EigenLayer: DEEP Full research.  

EigenLayer is a restaking protocol within the Ethereum ecosystem. The primary goal of this protocol is to enhance the security of decentralized applications.

Ethereum itself provides security for smart contracts and transactions. However, infrastructure projects such as bridges, oracles, rollups, and sequencers require their own security to achieve consensus among nodes.

Not every type of consensus is suitable for solving these problems. Proof of Work is too energy-intensive, while Proof of Authority is too centralized. This is why Proof of Stake (PoS) has become a popular consensus mechanism among most projects. You’ve likely observed the integration of staking or delegation of a token in various dApps and blockchains — such as The Graph, Chainlink, Celestia, and other PoS blockchains.

For example, validators in the Polygon network play a key role in ensuring the security and functionality of the network. They confirm transactions and add new blocks to the blockchain. To do this, validators stake $POL tokens, allowing them to participate in the consensus process. In return, they are rewarded for their work. This mechanism helps maintain the decentralization and security of the Polygon network.

The Problem with PoS Consensus

The creation of PoS infrastructure entails the following costs:

• It is difficult to find validators.
• Validators must invest significant funds to participate in a new network, which carries risks.
• Validators lose the opportunity to receive rewards from more stable tokens, such as the 3–5% returns from staking Ethereum. They need to deposit funds into a new blockchain and acquire the native token, for example, $POL.

For these reasons, EigenLayer was created on Ethereum. Ethereum is the best blockchain for developing such a protocol because the higher the protocol’s TVL (Total Value Locked), the more difficult it is to hack or compromise it. The image below visually explains this concept better — EigenLayer combines many separate applications, including Ethereum itself, ensuring security through its vast TVL.

To better understand the essence, please note the following terms:

• Token: Any token that can be sent to staking. For example, we can use the Lido wrapper, stETH.
• Staker: An entity that provides its tokens to EigenLayer.
• Restaking: The process of staking an asset again. For example, if you have 1 stETH in Lido, through EigenLayer, you can stake this asset and perform restaking.
• TokenPool: A smart contract where staked tokens, such as stETH, are stored.

Why Restaking?

When new infrastructure protocols are launched, they usually create their own token. However, convincing users to become stakers of this token is quite challenging:

1. The value of the protocol token can fluctuate significantly, making it harder to convince stakers of its necessity.
2. There is competition from other protocols offering higher yields for staking, which forces projects to offer incentives to attract stakers.
3. In the last six months, we have seen how VC tokens can be problematic. If you want to attract people with good rewards, you need strong inflation. However, if inflation is noticeable, the token depreciates. If the token depreciates, people tend to sell.

EigenLayer solves these problems by allowing stakers to place liquid staking tokens into restaking and receive multiple rewards from different sources simultaneously. Previously, staking ETH only secured the Ethereum blockchain. Now, through EigenLayer, users can secure the blockchain and, by depositing their stETH into EigenLayer, also secure dApps. In this way, one asset receives more applications through an additional “layer.”

Participation Options in the Product

1. Staking LST tokens, which will provide security for dApps.
2. EigenPod: A smart contract that performs the same functions as TokenPool but deposits native ETH. To create an EigenPod, you need to be an Ethereum validator.
3. Use the native token of the product, but this option will be discussed later.

Validators can offer economic security to protocols by sending their assets to restaking. In doing so, they contribute to the security of other infrastructures while earning rewards in ETH and EigenLayer’s native token.

Team

The team consists of individuals who have already actively participated in the development of Web3 products and have considerable experience: https://cryptorank.io/price/eigenlayer/team

• Sreeram Kannan: Previously a professor at the University of Washington. For 7–8 years, he has been actively publishing research on blockchain topics.
• Alan Curtis: Founder of four companies, including The Horse and I, RADAR, Multsig Media, and Rio Network — from selling horses to multisignatures and liquid restaking. He worked with multi-billion dollar capital at Blockcap and participated in listing a product on NASDAQ.
• Grace Hartley: Worked at KPMG US and Consensys for eight years.
• Yuan Han Li: Has been working at Blockchain Capital since 2021.
• Daria Mehra: Has been programming for more than eight years.

Product Analysis

It is worth noting that EigenLayer represents an ecosystem of several products. This includes the AVS (Actively Validated Services) and Data Availability layers. Below, we will analyze both of these products in order.

