticism of the ATOM token is the value capture problem, where ATOM tokens staked on Cosmos Hub do not hold value for networks built using the Cosmos SDK like Osmosis and Injective, making it difficult for the prosperity of other ecosystems to reflect on the ATOM token.

As a result, the Cosmos core team developed Interchain Standards ICS to provide shared security for blockchains created based on this framework. There are currently two networks built on it, Stride and Neutron.

The long-awaited ICS may bring a glimmer of value capture opportunities for the ATOM token, but now EigenLayer, with Ethereum's security brought to the Cosmos ecosystem, who still needs ICS? Therefore, in the long run, the impact on the ATOM token may be negative.

yyy: Contribution to the Prosperity of the Cosmos Ecosystem

Web3 Caff researcher yyy believes that while ICS businesses will indeed face severe direct competition, it may not have a significant impact on the price of the ATOM token, as the effects of ICS on token prices are not clear.

Instead, due to EigenLayer, the advantages of building blockchains on the Cosmos ecosystem will become more prominent. By providing a good consensus foundation through the Cosmos SDK and utilizing EigenLayer to provide Ethereum's security, many more competitive projects are expected to be created in the long run, ultimately positively impacting the governance token ATOM in the Cosmos ecosystem.

Cosmos and Ethereum Complement Each Other Through EigenLayer

While Ethereum and Cosmos initially had different goals, the paths of these two ecosystems are gradually overlapping. Both face similar technical challenges such as MEV, liquidity fragmentation, and interoperability. EigenLayer can deepen the connection between the two, allowing them to complement each other and jointly solve the aforementioned issues.

Due to the flexibility of its Cosmos SDK design, Cosmos has flourished as a center for many projects and design experiments; while Ethereum serves as a secure settlement layer. EigenLayer can complement the strengths of both, strengthen the development of both ecosystems, and is expected to bring more innovation.

In the short term, there may not be short-term benefits for ATOM, making ETH more valuable. However, in the long run, both ecosystems will benefit.