Imagine locking your funds in a Fixed Deposit and still being able to use them to earn extra rewards. Sounds amazing, right? 😎

This is exactly what EigenLayer stands for. By restaking—or in simpler terms, by reinvesting the same money—you can earn more rewards, secure the network, and boost new Dapps simultaneously.

General Introduction to Staking 🔐

Essentially, staking refers to the process of locking in your funds for the smoother operation of the blockchain network. These operations include the validation of transactions and securing the network by providing increased liquidity through your locked funds.

As we've discussed a little about staking, it is also important to know why staking was needed and how it is better than the consensus mechanism that was previously used.

• Consensus Mechanism 🫱🏻‍🫲🏻

  • As blockchain is a decentralized technology, validating legitimate transactions requires agreement among network participants on the state of the ledger. To achieve this agreement, the concept of a consensus mechanism was introduced.

  • Various consensus mechanisms like Proof-of-Work(PoW), Proof-of-Stake(PoS), Proof-of-Commitment(PoC), etc. are used now-a-days.

• Proof-of-Work(PoW) & Proof-of-Stake(PoS):

  • In Proof-of-Work (PoW), to achieve consensus, miners had to solve a Byzantine (mathematical) problem that involved very heavy computation and consumed a lot of energy and electrical resources. 😵‍💫

  • To promote better environmental practices 🌍, a Proof-of-Stake (PoS) consensus mechanism is being adopted. Users will stake their funds for smoother blockchain operations, earning rewards and staking tokens in return for providing liquidity.

• Staking Tokens

  • In exchange for locking in your funds/cryptocurrencies, you receive staking tokens that hold the same value but have a different notation. For example, if you lock in ETH, you get stETH, but the value remains intact.

  • Now, these staking tokens, also known as liquid staking tokens (LSTs), can also be reinvested. 😉 This is known as Restaking.

EigenLayer:

Remember, the concept of Restaking? 🤔

EigenLayer is a platform that enables staking or restaking ETH using the network’s existing infrastructure to enhance both security and functionality.

An easier way of understanding would be considering EigenLayer as a broken/middleman built on Ethereum, featuring functionalities such as Decentralized Sequencing, Light Node Bridging, etc.

But, EigenLayer is not just limited to acting as a middleman between two parties i.e. the Users & the Ethereum Network. Users can also opt into EigenLayer allowing their staked assets to secure additional protocols. 💪🏻