AVS

The ultimate goal of EigenLayer is to solve the problem of fragmented security.

Imagine you own 1 stETH. Now imagine you are a guard for the “Speculator” bridge. If you deposited 1 stETH into the protocol to secure the bridge’s cargo transport, you are only securing the cargo. EigenLayer solves this problem by allowing you to secure additional objects with the same amount of funds — such as the grandmother from the neighboring house, a dog, and capitalism.

The problem is that if the protocol’s security is ensured by multiple sources, and if one of them is vulnerable, not only the other sources of security are at risk but also the protocol itself. This is because it is much easier to attack one source and then deal with others, rather than attacking one monolithic source.

This problem is further exacerbated by the fact that each dApp is often isolated and, therefore, more vulnerable. Instead of securing each dApp individually, EigenLayer introduces Actively Validated Services (AVS), enabling the security of multiple applications simultaneously through the liquidity of restaked Ethereum.

For example, in the Omni Network, $7,588,000 is staked. To create an invalid block and validate it would only require $3,794,100 — just over 50%.

In contrast, Ethereum worth $1,833,000,000 has been deposited into the EigenLayer pool, which secures Omni Network. As a result, a malicious actor would need not only $3,794,100 in $OMNI but also $1,833,000,000 in $ETH to carry out an attack.

A similar model is implemented in all applications secured by EigenLayer, regardless of the TVL of the application or blockchain.

Slashing

This aspect is worth discussing in detail as it is key to the functioning of EigenLayer in penalizing dishonest blockchain participants.

• What is slashing? For simplicity, slashing can be considered a fine for misconduct.

Imagine once again the “Speculator” bridge. The security of this bridge is ensured by a guard who deposited funds into the EigenLayer pool. If the guard decides to steal a few tomatoes from a truck passing over the bridge every day, and part of the cargo does not reach its destination, they will lose the funds they previously deposited. By tracking security cameras, “Speculator” will be able to prove the guard’s fraud, leading to their share in EigenLayer being slashed.

• How severe is slashing? Consider the example of classic slashing in Ethereum. Initially, a validator is penalized 1/32 of their stake, i.e., 1 ETH. Afterward, they are placed in a withdrawal queue and, during the waiting time (~36 days), they lose ~0.07 ETH — 8000 GWei every four minutes while waiting for withdrawal. This describes the most lenient mechanism, as if multiple malicious actors are involved, the slashing penalty will be much higher to prevent coordinated collective attacks.

Building EigenLayer

Now, considering the existing model, with variables such as Token, Staker, TokenPool, and slashing, how can we eliminate fragmented liquidity and provide security for dApps and blockchains?

The answer lies in TokenPool, which is a contract that defines the main conditions for staking, including slashing conditions for stakers.

TokenPool and Slashing

In the current model, 1 AVS (the object being secured, in our example, a box of tomatoes) has 1 TokenPool — the EigenLayer pool where the guard has deposited their funds. This AVS continuously monitors the condition of the tomatoes in the truck.

If a validator wants to participate in two AVS simultaneously, securing both the box of tomatoes and capitalism, they will need a new TokenPool, which must include slashing conditions for both AVS. The validator will then be required to follow the slashing conditions of both the first TokenPool and the second one.

A smart contract called “slasher” allows participation in multiple TokenPools without needing to change slashing conditions each time a deposit is made.

Here’s how Stakers, TokenPools, and Slashers will interact:

By using a third entity, which is a separate smart contract, security for multiple AVS can be ensured at once. In essence, we have just created EigenLayer — users deposit tokens into a TokenPool through AVS and participate in securing dApps.

Operators

Stakers are dependent on operators. This dependence arises because the “conductor” between the Staker and TokenPool, which together provide security for applications, is the operator. Operators are participants in the restaking ecosystem. They register with EigenLayer and allow staking validators to delegate their assets. Each participant can become an operator, but this is a complex and costly procedure, so many delegate their funds to already established operators. Operators are not required to have a minimum number of delegated tokens and receive 10% of the overall rewards, while the remaining 90% are distributed proportionally among the stakers.

In the context of AVS, operators play a key role — users delegate their assets to them, which provides security for AVS.

