Phase 2 of the Season 1 #EigenLayer stakedrop is ongoing!

113M EIGEN have been distributed, which is 6.7% of the total stakedrop supply.

Want to find out more about EigenLayer? Read on 👇

Key Takeaways

EigenLayer is a protocol that enhances Ethereum's Proof-of-Stake system by allowing users to 'restake' their ETH.

EigenLayer's approach uses modular security, enhancing the flexibility and functionalities of staked ETH through a concept called "restaking collective".

Challenges include increased complexity, potential centralization risks due to staking pool dominance, and collusion threats within the module-based design.

Introduction

Ethereum transitioned from a Proof-of-Work (PoW) model to a Proof-of-Stake (PoS) system through a series of upgrades. In PoS, users stake their ETH tokens to secure the network. Essentially, they become validators who verify transactions and ensure network integrity. In return for their contribution, stakers earn rewards.

However, staked ETH is temporarily locked, limiting its accessibility. This is where EigenLayer steps in with its innovative approach. This article provides a quick overview of EigenLayer, its airdrops, core functionalities, pros and cons, and the key differences between traditional staking and EigenLayer staking.

What Is EigenLayer?

EigenLayer is a protocol built on top of the Ethereum blockchain. It introduced a concept called "restaking collective," allowing ETH stakers to support applications within the Ethereum ecosystem.

EigenLayer creates a dynamic marketplace for decentralized trust. Developers can benefit from the security provided by the collective pool of stakers, while stakers can support the development of their projects.

How Does EigenLayer Work?

Modules

EigenLayer introduces a modular security approach. It allows stakers to contribute their ETH to secure specific functionalities within the network. These functionalities are generally referred to as modules.

For example, a module might be dedicated to securing decentralized storage solutions like Arweave. Some modules could secure in-game items within blockchain-based games. Others could foster trust within DeFi applications like Aave.

Smart contracts

Ethereum stakers can restake their staked ETH via EigenLayer smart contracts, offering a new set of security and validation services to specific modules in the network. This is achieved by granting EigenLayer contracts the ability to set certain conditions on staked assets.

Restaking 

EigenLayer restaking can be done in two different ways: 

1. Solo staking. Users can operate their own nodes and actively validate transactions for the modules. This method is more suitable for advanced users.

2. Delegation. EigenLayer also allows delegating the node operation to other participants within the network. This is a convenient option for users who want to contribute to EigenLayer while avoiding the technical aspects. 

Staker diversity 

EigenLayer recognizes that stakers may have different preferences and capabilities. Some can have powerful computers suitable for solo staking, while others may prioritize convenience through delegation. 

Additionally, stakers may have different risk tolerance levels. EigenLayer allows modules to adjust their requirements to match specific stakers, fostering a more flexible network.

Actively Validated Services (AVS)

EigenLayer adopts Actively Validated Services (AVS) as specific services within the Ethereum ecosystem that require active validation and enhanced security. AVS can include high-stakes applications like decentralized finance (DeFi) platforms, cross-chain bridges, and other critical infrastructure. By leveraging AVS, developers can ensure their applications receive the necessary security and validation from a dedicated pool of restakers, enhancing the overall trust and reliability of their services.

Traditional Staking vs. EigenLayer Staking

EigenLayer disrupts the traditional staking on Ethereum, offering a unique approach with its "restaking collective" concept. Let’s take a look at the key differences between traditional staking and EigenLayer staking.

Liquidity

In traditional staking, staked ETH becomes temporarily locked. While the staked ETH is locked, stakers can’t use it. In contrast, while the underlying ETH remains staked, EigenLayer allows users to leverage it for additional purposes. For example, stakers may use it to increase the security of various applications being built on Ethereum.

Participation and rewards

When it comes to traditional staking, participation is relatively straightforward. Essentially, users lock up their ETH and earn rewards based on the staking protocol they choose. 

In contrast, EigenLayer offers a wider range of participation options. Users can choose between solo staking or delegation. Delegation might be a better choice for users who don’t have advanced technical knowledge of cryptocurrencies. 

In addition, EigenLayer staking can potentially be more rewarding. Modules with higher security needs might offer greater rewards for stakers who secure them.

Security focus

In traditional staking, staked ETH directly contributes to the security of the Ethereum blockchain. In EigenLayer staking, security becomes modular. Users can contribute to the security of specific modules within the Ethereum ecosystem. The overall security of a module generally depends on the collective staking power directed towards it.

EigenLayer Airdrop

EigenLayer airdrops are set to occur in multiple seasons, each containing one or more phases. In total, EigenLayer allocated 15% of the total supply of EIGEN tokens to be distributed across all seasons.

