EigenLayer (EG) is stepping onto the DeFi stage with a fresh idea to help DeFi projects leveraging Ethereum security with ease and allow investors to generate more yield on their assets with simplicity.

EG has secured over $50 million in funding with big names like Coinbase Ventures, Polygon Ventures, and Polychain Capital backing them up.

Summary:

1. Fixing a Big Issue

2. How EG Does Its Magic

3. Slashing Mecanism

4. Potential Risk

5. Growing Ecosystem

1- Fixing a Big Issue

Right now, if a decentralized app (dApp) wants to build on Ethereum but doesn’t understand its language, it has to create its own security system (called AVS) from scratch. This is tough, expensive, and the new security system can be an easy target for hackers.

EigenLayer (EG) offers a smart solution by leveraging Ethereum’s built-in security to create AVSs. dApps can then use these ready-made security systems instead of building their own, saving time and money.

2- How EG Does Its Magic

EigenLayer makes these security systems (AVS) by collecting staked ETH (ETH locked on Ethereum blockchain to secure the network) from investors and restaking them.

To better understand the roots of restaking, read this article.

EG offers multiple restaking options:

If you want to generate yield on your LSTs, EG currently supports the following tokens:

3- Slashing & Risks

Slashing is a penalty system to sanction validators' bad behavior in PoS systems.

Ethereum has its own slashing rules.

Each dApp building on EG can also set its own slashing rules.

EigenLayer's smart contracts manage how Ethereum PoS validators can withdraw their staked ETH. If a staker breaks the rules on an AVS, they can lose some ETH and be stopped from other activities on EigenLayer. When they take out their ETH, they’ll get less based on AVS rules.

4- Potential Risks

No DeFi protocol is immune of potential hacks.

In cryptoeconomic security, a system is secured if CoC > PfC.

CoC: Cost-of-Corruption

PfC: Profit-from-Corruption

To attack a network a quorum of 50% is required.

➡️ if $8M AVS secures a $2M TVL protocol

CoC ($4M) > Pfc ($2M) -→ ✅ Network secure

➡️ if $8M AVSs secure 10 $2M TVL protocols

Pfc ($20M) > CoC ($4M) -→ ⚠️ Network at risk

5 - Growing Ecosystem

EigenLayer has a growing ecosystem with more and more interesting projects leveraging its technology.

We’ll keep following its growth as EigenLayer’s vision looks very promising.

I hope you now have a better overview of EigenLayer.