Editor's Note: EigenLayer is promoting the development of trusted distributed networks in a similar way to how AWS changed the startup economy. By providing a reliable pool of validators (operators), EigenLayer enables new protocol developers to easily obtain technical services without staking their native tokens. This not only reduces startup costs, but also allows projects to provide security through established assets (such as ETH), thereby reducing the need for token issuance. As more innovative projects emerge, EigenLayer may lead the next wave of entrepreneurial trends and inspire more experiments and development.
Original article by Shlok Khemani
Original title: Actively Validated Services, How EigenLayer is unshackling crypto entrepreneurship》
Original translation: zhouzhou, BlockBeats
NFTs, DAOs, and DeFi have been important primitives that are gradually disrupting the financial system. Shared security is another key component in this evolution. EigenLayer has become an important player in this ecosystem, and its tokens will be transferable on September 30th.
We see this as Web3’s “AWS moment” — a critical node, similar to the period in the mid-2000s when server costs fell, and the cost of cryptoeconomic security also fell. Today’s post will dive into how Active Verification Service (AVS) works and our logic behind it.
The progress of civilization is that we are able to perform more important operations without thinking. - Alfred North Whitehead
In late 2002, eight people attended a tech conference at Amazon’s old Pacific Medical Center headquarters, a day that would mark a turning point in the fate of Amazon, the startup economy, and the course of capitalism: Amazon launched the first version of Amazon Web Services (AWS).
Jeff Barr was one of the eight attendees at the AWS launch event and joined the AWS team shortly afterwards. Today he is AWS's chief evangelist and often explains new features of AWS through the Lego blog. (Image source)
A non-exhaustive list of what it took to start an Internet company in the 1990s and early 2000s: physical servers, networking equipment, data storage, software licenses for databases and operating systems, a secure facility to house the hardware, a team of system administrators and network engineers, and a robust disaster recovery and backup solution. All of this would cost at least $250,000 and take months or even a year to set up.
What’s surprising is that these infrastructure expenses have little to do with a company’s unique product or service. Whether you’re building a pet store or a social media platform, you have to go through the same process from scratch. It’s estimated that 70% of engineering time is spent on building and maintaining data centers, leaving only 30% for actual business operations.
By introducing cloud computing, AWS fundamentally changed the economics of startups with a flexible pay-as-you-go model, eliminating the need for upfront investments in time, energy, money, and people. Transforming infrastructure from a capital investment to an operating expense, it enabled small teams with revolutionary ideas to quickly launch and validate their hypotheses. Many of these teams eventually grew into companies like Stripe and Airbnb.
Around the same time, an anonymous programmer named Satoshi Nakamoto changed the structure of capitalism in another way. He found a way for globally distributed computers to reach consensus without trusting each other, solving a problem that had plagued computer scientists for decades. This was a breakthrough innovation from zero to one in the history of technology.
While Satoshi Nakamoto’s Bitcoin primarily leveraged this trustless distributed system to maintain a payment ledger, Vitalik Buterin created Ethereum, which expanded its capabilities to support any general-purpose computation. Over time, other use cases for this system have emerged—from decentralized storage networks like Filecoin to oracle networks like Chainlink that can securely provide real-world data to blockchains.
However, the process of building such a decentralized network from scratch is similar to the creation of Internet companies before AWS — costly, resource-intensive, and often irrelevant to the core issues of the network. Given that many of these networks involve real money from the outset, the consequences of any mistakes can be catastrophic.
When a problem affects enough people, a solution emerges. Amazon made it easy to start an Internet company, and now the EigenLayer team is providing similar support for those who want to build a trusted distributed computer network. Each network built on EigenLayer is called an "Active Verification Service" (AVS).
Before we dive into AVS, we first need to understand why launching a distributed network is so difficult.
challenge
Let’s review the problem: you have a global network of computers, each operating independently, and you need to reach consensus among these mutually untrusting nodes on a common fact. This fact could be anything — the balance of tokens in an account, the price of NVIDIA’s stock, the result of a complex calculation, or the availability of a file in the network.