Season 1 Phase 1

Season 1 of EigenLayer’s airdrop campaign started on May 10, 2024, with 6.7% of the total token supply. Its claim window will be open until September 7, 2024.

The first snapshot happened on March 15, 2024, with bonus airdrops allocated to users who have restaked ETH or LSTs on EigenLayer between March 15 and April 29.

To be eligible for the first phase of the airdrop, users had to meet specific criteria, such as:

Holding or staking LRT tokens for a certain period.

Active participation in EigenLayer's governance processes.

Contributing to the development or testing of EigenLayer modules.

Engaging in community activities, such as participating in forums or social media discussions related to EigenLayer.

Season 1 Phase 2

Season 1 Phase 2 airdrop eligibility extends to DeFi users who participated in platforms such as Kelp, Pendle, Equilibrium, and others before March 15, 2024. This phase aims to reward long-term supporters and early participants in the network, fostering greater community engagement and participation.

To be eligible for the airdrop, users must have participated in the initial phase of EigenLayer's restaking program or be long-term supporters of the protocol. Specific eligibility criteria may include holding or staking LRT tokens, participation in network activities, or involvement in governance processes.

How to claim EigenLayer airdrops

Be wary of fake websites and phishing attacks. Make sure you are using the official websites and channels.

Eligible users can claim their airdropped tokens through the EigenLayer platform. The process involves connecting their wallet, verifying eligibility, and following the steps provided.

As of June 2024, the EIGEN tokens from the first airdrop season are not yet transferable but can be staked or delegated after being claimed.

Season 2

According to the EigenLayer Foundation, Season 2 has already started and any ecosystem participation beyond the March 15 snapshot will be considered for Season 2 airdrops. However, the details of Season 2 distribution are yet to be announced.

Enhanced Security for EigenDA

In June 2024, EigenLayer improved the security of EigenDA – its decentralized application (DApp) platform – to counteract Sybil and DDoS attacks.

Sybil attack prevention: Sybil attacks involve a malicious actor creating multiple identities to gain a disproportionate influence on the network. EigenLayer's enhanced security measures include stricter identity verification processes and mechanisms to detect and prevent malicious activities.

DDoS attack mitigation: Distributed denial-of-service (DDoS) attacks aim to overwhelm the network with a flood of traffic, causing service disruptions. To counter this, EigenLayer has implemented robust traffic filtering and rate-limiting mechanisms. These measures ensure that legitimate traffic is prioritized and that malicious traffic is effectively blocked, maintaining the availability and performance of the EigenDA platform.

Continuous monitoring: EigenLayer has also introduced continuous monitoring and threat detection systems to proactively identify and respond to potential security threats. This involves real-time analysis of network traffic, anomaly detection, and rapid incident response to address any emerging security issues.

Pros and Cons of EigenLayer

Pros

1. Enhanced security for DApps. By leveraging a pool of validators for various modules, EigenLayer strengthens the overall security of decentralized applications (DApps) built on those modules. This fosters a more trustworthy environment for users interacting with DApps.

2. Testing ground. EigenLayer acts as a platform for testing and validating new Ethereum functionalities before integrating them into the mainnet. This lets developers experiment with innovative ideas like danksharding, a core feature of the Ethereum Cancun upgrade.

3. Permissionless innovation. Developers no longer need to build their own validator sets to secure their applications. Instead, they can leverage the existing pool of secure validators offered by EigenLayer through restaking. This generally lowers the entry barrier for developers and fosters more innovation on Ethereum.

Cons

1. Complexity. EigenLayer introduces a new layer of complexity to the Ethereum ecosystem. Understanding how restaking works, choosing the right modules to participate in, and managing the technical aspects (for solo stakers) can be challenging for some users.

2. Centralization risks. While EigenLayer promotes decentralized trust, a few dominant staking pools may emerge, leading to a degree of centralization within the restaking collective.

3. Module collusion risks. ​​The modular design of EigenLayer offers flexibility but also introduces a potential risk of collusion between malicious actors controlling multiple modules.

Closing Thoughts

EigenLayer's "restaking collective" serves as a potential game-changer for decentralized trust on Ethereum. By enabling permissionless innovation and providing a testing ground for Ethereum features, EigenLayer may play a crucial role in shaping a future of robust, secure, and scalable decentralized applications.

Further Reading

What Is Liquid Staking?

What Is the Ethereum Cancun Upgrade?

What Is Crypto Staking and How Does It Work?

What Is Danksharding?

Disclaimer: This content is presented to you on an “as is” basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the article is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Please read our full disclaimer here for further details. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. This material should not be construed as financial, legal or other professional advice. For more information, see our Terms of Use and Risk Warning.