Have you ever heard of Usain Leo St. Bolt? Yup, the fastest man in the history of this world. Well, the innovation in the Blockchain space runs even faster than him! 🏃🏻‍♂️

In this fast-paced Blockchain space, EigenLayer came up with the concept of restaking, wherein users can stake or restake their ETH for higher rewards and to ensure crypto-economic security across multiple platforms/networks and modules.

Problems tackled by EigenLayer 👊🏻

EigenLayer solves for many problems, but the essence of it lies in the Trust factor. The main motto of EigenLayer lies in building Programmable Trust so that developers can easily move on to more complex systems, rather than building trust from scratch.

Further explained in the following points:

1. Cost Efficiency in Establishing Initial Security 🔐

   • For new networks/protocols coming into the picture, it would cost them a fortune to establish a new Validator set in order to build trust from scratch.

   • To solve this issue, EigenLayer proposed the idea of programmable trust i.e. use of existing validator set and smart contracts for governance.

2. Improved Flexibility 🧘🏻

   • Protocols that wish to build on Ethereum, need to adhere to some basic rules laid out by the team. This can also lead to a lack of sovereignty/flexibility.

   • But, on EigenLayer protocols have the freedom to customize their architecture, including the consensus mechanism, slashing conditions, etc.

3. Increased Capital Efficiency 💹

   • Given the ability to restake ETH, stakers can now earn rewards from multiple protocols with the same capital.

   • Not only do restakers receive rewards for securing Ethereum, but they also accrue fees via the Actively Validated Services (AVSs) that utilize their restaked ETH.

4. Diversified Investment Options 🎛️

   • Along with increased capital efficiency, stakers also reap the benefit of diversified investment options.

   • Also, stakers can strategically select operators based on their efficiency, trustworthiness and the rewards that they’ve earned.

The Risks 💀

Now that, we know that there are multiple benefits. There are some downsides as well. 🤐

Risk No. 1: Risk of Slashing

• Malicious user behaviour can lead to up to 100% of ETH getting slashed.

• It is also important that restakers continuously monitor each AVS before they restake to them.

Risk No. 2: Risk of Centralization

• Majority of ETH stakers using EigenLayer to get higher rewards, it puts a lot of control in one place, hence more chances of system failure.

• All of this leads to centralization. 🏦

Risk No. 3: The Yield Risk

• As stakers go for more & more rewards or the highest yield, the protocols will get in line to offer the maximum yield possible.

• Ultimately, this may result in lower yield for the entire market as the value will decrease. 📉