Restaking Your Staked Eth to Earn Eth with EigenLayer - MVHQ

Restaking Your Staked Eth to Earn Eth with EigenLayer

0xBotwin
Dec 22, 2023
Layer2
General Strategy
Restaking Your Staked Eth to Earn Eth with EigenLayer

 

This one's a doozy! It took me a few days to truly grasp the concept of restaking your ETH with EigenLayer: understanding what it is, how it works, and the reasons you might want to restake your ETH using this protocol. Today, I'll delve deep into this protocol, discussing its potential across the Ethereum Network. Hopefully, by the end, you'll have a clearer understanding and be in a better position to decide whether or not you want to utilize it.

 

First

First and foremost, when using this protocol, you're presented with two ways to restake your ETH. One option allows you to restake your already-staked ETH without needing to withdraw from your validator. This is achieved through their unique smart contract named "EigenPod." All you need to do is provide your validator withdrawal credentials. The second option lets you restake your Liquid Staked Tokens, or LST, such as stEth (from Lido), cbEth (Coinbase's wrapped staked ETH), and rEth (courtesy of Rocket Pool) via their "StrategyManager" smart contract. And here's some exciting news: EigenLayer has plans to expand and accommodate staking of ETH from other protocols in the future!

 

Why?

So, you might be wondering, "Why would I want to restake my ETH with EigenLayer, and what's in it for me?" The first and most direct answer is: rewards! With EigenLayer, restakers can pool their staked ETH, banding together to bolster the security of various protocols and apps. This means they can leverage Ethereum's inherent cryptographic security, allowing other projects to sidestep the cumbersome process of building their own security infrastructure. Instead, they can simply tap into the robust security framework provided by the EigenLayer stakers. Here's the cherry on top: stakers have the opportunity to rake in additional rewards by extending their security commitment to multiple services under this protocol's umbrella. Plus, there's no need for any extra investment, as you're essentially capitalizing on the same ETH you've already staked. Traditionally, each decentralized service crafted for Ethereum would have to carve out its security niche. The drawback? This approach can lead to a scattered landscape, potentially riddled with vulnerabilities or inconsistencies. EigenLayer provides a remedy, forging a stable security bedrock upon which decentralized apps and protocols can confidently stand. It's all about harnessing the collective's strength to safeguard every individual component.

 

Data Availability and Scaling

At its core, data availability ensures that all essential information, like transaction data, remains at the ready for block validation throughout the entire network. As blockchains swell and stretch, scalability becomes a pivotal factor in determining a chain's long-term viability. This truth rings even louder as more dapps and protocols emerge, leading to broader network adoption. EigenLayer steps into this landscape with a mission: to trim down bandwidth and untangle communication intricacies through their protocol, paving the way for chain hyper-scalability. By cutting back on these demands, we can anticipate a spike in throughput and a swifter delivery of data to everyone involved in the network.

 

MEV Protection (F&$K You Jared) Utilizing Decentralize Sequencers 

EigenLayer nodes have the capability to create a Decentralized Sequencer spanning multiple rollups, carving out a space free from the clutches of MEV. Wondering how this magic unfolds? It's all thanks to EigenLayer's Decentralized Node Sequencers. These allow the collective of nodes to collaboratively set the sequence in which transactions roll out. In a typical on-chain setting, a sneaky MEV bot might tempt a validator with a bribe, pushing its transaction to the front of the line, despite a backlog of pending transactions. This manipulation gives the MEV an opening to launch a "sandwich attack" on unsuspecting users during token swaps. But here's where EigenLayer shines: by establishing a collective decision-making process for transaction sequencing, it effectively shields the process from the MEV's cunning tactics, ensuring that users' token exchange rates aren't compromised.

