Since EigenLayer introduced the concept of re-mortgage, the popularity of re-mortgage has also risen, and it has gradually become one of the hottest topics; and EigenLayer has locked more than $1 billion in total value in a few months. And now the market seems to have reached a consensus that EigenLayer will become one of the most profitable "airdrop mining" projects this year. It's not that you understand it, I understand it, and he doesn't. Only such transactions can make money. When I first saw EigenLayer, I thought it was a copycat of Lido, and there was nothing to see, but recently I found that his goal is far more than that.
EigenLayer invented the concept of "re-pledge", which enables the use of ETH on the consensus layer to extend cryptoeconomic security to other applications built on the contract layer. As a user, you can also choose to "re-pledge" your native ETH or choose liquid staked ETH, which can also receive additional income rewards.
In fact, EigenLayer's business model is very simple - the platform takes a portion of the revenue generated by applications built on the smart contract layer or what they call "active verification services". This part of the service can be anything from oracles, sorter networks or even aggregation.
This model is really similar to the leading liquid staking protocol Lido, as both protocols generate income by taking a portion of the generated revenue. The main difference is that Lido takes a portion of the native revenue generated by ETH deposited into the platform; while EigenLayer captures the revenue generated by additional services built on top of it.
Let's compare some of Lido's revenue data. Lido can currently generate nearly 90 million in annualized revenue expenses from a total TVL of about 20 billion. Lido's current FDV is close to 3 billion. That is, the difference between revenue and FDV is 30 times.
However, there are key differences between EigenLayer and Lido. First, Lido's cash flow generation capacity will scale linearly with the amount of ETH collected; but EigenLayer will not. It still requires multiple applications to be built on EigenLayer to make the smart contract layer generate positive cash flow. This demand-side driven dynamic may be a major obstacle to profitability, while Lido is a supply-driven business. Lido makes profits by collecting assets.
Therefore, one might argue that Lido and EigenLayer should not have the same fee multiples since the growth profiles of the two applications are completely different.
On the other hand, I feel that the total target market of EigenLayer is relatively uncertain. From a normal theoretical perspective, I am in business, and my needs cannot be limited by myself. I am a security platform and I get positive returns from the platform, so there may be unlimited applications getting security from EigenLayer.
Tia is another market that is often mentioned as comparable to EigenLayer. However, it is important to note that there is a verification service on EigenLayer - EigenDA, whose business is easily confused with Tia, and is actually also a data availability solution.
Tia is doing DA sampling. Every DA node in the Tia network must store all the data, and because of this model, Tia has a large amount of data storage. Therefore, Tia has added a light node network called Halo Network, which is used to prove that each DA node still holds the data. If the DA nodes cannot prove that they own the data, their $TIA token rights will be cut. After all, Celestia is a mature chain. But here we think about the service that Celestia actually provides - they are actually selling a consensus layer to Rollups, which is a database built by many DAs, and this layer also has a cheaper data availability cost. So, Celestia is accumulating value in security needs, thus ensuring the collective asset value in his ecosystem.
DA nodes must ensure that they store all the required data in the ecosystem; otherwise they will be cut off. In other words, Celestia is actually a "sales" that sells security.
EigenLayer is ultimately selling “security”, but this security is that some cryptoeconomic value will be abandoned when unexpected events occur. As mentioned earlier, liquid staked ETH can be re-staked to extend cryptoeconomic security to applications on the network; stakeholders are facing additional “slashing” risk. Applications are effectively outsourcing large parts of the cryptoeconomy to re-staked ETH from EigenLayer.
There are certainly some major differences between the base functionality provided by EigenLayer and Celestia; but at its core, both protocols profit from or accrue value in cryptoeconomic terms. This is within our own mental framework, but there are still some unanswered questions or fundamental differences that may affect fair valuation.
Back to the issue of selling security, the first difference is where the "security" comes from. Tia bootstraps its own validator set and pays fees to validators through native token inflation, which "protects" the network and provides consensus; while EigenLayer obtains "collective security" from retryers who are willing to take more slashing risks.
Then there is the question of who pays the bill and who is responsible if something goes wrong. EigenLayer will take on more risk, and their ETH-denominated "stake" will be slashed when custom conditions are met. For Celestia, this is even simpler because their stake will be slashed if the DA node cannot provide the required proof. If there is a token in the future, EigenLayer's token should not accumulate as much value compared to Celestia.
I think EigenLayer's pricing should be closer to tia than Lido, although their business and revenue models are very similar. But in terms of valuation, it is more inclined to tia. Although Celestia has risen from 2u at the time of launch to 17u, I don't understand this operation, but one fact that must be acknowledged is that the Celestia ecosystem has matured, and Rollups actually use their technology, such as Manta Network. This may also be the reason why Celestia began to accumulate more value by taking advantage of the need for "security".
Although EigenLayer does not "sell" the security guided by the network itself, they have successfully commercialized the product and achieved commercialization by selling it to applications in need. The approach of "encircling Wei to save Zhao" allows them to avoid capital loss in their subsequent development, thereby ensuring the security of applications developed on the platform, thereby ensuring their security. This flywheel effect can actually be achieved from this perspective.
It depends on when EigenLayer decides to launch its own governance token. We will study it then. When I wrote this article, the market was still going down. I would like to take this opportunity to briefly say that after the 4.2K monthly pressure is broken, the subsequent rise may be waiting for the monthly line to start. However, if there are new narratives like Inscription and new token distribution models in the middle, we still need to pay attention to them, and don’t worry about the market trend. A mountain looks like a peak when viewed from the side, and it looks different from far and near.