Nodes in these networks may have an incentive to manipulate facts, for example, falsely reporting a higher token balance than it actually is. However, as long as the majority of the network's nodes agree on the actual truth, malicious actors will be ignored. When the majority of nodes agree on a state that deviates from the truth, the situation becomes dangerous and the network is threatened.
Satoshi Nakamoto cleverly combined the concepts of cryptography and game theory to create Bitcoin's Proof of Work (PoW) system to solve this problem. Today, most networks use a variant of PoW - Proof of Stake (PoS), which contains four key elements:
Cryptography: Prevent identity impersonation and ensure the integrity and authenticity of data in the network.
Reward mechanism: Real participants (validators) are financially incentivized through users’ transaction fees and newly minted tokens in the network.
Penalty mechanism: Malicious actors face financial penalties, validators must stake the network’s native tokens to participate, and if they perform malicious operations, the staked tokens may be destroyed (slashed).
The power of distribution: Having more validators with well-distributed stake makes the network more resilient to attacks.
PoS networks allow ordinary users to delegate their tokens to validators and receive a portion of the validator's rewards. However, this method also puts users at risk - if the selected validator behaves maliciously, the user's stake may be cut.
On some blockchains (such as ETH and Solana), the protocol allows stakers to exchange native tokens for liquidity tokens (for example, Lido provides stETH tokens to Ethereum stakers), and this derivative asset is called Liquidity Staking Token (LST).
In this context, imagine you are a team that wants to build a PoS network from scratch. You first need to find a group of validators - people who have the technical expertise and hardware to join your network. You may find these people on Discord and X (formerly Twitter). However, to attract their attention among many competing projects, you need to either perform well in marketing or get a lot of venture capital backing.
Once you have their attention, convincing them to join your network is no easy task. Remember, validators either stake their own capital as collateral or spend effort attracting others to stake. Since your network is still in its early stages, the value of the token may not be high. Why would validators risk acquiring a token that could plummet at any time, especially when they are already exposed to volatility risks in other network assets?
Your best strategy may be to increase rewards: provide validators (and stakers) with higher returns to compensate for the greater risk they take, which explains why staking annualized yields (APYs) are generally higher on nascent networks. The problem is that high issuance is actually an indirect expense to the entire network, potentially diluting the value of the token.
Even if you successfully address these challenges, you may still have fewer validators than you would like in the early stages. The scarcity of validators reduces the security of the network, making it more vulnerable to majority attacks. Beyond that, you will need to consider other factors, such as the geographic distribution of validators, creating secure and audited client software, and planning infrastructure elements including data availability, transaction ordering, confirmation services, and block proposals, depending on the specifics of your project.
Similar to internet startups before AWS, these steps are time-consuming and resource-intensive, and they are not directly related to the core problem your network is trying to solve.
Security as a Service
Recently, I explored how the Internet has spawned a new generation of businesses (platforms) that create value by efficiently connecting supply and demand. In the scenario we just discussed, there is a group of validators - the "supply side" who want to make money by providing technical services while minimizing financial risks. The "demand side" is emerging blockchain protocols that want to find trusted and reliable validators to protect their network security.
EigenLayer, as a platform, fills this gap, connecting validators (called “operators”) with networks seeking their services (called “active validation services” or AVS).
Now, let’s think back to the perspective of a new protocol developer:
First, EigenLayer provides a set of verified trusted validators (i.e., "operators") who commit to verifying multiple services, including emerging services. This solves your initial problem: how to find reliable validators?
Secondly, the most important breakthrough of EigenLayer is to separate "rewards" from "punishments". Operators do not need to pledge your native tokens to protect your network. EigenLayer requires them to deposit (or attract pledges) existing assets such as ETH and Liquid Staking Tokens (LST). If malicious behavior occurs, these assets will be cut.
