On September 17th, the Eigen Foundation announced on the X platform that it has opened the application for the second season airdrop, and the application window will last until March 16th, 2025. As a re-staking model, the EigenLayer brings a new security sharing mode to Ethereum, allowing different blockchain protocols to share Ethereum's security infrastructure without the need to establish a large verification node network. This significantly reduces the start-up cost of the new blockchain protocol and enhances the security of the entire network.
On October 9th, The First trading platform announced the launch of EigenLayer and opened its ecological token EIGEN for spot trading. With the introduction of a new remortgaging primitive in EigenLayer, the EigenLayer ecosystem will become a key participant in solving multiple potential problems on the Ethereum network. On the occasion of its token launch, we can glimpse the core concept of EigenLayer and some future development concepts mentioned, thus exploring the investment value of EIGEN tokens.
First, what is EigenLayer?
EigenLayer was founded in 2021 and is a pioneer of the concept of re-staking. It is a Middleware platform located between the Ethereum mainnet and other applications. By deploying mainnet smart contracts, the platform allows stakers to re-stake their ETH and ETH staking derivative tokens (LST) on EigenLayer, thereby obtaining dual benefits and governance rights. Users who pledge ETH can choose to join the EigenLayer smart contract to re-pledge their ETH and extend the security of the cryptocurrency economy to other applications on the network. At the same time, it will provide additional benefits for network participants. This process not only improves the efficiency of capital utilization, but also enhances the overall security of the network.
Since its launch in June 2023, EigenLayer has experienced rapid growth, with a total staking value of over $10 billion, making it one of the largest blockchain protocols on the market and even surpassing many major decentralized finance (DeFi) platforms such as Aave, Rocket Pool, and Uniswap.
EigenLayer innovatively introduces the "Restaking" mechanism, which cleverly utilizes ETH staked on Ethereum to provide solid support for the secure operation of other blockchain protocols and applications. Through Restaking, Ethereum validators can flexibly invest some or all of their staked ETH into active verification services (AVS) such as bridge protocols, sorters, and oracles. These services originally required self-built staking and verification systems to ensure cyber security, but now, with EigenLayer's Restaking function, they can enjoy the same level of security as Ethereum without independently raising huge amounts of capital.
The re-pledging mechanism not only greatly expands the use of pledged capital, enabling it to support multiple networks at the same time, but also significantly improves the capital efficiency and security of the entire ecosystem. It is worth mentioning that this mechanism does not require the introduction of any additional native tokens. Only by using existing ETH or liquidity staking tokens (such as stETH, rETH, etc.), validators can easily participate in the AVS staking verification process, further reducing the participation threshold and promoting the flow and sharing of capital.
II. EigenLayer operation mechanism
EigenLayer is an innovative blockchain ecosystem whose core lies in the re-staking mechanism. This mechanism allows Ethereum validators to re-staking staked ETH into the EigenLayer network. These ETH not only serve as a guarantee capital to support the secure operation of the EigenLayer network, but also bring dual benefits to stakers: on the one hand, verification benefits from the native Ethereum network, and on the other hand, additional benefits from the Active Verification Service (AVS) provided by EigenLayer.
Active Verification Service (AVS) is a key component of the EigenLayer ecosystem. They use re-staked ETH to provide enhanced network services such as computing, storage, data processing, etc. These services can be analogized to Middleware or modules, providing services for upper-layer applications such as new blockchains, data availability layers (DA layers), virtual machines, oracle networks, cross-chain bridges, etc. Through AVS, EigenLayer provides powerful data support for applications such as DeFi, games, wallets, etc.
In the EigenLayer ecosystem, Rollups, as a solution for Ethereum Layer 2, also benefits from the Modularization service provided by AVS. Especially EigenLayer's Super Data Availability Service (EigenDA), which enables Rollups to achieve super-scale data processing and greatly enhances its ability to handle large-scale data.
Operators play a key role in ensuring the security and stable operation of the EigenLayer network. They perform various verification tasks, such as verifying transactions, executing smart contracts, and maintaining cyber security. These verification behaviors rely on pledged ETH as a security guarantee, which is also the foundation of AVS. Operators' work ensures that AVS can operate reliably and provide support for upper-layer applications and services.
In order to cope with the additional risks that re-staking may bring, EigenLayer has introduced multiple risk control mechanisms. Among them, the "Decentralized Validator Cluster" (DVC) system is used for Risk Diversification to ensure that even if some AVS have problems, it will not affect the security of the entire network. In addition, EigenLayer has implemented a penalty mechanism to ensure the honest behavior of validators. If validators act maliciously, they will face the risk of having their staking revoked.
In addition to the above mechanism, EigenLayer also introduces an internal points system. Every hour, the system awards an EigenLayer point to each re-pledger who deposits ETH. This points mechanism is used to measure the user's contribution to the network, and the activity and duration of their pledge are reflected by the number of points. Although the specific purpose of the points is not yet clear, many users continue to re-pledge activities, looking forward to future token airdrops based on points. This indicates that users have expectations and confidence in the future development of EigenLayer.
III. EigenLayer team and financing information
EigenLayer is a re-staking protocol developed by EigenLabs. EigenLabs is a laboratory focused on blockchain innovation and research, with its headquarters located in Seattle, Washington, US. Sreeram Kannan, the founder of EigenLabs, is an associate professor in the Department of Electrical and Computer Engineering at the University of Washington and the head of the UW Blockchain Lab. The EigenLabs team consists of 30 experts and enthusiasts from different fields and backgrounds, mainly engineers, as well as product managers, strategic directors, and legal advisors.
EigenLabs has successfully raised $50 million in Series A financing, led by Blockchain Capital. This funding injection is consistent with EigenLabs' strategic plan to gradually launch the first iteration of the EigenLayer protocol within a year. This round of financing also attracted the participation of many well-known investors, including Electric Capital, Polychain Capital, Hack VC, Finality Capital Partners, and Coinbase Ventures. EigenLabs' previous financing activities were conducted in August last year, when they completed a seed round financing, raising $14.50 million, led by Polychain Capital and Ethereal Ventures. In the EigenLayer private round of financing in February this year, a16z contributed $100 million.
IV. EigenLayer Token Economics
The initial total supply of EIGEN is 1,673,646,668.28466 tokens. This number comes from the result of encoding the term "open innovation" onto a classic telephone keyboard. The distribution of EIGEN is as follows:
Community: 45% and all future inflation
Equity stake: 15%
Future Community Plan: Inflation + 15% after activation
R & D and ecosystem development: 15% allocated by the Eigen Foundation for R & D, funding, operating expenses, and overall ecosystem growth
Investors: 29.5%
Early contributors: 25.5%
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