Modularity

Modular architecture is achieved by simplifying contracts, which makes EigenLayer look like this:

Here, you can see the distributed architecture where the staker and operator are separated. However, they are connected through the interaction of contracts, with a Delegation Manager responsible for delegated funds and the selected TokenPool. Later, requests are sent to the “slashers” to verify the process for potential fraud.

If the architecture is made even more modular than described above, this will bring more speed and reliability and will look like this:

Several more smart contracts are implemented:

• TokenManager manages staking and withdrawals.
• DelegationManager allows operators to track shares.
• SlasherManager provides AVS developers with an interface to define slashing logic.

EigenDA

• What is DA (Data Availability)?

DA, or Data Availability, is a concept in blockchain that ensures specific data is available to anyone who wants to access it. This is particularly important for decentralized applications (dApps) and protocols that require reliable data storage and constant, fast access to it.

Key aspects of DA:

1. Availability Guarantee: DA provides confidence that existing data can indeed be accessed and used.
2. Security: DA systems must meet conditions that ensure data security.
3. Throughput: This refers to the speed at which the system can accept and process data — the higher, the better.

EigenDA is a scalable data storage solution with a throughput of 15MB/s (120Mbps), making it the fastest DA solution currently available. Future plans indicate the throughput will be increased to 100MB/s and beyond. A key advantage of EigenDA is that it does not require its own token, as security is ensured by deposited $ETH. This is a competitive advantage over other projects in this category, such as Dymension, Celestia, and Avail. Additionally, scalability here occurs both horizontally and linearly, meaning that a larger number of operators enables more efficient scaling.

Recently, an experiment was conducted where blocks from the following networks were uploaded to EigenDA simultaneously:

• L1s: Bitcoin, Ethereum, Solana, Celo, Celestia, Avalanche, BNB chain, and Fantom.
• L2s: Polygon, Mantle, Base, Arbitrum, Optimism, XAI games, Blast, Scroll, ZKSync, Mode, and Taiko.

As a result, the protocol was loaded by only 54%.

EigenDA operates based on three components:

• EigenDA Operators: These are third-party participants running nodes on EigenDA through EigenLayer. Successful data verification allows the operator to store the object and send confirmation back.
• EigenDA Disperser: Manages the interaction between clients, operators, and contracts.
• EigenDA Retriever: Requests data from operators, verifies it, and restores the original object for the user.

Funding

In total, the product has raised $164.5 million. Now, let’s analyze each of the raised rounds in more detail.

Seed Round:

• Investors: Polychain, Ethereal Ventures, Robot Ventures, Figment Capital, dao5, and P2P Validator.
• A large number of angel investors also participated in this round. This creates a somewhat diluted seed round, with many participants, which is either neutral or negative for the project. However, many participants in this round have also invested in other infrastructure projects. No information is available on the valuation during the Seed round.

Series A:

• Investors: Blockchain Capital, Polychain Capital, Coinbase Ventures, Electric Capital, Hack VC. This round saw fewer funds involved and three Tier-1 funds, which is a green flag. It can be assumed that the product developed over the course of less than a year and positioned itself as a leader in future restaking infrastructure. Notably, this round took place at a valuation of $500 million (12x), which is concerning, as once vesting begins, investors will be incentivized to sell their tokens and recoup their investments.

Undisclosed Round:

• Investor: a16z. It is difficult to determine what was purchased — part of the company’s equity or tokens. It can be assumed that a16z entered at a valuation of over $1 billion FDV, and, as a result, formally bought out the allocation of funds that participated in earlier rounds. This round occurred just a month or two before the snapshot and the initial token distribution to the community, meaning that a16z likely entered the round experiencing FOMO, aiming to catch the last train. It’s important to consider that around that time, the protocol was valued at over $11–12 billion FDV in the pre-market, compared to the current valuation of $6 billion. Even Ether.fi, a vampire protocol, peaked at about $8 billion FDV.

Security

EigenLayer was designed with a thoughtful architecture that allows smart contracts to be upgraded if necessary. There is also a protocol suspension feature for emergency situations.

Operations Multisig: The ability and responsibility for making decisions regarding contract updates, suspending functionality, and adjusting parameters were initially delegated to six key governance multisigs with a 3/6 threshold. This means consensus is reached when half of the multisig owners agree — this applies to the “main” governance tool.

