A Quick Overview

So, EigenLayer is a protocol that facilitates the staking or restaking of ETH across multiple networks and protocols for better rewards for the stakers, while ensuring security for the protocols by providing more liquidity to ensure smooth operations. 😎

Just a subtle reminder that the LSTs received from the staking of native ETH can be restaked to ensure the security of subsidiary networks and earn higher rewards. This process/concept is known as restaking.

How does Restaking work?

There are two methodologies for restaking: Native Restaking and Liquidity Restaking. Both involve the initial staking of native ETH, but there are some differences in their operational procedures.

Native Restaking on EigenLayer is open to users who operate an Ethereum Validator Node. Validators who wish to restake their assets are required to run additional node software necessary for the restaking module.

In Liquidity Restaking, the user stakes their assets with the validator and receives LSTs in return. These LSTs can then be restaked on other restaking protocols. Once these tokens are deposited, users can explore DApps to restake their tokens. These DApps are known as Actively Validated Services (AVS).

Both of these restaking methodologies involve some terms and conditions (T&Cs) and the risk of slashing in case the validator node defaults. All this is managed through a smart contract known as EigenPod on the EigenLayer.

Parties involved in Restaking

Now that we are familiar with the restaking methodologies, it will be easier for us to understand the actual parties involved in the process. Let’s begin, shall we?

1. Operators:

   • Operators are similar to validators but instead of validating transactions, Operators provide support to AVS.

   • Operators enable stakers to delegate their staked assets as either native ETH or LSTs.

2. Actively Validated Services (AVS)

   • AVS can be interpreted as any system that needs its own way of checking and confirming things to make sure that they’re correct. It takes place across a network of computers.

   • For example, Sidechains, Data Availability Layers, New Virtual Machines, Keeper Networks, etc.

3. Liquidity Staking Providers

   • Users can deposit their LSTs with EigenLayer for restaking, expanding the pool, securing the network, etc.

   • Lido, Rocket Pool & Coinbase are some of the popular Restaking Providers.

4. Liquid Restaking Protocols

   • Users receive LRTs (Liquid Restaking Tokens)🪙 in return for maintaining liquidity and participating in EigenLayer.

   • Some famous protocols include EtherFi, Renzo and Kelp.

5. EigenLayer

   • Various components of the EigenLayer’s ecosystem are involved.

   • Specifically, EigenPods for data/asset management, AVS for network security, and a network of operators for managing the restaking process. Hefty job, isn’t it. 🫡