What is eigenlayer and what does it do?

2024 @eigenlayer
What is it and what does it do?

First of all, we can say that EigenLayer is an original work. That's why I can't compare it to other projects you know. We need to explain a few basic information for you to learn.

Lets start. The first thing we will talk about is Bitcoin.

What is Bitcoin? Bitcoin is a payment network consisting of a piece of code. What makes this payment network different from other payment networks is that everyone downloads the Bitcoin code to their computer and joins the network.

In this network, information/data is processed into computers in blocks, package by package, and due to this structure, we call Bitcoin blockchain. We call the people who process these blocks and write them to the network as miners.

Miners process blocks using electricity and processing power. And the more this processing power, the higher the chances of processing blocks.

Why is it desired to process a block, because the miner who processes the block receives the block reward + transfer fees for the transactions within that block in Bitcoin.

In other words, there is a symbiotic relationship between Bitcoin price and mining. An increase in the price of Bitcoin encourages miners to participate more in the network.

We call this crypto-economic security.

From where?

As the Bitcoin price increases, more miners join the network, more honest miners cause that network to be more secure, because according to the Bitcoin consensus, if 51% of the miners are malicious, the processing of information into the network may stop or false information may be processed.

Crypto-economic security.

Ethereum is a blockchain that first works with this system and then switches to PoS. Here, instead of mining devices that require large processing power, tiny computers containing 32 Ether are used. In this case, electricity is saved. And in order to ensure the crypto economic security I explained above, each correct block processed into the Ethereum blockchain pays Ether to computers with 32 Ether, while in case of cheating, 32 Ether is deleted. (Slashing)

This is also a crypto-economic security.

If you pay attention, in both models, the increase in the price of existing currencies actually increases the security of that system. While the Bitcoin price encourages miners to join the network, the Ether price makes it difficult to attack the network. That's why Bitcoin or Ether has a price; They have the task of protecting the blockchain crypto-economically.

Now.

There is only one thing about Bitcoin; peer-to-peer, that is, sending value between peers.

Ethereum is a smart contract platform. We can actually call smart contracts applications. Let's even say this: Ethereum is the iPhone/iOS, and the apps on it are smart contracts. So, it's not just sending value, you're borrowing money, exchanging money, minting different tokens, uploading images, etc.

However, the mathematics of both systems is based on crypto-economic security.

Now.

We trust these systems because their crypto-economic security is extremely high. Making a 51% attack on Bitcoin is extremely difficult and costly. In Ethereum, this is a price of $33 billion. However, in Bitcoin Cash, the hourly attack fee is 10k USD. It's not very safe.

Additionally, applications on Ethereum benefit from this security. For example, Uniswap is an extremely secure application because it is on Ethereum. Manipulation of Uniswap may be possible through a direct attack on Ethereum. This is exactly why applications buy security from Ethereum, why initial applications/bridges/oracle services etc. Coming to Ethereum. Because its crypto-economic security is extremely high.

Rollups are more valuable in Ethereum because Rollups are ultimately applications and smart contracts on Ethereum. That's why we say Rollups share the security of Ethereum.

So, if Ethereum is so secure, how can bridges and DEXs be hacked?

These hacks are caused by code vulnerabilities in existing smart contracts. Ethereum promises immutability of codes, if the code is wrong, the problem arises from the application itself.

So the current crypto-economic security we have is effective only on Ethereum or codes or smart contracts on EVM. For example, AAVE is fed by ChainLink, that is, price information is updated by ChainLink. If ChainLink provides incorrect information, AAVE may cause serious liquidation to borrowers and lenders. This is a situation outside of Ethereum.

Now let's move slowly to EigenLayer.

Roughly, we have a system like this: There is a blockchain called Ethereum, which maintains the immutability of applications on the blockchain because the blockchain itself has strong crypto-economic security. However, other than this, such as bridges; multi-sig. Oracle services are completely up to the security of that oracle. Trustworthy. They are completely independent of Ethereum's crypto-economic security.

Here EigenLayer says; let's combine them into a single network and share the crypto-economic security of Ethereum.

The system works like this.
The man running the validator with 32 Ether should also download the codes of a separate blockchain called EigenLayer. Then, this man should also validate EigenLayer and if he acts as an asshole in EigenLayer, his 32 Ether should be slashed. Just like Ethereum.

And the blockchain called EigenLayer also uses the crypto-economic power of the Ethers staked here to provide services such as Oracle, DA, etc. that the applications/bridges/Rollups need. cover your services.

This system is called re-staking. Re-staking of staked Ethers, that is, providing the services needed by applications by a single layer (EigenLayer), is called "pooled security via re-staking".

In summary

There is EigenLayer, people who stake Ethereum stake here again and provide the services needed by the applications on a separate layer by sharing the crypto-economic security in Ethereum.

*Let's come to the most curious places* 🤣

Now those who stake the staked Ether back to EigenLayer should receive a payment from EigenLayer for this work. Just as being a staker in Ethereum makes you pay ETH, this will also be $EL in EigenLayer.

At the same time, other services that want to use EigenLayer will have to pay additional fees.

So token is inevitable.

In crypto, no one does anything for his father's benefit. Therefore, it is clear that these stakes will be rewarded, and it is clear that this will happen with EL. I don't know if there will be an airdrop, but incentive with $EL is required for the network to continue.

I guess you won't be wondering about anything else other than the token anyway, if I open a Space for your other questions, I will answer them.

Kind regards

via @TobbyKitty