Pauser Multisig: Additionally, there is a less influential 1/14 multisig that can only suspend the protocol. That is, one participant’s decision is enough to temporarily suspend the protocol’s operations.

Community Multisig: This multisig can perform emergency actions, including executing urgent updates or replacing the Operations Multisig in the event of a private key compromise. It consists of 13 Ethereum community members, and consensus is reached when 9 out of 13 participants agree.

Audits

EigenLayer has undergone several audits by various firms, including:

• Diligence (March 2023)
• Sigma Prime (May 2023, February 2024, July 2024)
• Cantina (April 2024)
• Certora (August 2024)

While most critical and high-risk vulnerabilities have been resolved, a significant number of medium- and low-risk issues remain, making it difficult to assess the audits as entirely satisfactory. Nevertheless, the product has a bug bounty program with a maximum reward of $2 million, indicating a commitment to security.

Tokenomics of EigenLayer

$EIGEN is the native token of the EigenLayer protocol. Below are key metrics and details about the token:

• Price: $3.87
• Market cap: $721,520,000
• Fully diluted valuation (FDV): $6,477,000,000
• Volume: $350,000,000 (48.8% of market cap)
• Total circulating supply: 186,580,000 (11.1%)
• Staked tokens: 54,504,864 (29.2% of the total circulating supply)
• Withdrawal Queue (7d): 2,216,578 (1.1% of the total circulating supply)
• Max supply: 1,673,646,668
• Inflation rate: 4%
• Number of holders: 209,820

Staked Tokens

• Ether.fi: 1,534,757 (0.8% of the circulating supply) — Address: 0xE77076518A813616315EaAba6cA8e595E845EeE9
• Renzo: 4,283,671 (2.3% of the circulating supply) — Address: 0xd4fcde9bb1d746Dd7e5463b01Dd819EE06aF25db

Analysis of Circulating Supply

• The real circulating supply is significantly lower due to the large number of tokens locked in staking. The circulating supply excluding staked tokens is 132,075,136 (7.9%).
• The number of tokens in the withdrawal queue has slowed down since the Token Generation Event (TGE). On the current market, holders have likely taken some profit or moved tokens to other protocols for staking.
• Based on the current withdrawal queue, the real circulating supply will increase by 1.6% to 134,291,714 (8.02%).

Token Withdrawals

• Withdrawals are categorized into user withdrawals and investor withdrawals. Investor withdrawals amounted to 70,078,681 tokens over the past seven days. However, under agreement, investors cannot sell these tokens for one year, so the future token supply should not be considered an immediate increase in the circulating supply.

Utility

The $EIGEN token introduces a mechanism to handle “intersubjective” failures, which are situations where participants’ behavior cannot be identified on-chain but still requires penalties. Such failures are categorized as:

1. Objective disagreements: Deterministic situations where there is a clear “right” or “wrong” — e.g., is the contract code reproducible?
2. Intersubjective disagreements: Deterministic situations where there is a clear “right” or “wrong,” but the methods of determining this may differ — e.g., is 1 BTC equal to $1?
3. Subjective disagreements: Non-deterministic situations where the answers can be subjective — e.g., is Paris a beautiful city?

Token Model

EigenLayer’s restaking expands Ethereum’s ability to provide security beyond the main Ethereum blockchain by enabling restaked ETH and LSTs (Liquid Staking Tokens) to secure other decentralized infrastructures and services.

Forking $EIGEN is also possible in cases where there is a disagreement. In situations like the 0.5% price deviation of USDC in DeFi, for example, $EIGEN can fork to correct such discrepancies. Once the correct fork is agreed upon, the token can be replaced, ensuring that bad actors are slashed accordingly.

Additionally, $EIGEN is designed to be easily forked if needed. Exchanges and dApps can update their information regarding $EIGEN after each fork, as the token can be wrapped into its forked version, called bEIGEN, which is intended for staking in AVS.

Staking and Earnings Since the token has an inflation rate of 4%, holders can expect to earn at least 4% annually on their staked positions. According to current data, staking $EIGEN yields approximately 6.6% APR, which includes protocol revenue.

