LXDAO re steaking.
LXDAO Expert WG｜
Re-staking —— EigenLayer in a Nutshell （first part）EigenLayerLIDOThe LXDAO technical sharing by the Expert WG introduces EigenLayer, a middleware protocol on Ethereum that allows users to earn rewards by staking their Ethereum assets in multiple savings accounts, attracting significant investment and playing in a playground with billions of dollars worth of assets.
——Generated by ChatGPTwritten by ShanniIntroductionThe LXDAO technical sharing, produced by the Expert WG, primarily comprises seasoned experts from diverse fields.Their task includes but is not limited to: expert consultation, code review, thematic research, technical sharing, etc.Welcome to subscribe to LXDAO！This article is the upper version of a two-part series.Main BodyEigenLayer is a middleware protocol based on Ethereum, everyone’s favorite network ;). Imagine you already put some of your Ethereum into a savings account to earn interest. EigenLayer says, "Hey, why not double dip?" This means you can put that same Ethereum into another savings account and earn more rewards and have a say in some decisions, too.Money MattersEigenLayer got a lot of people excited early on and raised over $64 million from investors. That's a lot of money! And they were valued at $500 million at one point.They're playing in a huge playground, where people have already put $100 billion worth of Ethereum to work. As of March 19, 2024, they've got $10 billion in their playground.Doubling Down on Staking MarketEthereum has a system where you can lock up your Ethereum to help keep the network secure and, in return, you get some rewards(Proof of Stake). In the new consensus mechanism, Beacon Chain, you can lock up or “stake” assets to create new blocks. In return, you get rewards as an on-chain validator, which earns about 7-14% interest per year, including MEV and priority voting rights.But, there's a catchYou need a lot of Ethereum to play (32 ETH), it's a bit complicated, and you have to lock up your Ethereum for a long time, typically 6 months to a year. This has made some people hesitant. The industry's answer? Make it easier for everyone to stake their Ethereum without the hassle, with solutions like Lido leading the charge.How It All WorksEthereum relies on three main parts to keep it running smoothly and securely:•The Trust Layer: This is all about the network of people who produce the blocks, or chunks of data, that keep the Ethereum network humming, formed by validators.•The Consensus Layer: These are the rules about how blocks are made and which version of the blockchain is the right one.•The Execution Layer: This is where the Ethereum Virtual Machine lives. It's like the brain of Ethereum where all the smart contracts and dapps run.Ethereum dapps (decentralized apps) face a couple of big challenges when they run on Ethereum's system:1.If you want to make a dapp, you need to build your own system for making decisions (like Tendermint or Snowman) and a place for the dapp to run (like Sealevel or FuelVM). But this means you can't just use Ethereum's built-in trust system. You have to create a whole new trust layer just for your dapp. Even though you can build something called Layer-2 solutions on top of Ethereum to help with this, in the end, your dapp's transactions still rely on Ethereum's system (called EVM), which is where the final checks happen.2.Even though it seems like dapps on Ethereum are super secure because they're on the Ethereum network, they actually can be quite vulnerable because of other services they use, like oracles (services that bring real-world information into the blockchain) and cross-chain bridges (which let you move assets between different blockchain systems).For example, imagine your dapp is protected by $10 billion worth of Ethereum (ETH). But, if every service it relies on is only protected by $1 billion in ETH, your dapp is only as secure as these weaker services. This is something you can see happening when DeFi (decentralized finance) protocols get hacked because of problems with these cross-chain bridges or oracles.EigenLayer's Big IdeaEigenLayer makes it possible to create an open market where people can trade trust. This means that those who help secure Ethereum can decide through a free market if they want to help secure other apps and get extra rewards for it. They can choose based on what risks they're willing to take and the rules about losing some of their stakes if something goes wrong. This gets rid of stiff rules on how things are run. On the other hand, apps can buy the security they need at market prices, which lets them focus on making their apps better and running them smoothly while keeping them safe.What Makes EigenLayer Special1.Custom Decentralization: As more people use Ethereum, there will be a lot more Ethereum being locked up as a security measure. EigenLayer gives these people new options and opportunities. For example, they can join special services that only they can use, like services that help hide information or compute things together without a central control point. To make it easy for more people to join in, these services try to keep technical requirements low so that even with basic setups, people can still participate.2.Custom Penalties: EigenLayer also introduces a system where if you decide to secure a service, you agree to certain rules. If something goes wrong, you might lose some of your Ethereum as a penalty. But, if everything goes right, you can earn extra Ethereum rewards from the service you helped secure. This system helps make sure everyone behaves and the network stays safe.3.Operator Delegation: If someone wants to be part of EigenLayer but doesn’t want to handle the technical stuff, they can let someone else do it for them. They choose someone they trust to run the technical side, and if that person does a good job, they get to share in the rewards. But before they choose someone to do this, they need to check them out carefully to make sure they're reliable. However, if someone really wants to, they can choose to handle everything themselves, keeping full control over their assets and how they’re used in securing the network.In simple terms, EigenLayer is all about giving people more choices on how to use their Ethereum to help keep the network safe, and even make some extra money from it, all while making sure the system stays secure and trustworthy.Making Staking SimpleStaking with EigenLayer is like adding a turbo boost to your Ethereum investments. It opens up new ways for your staked Ethereum to work harder for you. Here's a bit more about how it shakes things up:1.Re-stake Directly (Native restaking): You can take the Ethereum you've already staked and stake it again through EigenLayer. It's like stacking your investments for even more rewards from L1 chain.2.Use Staked Tokens (LST): If you've got Ethereum staked in places like Lido or Rocket Pool, you can move those over to EigenLayer and keep the rewards coming.3.Stake in Pairs (ETH LP Restaking): Here, validators can put ETH that's already been put to work through other services like Lido or Rocket Pool into EigenLayer. It's a bit like moving money from the DeFi world into EigenLayer to earn more.4.Mix and Match (LST LP Restaking): In this method, validators use a token that includes a liquid staking ETH token (like the kind you get from Curve’s stETH-ETH pair) to make more money. This route takes them from the first blockchain layer, through DeFi, and finally into EigenLayer.Middleware (a kind of software that helps different programs communicate) can choose to keep requiring its own special tokens to be staked (locked up as a form of investment) when it starts using EigenLayer. This way, the software can keep the value of its own tokens and avoid the problem where the price of just one type of token falls a lot, causing what's called a "death spiral."Looking Out for RisksWhile EigenLayer offers more ways to earn, it's important to keep an eye on the risks. For example, if a bunch of security providers decide to cause trouble or if there's a loophole that lets someone take advantage of the system, you could be at risk. But that's a part of investing - weighing the potential rewards against the possible risks.What It Means for ProjectsIf you're thinking about using EigenLayer for your project, there are a few things to consider:•Building Trust: Starting a new security system from scratch can be tough. You've got to convince people it's safe and worth their investment, which can be a big challenge.•Costs and Benefits: Using EigenLayer might save you some hassle, but it's not always clear how much you're saving or what new costs might pop up.•Long-Term Questions: Relying on EigenLayer means tying your project to another system. As your project grows, you'll need to think about whether this relationship is still beneficial or if it might limit your options down the road.In a NutshellEigenLayer is like a new tool in the Ethereum toolkit. It's trying to make staking more flexible and rewarding, which could be great for everyone from individual investors to big projects looking for secure ways to operate. Like any tool, it's got its strengths and weaknesses, but it's definitely worth keeping an eye on as the world of Ethereum continues to evolve.
