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

How does the re-staking project RSD EigenLayer solve the challenge of establishing consensus from scratch in infrastructure projects and at the same time enhance the security of on-chain applications? What capabilities does it have to become the sixth largest crypto fundraising in 2023? This article, referencing its whitepaper, will provide a casual introduction to the potential of this emerging project from a business perspective.

What are the problems with existing ecosystem infrastructure

Web3 infrastructure includes projects such as oracles, cross-chain bridges, data availability layers (DA), sidechains, and DePIN. While these projects may not directly face users, they are crucial for on-chain protocols. For example, Curve relies on Chainlink for price feeds, and Rollups can utilize data availability layers to reduce on-chain costs.

However, the current state of infrastructure ecosystem has several issues, which can be summarized into two main points:

• High difficulty in establishing consensus networks
• Fragmented DApp security

High difficulty in establishing consensus networks

Infrastructure typically requires unique node designs and rules, different from Ethereum nodes and consensus mechanisms, thus needing to issue tokens and establish consensus networks independently. For example, to ensure correct price feeds, Chainlink constructs its own incentivized network and rules to ensure the nodes operate properly; otherwise, the nodes' staked LINK tokens will be confiscated.

Unlike Rollups, which can utilize Ethereum's security to build products, Rollups execute transactions on external servers and send information to Ethereum through a proof mechanism to ensure security is guaranteed by Ethereum.

Web3 infrastructure, besides the technology, also needs to consider how to build a decentralized incentivization layer from scratch. Ensuring decentralized services come at a high cost, making it difficult for new teams to enter the competition. Just look at how long Chainlink has dominated to understand this. Therefore, the EigenLayer team specifically refers to projects that need to construct consensus networks as "actively validated services, AVS."

On the other hand, for nodes supporting these decentralized infrastructure, as staking and rewards are usually in project tokens, the price volatility of these tokens is often greater than mainstream cryptocurrencies. This increases the nodes' risk resistance and profit evaluation capabilities, reducing their willingness to participate and further complicating the difficulty of establishing consensus networks in infrastructure.

Fragmented DApp security

Aside from the challenges faced by infrastructure teams, the security of on-chain protocols is closely related to infrastructure choices.

On-chain protocols not only rely on the blockchain but also typically use infrastructure to enhance services. For example, AAVE requires oracle price feeds, NFTs need decentralized storage layers to save metadata, and all protocols depend on RPC networks.

Therefore, the security of on-chain protocols involves not only smart contracts built on virtual machines but also considers the security of the infrastructure. Any vulnerability can hinder protocol security improvement, leading to fragmented DApp security issues.

Typically, the consensus strength of infrastructure is not as robust as mainstream blockchain networks like Ethereum, yet the security of on-chain applications becomes fragmented as a result. Hence, most protocols choose larger infrastructure, exacerbating the centralization problem that small teams face in constructing infrastructure projects.

Introduction to EigenLayer

Given the difficulties faced by AVS products in establishing network consensus and the fragmentation of DApp security, the EigenLayer team offers a perfect solution to address both issues: providing a decentralized infrastructure layer that can stake any token.

EigenLayer has built a new decentralized network, offering AVS projects a way to establish consensus networks without the need to issue their own tokens and build them from scratch, while extending Ethereum's security and ensuring that DApps using external infrastructure do not compromise their security.

Design of EigenLayer

So, what does the EigenLayer network look like? The EigenLayer ecosystem primarily consists of two roles:

• Stakers: Token stakers
• Operators: AVS node operators

Operators can choose which external infrastructure to operate and become a node connected to EigenLayer, but they need to meet corresponding requirements. For example, nodes providing decentralized storage must offer hardware storage space.

Therefore, most general users are likely stakers who delegate tokens to operators. If an operator is penalized, the staker's tokens will also be affected.

To attract general users to stake and lower the entry barrier, EigenLayer aims to create a protocol that can stake various tokens, including liquidity staked tokens like LSD, such as stETH issued by Lido, allowing users to stake while enjoying Ethereum staking rewards, providing multiple benefits and flexibility. This is why EigenLayer is referred to as the ReStaking, RSD project.

Activating the Infrastructure Ecosystem with EigenLayer

With the above design, EigenLayer can simultaneously address the high barrier to entry for AVS and the fragmented DApp security issues. Moreover, EigenLayer further reduces the entry barriers for all stakers, expecting to activate the environment of the infrastructure ecosystem, bringing more innovation and security.

Development Status

EigenLayer Development Roadmap

EigenLayer will be divided into three stages to attract different participants into the ecosystem:

• Stage One: Attract token stakers, where the team provides staking services without rewards, mainly attracting stakers for potential airdrop opportunities.
• Stage Two: Attract AVS node operators, aiming to attract operators capable of operating data availability layers to join the ecosystem at this stage.
• Stage Three: Attract diverse AVS to formally serve infrastructure projects and provide security.

EigenDA is the team's first experimental AVS

Keen readers may notice that we are currently in the second stage of EigenLayer's development. However, if there are no external AVS at present, what services can operators run nodes for? How can feasibility be tested?

Actually, in the second stage, the EigenLayer team has proactively created a data availability layer service called EigenDA, serving as the sole AVS in the second stage. EigenDA is the first AVS launched on EigenLayer.

Similar to other data availability layers, EigenDA provides high-throughput data storage for Rollups.

EigenDA will verify whether a decentralized consensus network without issuing tokens can successfully build a deployable infrastructure product. The team aims to attract 30 operators to provide 1Mbps data transmission for EigenDA and gradually expand to 10Mbps with more operator participation.

Fundraising Status

EigenLayer has also achieved success in the capital market, raising $50 million this year, successfully completing its Series A funding round. Shining in this bear market, it is the sixth-largest Web3 project in fundraising this year, indicating high expectations from investors for infrastructure networks.

Future Development of EigenLayer

EigenLayer Becoming the Infrastructure of Infrastructure

By extending Ethereum's security to external infrastructure networks through re-staking tokens, EigenLayer reduces the complexity of such projects, expecting to attract more significant capital into the infrastructure ecosystem, leading to expected growth in related innovative applications.

Furthermore, the security of on-chain protocols can be integrated, reducing the risk of protocols relying on weak external consensus networks and effectively enhancing user trust in protocols, ultimately driving healthier industry growth.

By creating a new decentralized infrastructure network, EigenLayer aims to solve common problems faced by other infrastructure projects, hoping to truly become the last infrastructure that needs to rebuild a consensus network.

Potential Airdrop Opportunities with EigenLayer

Since EigenLayer aims to serve as an incentive layer for other infrastructures, it is highly likely to issue tokens to attract more stakers to join the ecosystem. As a user, staking stETH on the official website is straightforward, but it comes with the risk of malicious operators and protocol vulnerabilities.

Ranked as the sixth-largest fundraising project, there is much market speculation about EigenLayer, potentially becoming another promising airdrop opportunity.

This article does not constitute investment advice.