This separation means that stakers and operators can avoid the risk of holding additional new tokens, and they can earn additional returns by holding mature assets they already trust. (Saurabh’s analysis of “intersubjectivity” explains how EigenLayer improves capital efficiency.)
From a protocol perspective, this model eliminates the need to compensate validators by issuing tokens (which can lead to token inflation). Instead, you benefit from the stronger security guarantees provided by ETH as collateral. In fact, this flexibility even gives you the option to not issue tokens if you don’t want to!
Finally, you can carefully select a cluster of operators based on the security needs of your specific product. You can weigh the validators’ technical capabilities, the size of their staked assets, their geographic location, and their security record in other networks before integrating them into your network. This selectivity is a luxury compared to the daunting task of building a network from scratch.
When one security risk is mitigated, another risk emerges - dependence on EigenLayer itself. However, EigenLayer is not an independent blockchain, but a set of smart contracts deployed on Ethereum. Ethereum has more than 6,000 nodes and $86 billion in funding. Although smart contract risks still exist, Ethereum itself is the safest existence in the blockchain.
You may ask: What is a “reward”? How does the economic model built on EigenLayer work?
The protocol can reward operators and delegators with any ERC-20 token. In practice, this gives AVS two options:
Distribute rewards in established tokens such as ETH or stablecoins. In this case, the relationship between operators and AVS is transactional — operators provide services and AVS pays them in widely accepted currencies. EigenDA, the first AVS, launched operator rewards by distributing ETH to operators and delegators.
Distribute rewards with your own tokens. This approach is closer to the economic model of traditional crypto networks. Although this model gives AVS the flexibility to pay for security through token issuance (rather than directly using the cost of ETH/stablecoins), they must also convince operators that their tokens will maintain their value. If this cannot be done, it will be difficult to attract operators because they are likely to sell the AVS tokens immediately after receiving them.
Initially, 10% of AVS rewards will be distributed to operators and the rest to stakers, but this parameter will become flexible in the future. In addition, in order to "enhance incentive alignment", EigenLayer plans to distribute rewards equivalent to 4% of the initial $EIGEN supply to encourage delegators and operators to participate in the network.
EigenLayer’s strong value proposition has attracted a variety of projects seeking to deploy as an AVS. The list includes some common projects - such as rolling chains that require operator services, data availability services, bridges, oracle networks, and ordering layers.
However, given that operators can theoretically support any type of computation (not limited to state transitions), we have also witnessed many innovative and experimental projects being developed using EigenLayer. These projects include decentralized physical infrastructure (DePin) networks, AI inference engines, zero-knowledge proof coprocessors, privacy-oriented protocols (including TEE, FHE, MPC), zkTLS networks, and even policy engines for smart contracts.
The Great Liberation
Earlier, I made a relatively bold statement that AWS had changed the nature of capitalism. Before AWS, the high capital requirements to start a company meant that founders either had to self-fund or receive investment from outside sources (friends, family, venture capital). This financial barrier effectively excluded a large portion of the global population from Internet entrepreneurship, making it an activity exclusive to the wealthy or privileged.
By dismantling these constraints, AWS not only simplified the process for existing entrepreneurs—a relatively small group—but it unleashed the creativity and imagination of many who previously thought entrepreneurship was beyond their reach, and this democratization spawned a wave of entrepreneurial experimentation. While many projects failed, the ones that succeeded drove unprecedented increases in economic productivity and human convenience.
From the perspective of the individual entrepreneur, cloud computing opens up a range of options - from trying to build the next billion dollar business, to earning millions of dollars a year as an individual developer like Pieter Levels, or anything in between.
We are excited about EigenLayer and AVS because they unlock similar opportunities for trustless distributed networks. If you have an idea that requires multiple computers to run without mutual trust? Now you can quickly implement it with AVS.
From governance chains to zkTLS networks, we are witnessing a lot of experimentation that may not have been feasible before. As more entrepreneurs realize the dramatic reduction in human and financial capital required to build such systems, we expect to see more experimentation.
Most will fail.
But there will always be a few that will guide the future direction of the industry.