 

Building and Protecting Light Node Bridges

EigenLayer opens the door to constructing Light Node Bridges. But before diving deep, it's crucial to differentiate between a Full Node and a Light Node. A Full Node holds an exhaustive replica of the blockchain, primed for validation. On the other hand, a Light Node keeps tabs on the latest blocks, only dialing up a Full Node when it needs extra data for thorough validation. Here's where EigenLayer's ingenuity comes into play: it facilitates off-chain bridges between blockchains, leveraging Light Nodes in the validation process. Should there be a consensus within the EigenLayer node ensemble, the transaction earns its validation stamp. But watch out! If any suspicion arises over a transaction's integrity, or if there are dubious inputs/outputs, anyone can raise the alarm. This triggers the "Slow Mode", switching gears to a meticulous on-chain validation to ensure every off-chain bridge is both secure and accurate.

 

ZK and Optimistic Roll Up Fast Mode Bridges

EigenLayer is set to introduce Fast Mode Bridges, optimized for Ethereum's nippier L2 solutions, namely ZKrollups and Optimism. Echoing the principles of Light Node Bridges, those tailored for ZKrollup can carry out off-chain transaction verifications. And in a scenario reminiscent of Light Node Bridges, if a transaction comes under scrutiny, the system reverts to a meticulous "slow mode" on-chain verification. This could potentially lead to a slashing penalty for any erring validator. When it comes to validating transactions on optimistic roll-ups, EigenLayer harnesses a more expansive pool of nodes, ensuring a robust consensus on the authenticity of bridged transactions.

 

Oracles and Low Latency Side Chains

EigenLayer boasts the capability to integrate Price Oracles, which hinge on a consensus mechanism, ensuring a robust and secure method for price data retrieval. Moreover, EigenLayer empowers restakers to be a pivotal part of low-latency settlement chains. This means they can bolster the security of side chains. And importantly, with an eye on the horizon, EigenLayer is crafted to be adaptable, ready to mesh seamlessly with emerging protocols in the future.

 

EigenLayer Now, EigenLayer Later

EigenLayer first pinged on my radar one morning amidst a surge in gas fees. My second rendezvous with it was rather unusual: a late-night message from @CaptainPlantain , which read, “What is re-staking? Can I keep re-staking my eth for an infinite money loop?”  Laughing out loud, the prospect of turning the money printer dial to 'Brrrrr' was too tempting to pass up. Thus, our deep dive began. At launch and in its nascent stage, EigenLayer set a limit to the amount of Staked Eth that could be deposited—a cap that was swiftly reached. This limit was set at 9,600 Eth, broken down into 3,200 stEth, 3,200 cbEth, and 3,200 rEth. In this maiden phase, a safety-oriented 7-day withdrawal delay was established for staked assets from both the protocol and the beacon chain—a practice not uncommon in staking protocols. As for rewards, restakers earn them in the form of Restaked points, determined by this intriguing formula:

 

 

Now, My smooth brain can't help you when it comes to Blockchain Math or anything involving symbols that aren't x + y = z. But there is a handy explanation guide to understanding the math of restaked points here: https://docs.eigenlayer.xyz/overview/faq/restaked-points 

 

Looking ahead, EigenLayer plans to accommodate additional LSTs for re-staking, further bolstering the myriad dimensions of Ethereum's ever-expanding infinite garden. With time and rigorous testing, Eigen intends to progressively increase its deposit threshold until an unrestricted cap is achieved. I hope this article illuminated the profound security enhancements EigenLayer brings to the network, showcasing its potential in fortifying, innovating, and sustaining a multi-tiered blockchain ecosystem. If this piece resonated with you, consider giving me a shoutout or follow on Twitter at @0xBotwin. Wishing you all a stellar weekend, MVHQ fam! Deuces! 

 

Eigenlayer Website: https://www.eigenlayer.xyz/ 

Eigenlayer Documents: https://docs.eigenlayer.xyz/overview/readme 

Eigenlayer White Paper: https://2039955362-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FPy2Kmkwju3mPSo9jrKKt%2Fuploads%2F9tExk4U2OdiRKGEsUWqW%2FEigenLayer_WhitePaper.pdf?alt=media&token=c20ac4bd-badd-4826-9fb6-492923741c9e 

Eigenlayer Restaking App: app.eigenlayer.xyz