Instead of directly restaking in EigenLayer, there are two interesting alternatives:

1. Ether.fi — eEIGEN: Ether.fi allows users to earn rewards in both $EIGEN and points in protocols such as LRT². However, claiming rewards can sometimes be expensive.
2. Renzo Protocol — ezEIGEN: Similar to Compound, Renzo automatically rewards ezEIGEN holders directly into their deposits.

Stakedrops

EigenLayer has also implemented a stakedrop mechanism, which is essentially an airdrop for users who previously deposited assets into EigenLayer, either directly or through third-party dApps like Ether.fi.

• Stakedrop 1:
• Total tokens allocated: 113 million $EIGEN (about 6.75% of the total supply).
• Distribution period: May 10, 2024, to September 7, 2024 (120 days).
• Bonus tokens: 100 $EIGEN were allocated to participants of the first season, as well as those who restaked ETH or LST through EigenLayer between the snapshot date (March 15) and the stakedrop announcement (April 29).
• Stakedrop 2:
• Total tokens allocated: 87 million $EIGEN (about 5.2% of the total supply).
• Distribution period: September 16, 2024, to March 16, 2025.
• Earnings: 70 million $EIGEN are allocated to participants and operators, 11 million $EIGEN are allocated to ecosystem partners, and 6 million $EIGEN are allocated to community members.

Vesting After the TGE (October 2, 2024), investors and early participants will have their tokens locked for a year. Starting from October 3, 2025, 4% of the tokens for each category will be unlocked monthly. This ensures that the token’s short- and medium-term vesting schedule is reasonable and prevents excessive pressure on the market.

Metrics

EigenLayer’s metrics provide insight into the protocol’s activity and performance. Below are the key metrics tracked by the protocol:

TVL (Total Value Locked) Dynamics The overall TVL dynamics are neutral rather than negative. As the TGE (Token Generation Event) approached, the number of withdrawals increased, but overall deviations were minimal.

EigenPods EigenPods refer to the number of native ETH stakers in the protocol. The dynamics here are positive, with the number of EigenPods steadily increasing over time.

Withdrawal Requests The withdrawal activity has shown neutral dynamics, with no repeated spikes in withdrawal requests. The 120,000 ETH withdrawal in September was insignificant relative to the total TVL and was largely driven by the upcoming TGE.

Decentralization One critical metric in EigenLayer is its reliance on the Lido protocol. Due to Lido’s dominant share of TVL in EigenLayer, any vulnerability within Lido could cause widespread issues for EigenLayer. This high dependency on Lido creates a potential systemic risk.

It is also worth noting that EigenLayer holds the third-highest TVL among all protocols:

• For example, EigenLayer’s TVL is comparable to Solana’s and Binance Smart Chain’s, or even twice the combined TVL of several Layer-2 blockchains such as Blast, Mantle, Scroll, and ZkSync together.

Moreover, the market capitalization of the $EIGEN token represents 7.1% of the overall TVL.

Comparison with Competitors In terms of metrics, EigenLayer stands out due to its high TVL. Symbiotic leads in dynamics, but it’s unclear how this will evolve as the TGE approaches. Babylon and Solayer can be considered competitors, but for the purposes of this research, it’s recommended to focus on the Ethereum ecosystem.

Due to the limited number of asset types staked within the protocol, EigenLayer is positioned as the least risky option among competitors.

On-Chain Analysis

At the moment, on-chain analysis is challenging for several reasons:

• New token: Sellers haven’t had enough time to exit, and buyers haven’t had enough time to establish positions.
• Token withdrawals: Some tokens are being withdrawn from staking, which will create additional supply and increase demand.
• Native staking inflows: It is difficult to evaluate inflows into native staking, Ether.fi, or Renzo.

Currently, the on-chain dynamics are positive — many large players are accumulating positions, while distribution is minimal. A longer time frame is needed to evaluate the true dynamics, especially as the number of EIGEN tokens being withdrawn from staking decreases. Only once the additional 10–12% of the circulating supply is released from staking will the intentions of token holders become clearer.

In summary, the current on-chain dynamics show positive accumulation trends, with a minority of participants engaging in distribution.

The $EIGEN tokenomics model provides mechanisms for both staking and restaking, offering security beyond Ethereum’s blockchain. With its carefully structured vesting schedule and staking rewards, EigenLayer ensures a balanced and secure distribution of its native token while mitigating inflationary risks.

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