Darren Kleine

As Sreeram Kannan describes it, EigenLayer is a “marketplace for raw, decentralized trust” — the fundamental resource at the heart of blockchain technology.



<a href="https://blockworks.co/tag/ethereum">Ethereum</a> has already created such a marketplace and acts as the “natural source” for the “raw material,” Kannan says, but it has limitations. “I can only consume it if I write a smart contract on top of this platform.”



“For many reasons, I may want to access more raw, decentralized trust,” he explains. To do this, one would normally need to create “a whole new network of nodes as well as a staking token of value.”



“We were forced to actually think about, do we want to <a href="https://blockworks.co/news/new-layer-1s-not-sustainable">start a whole new layer-1</a> with its own economics underpinning it?”



Speaking to Blockworks on the Bell Curve podcast (<a href="https://open.spotify.com/episode/2q5HvTg3WEkMBDTBcpq7Gh?si=95f5f7749f1d4e9c">Spotify</a>/<a href="https://podcasts.apple.com/us/podcast/the-intersection-of-restaking-and-liquid/id1641356619?i=1000622262081">Apple</a>), the CEO and founder delves into details of the smart contract middleware and what he foresees as EigenLayer’s “endgame.”



<h2 class="wp-block-heading">Anatomy of EigenLayer</h2>



<a href="https://blockworks.co/news/eigenlayer-deploys-on-ethereum-mainnet">EigenLayer</a> is not a new chain or a new layer-1, Kannan explains. Instead, it is a system of <a href="https://blockworks.co/tag/smart-contracts">smart contracts</a> that allow <a href="https://blockworks.co/price/eth">ETH</a> stakers to “opt in” to serve other systems, called “actively validated services.”



Any protocol that needs nodes to talk to each other and come to consensus can be built as an actively validated service, Kannan says. Such a service would “talk to the EigenLayer contracts,” he says, specifying who can register, payment structure, slashing conditions and other selected parameters.&nbsp;



“If you&#8217;re claiming that you&#8217;re storing data relative to this hash,” for example, “I may ask you randomly to reveal portions of the data on the Ethereum chain and if you don&#8217;t, then you may lose your ETH,” he says.



“You&#8217;re working with the raw aspect of decentralized trust and you can allow people to build arbitrary protocols on top.”



Kannan envisions a crypto world that operates similarly to modern web application development. “You have AWS, which is the cloud,” he says, “on top of which, there are a lot of SaaS services,” for functions such as authorization, payment, and databases.



SaaS, or software-as-a-service, apps in the Web2 world allow for “open innovation,” he says. Anyone can be “hyper-focused and specialized in creating a certain utility” instead of needing to build out a “whole new world” from scratch.



“We all become more specialized in what we create and more general in what we consume.”



Kannan points out that any given Web2 application might integrate 15 or more SaaS solutions. Crypto applications reflect a similar need for a range of services, he says, from trusted execution environments to <a href="https://blockworks.co/news/push-protocol-drops-video-chat">private messaging</a>, <a href="https://blockworks.co/news/avail-bridge-data-availability-ethereum-rollups">data storage and availability</a>, oracles and bridges, guardian networks, and so forth.&nbsp;



“You can dream up whatever you want and build on top of it,” he says. “Open innovation is our core value.”



<h2 class="wp-block-heading">EigenLayer’s endgame</h2>



With the focus on decentralization, Kannan says “protocols should minimize subjective decisions.”



“If protocols are not expressing subjective decisions — and there are definitely subjective decisions to be made — then who expresses these subjective decisions?&#8221;



<iframe loading="lazy" frameborder="0" height="200" scrolling="no" src="https://playlist.megaphone.fm/?e=BWG6635350752" width="100%"></iframe>







“We want to be as close as possible to the <a href="https://blockworks.co/news/staked-eth-hits-20m-milestone">Ethereum staking layer</a>,” he says. Ideally, Kannan says EigenLayer would become part of Ethereum’s staking layer, whether through a protocol upgrade or an Ethereum improvement protocol, or EIP.



While the platform is currently undergoing an “initial shepherding process” with whitelisting for “cautionary” purposes, he says, it will eventually be a completely permissionless platform.



“Our platform minimizes its own subjectivity. We are not going to be playing this role of deciding, is this good or not good? It is up to the market to figure that out,” Kannan says.&nbsp;



“Open innovation is best built on top of a <a href="https://blockworks.co/news/building-credible-neutrality-mev">credibly neutral layer</a>. This is why we like Ethereum, and this is why we want ourselves to be as similar as possible to Ethereum and even at one point, dissolve into Ethereum itself.”



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EigenLayer’s endgame: ‘Dissolve into Ethereum itself’

Bessie Liu

Ethereum restaking protocol EigenLayer has launched on Ethereum mainnet.



The launch supports tokens including stETH, rETH, cbETH and solo-stakers.



EigenLayer is designed to extend <a href="https://blockworks.co/tag/ethereum">Ethereum</a> security to software modules such as bridges, oracle networks and consensus mechanisms by utilizing restaking to offer pooled security mechanisms. They’re built on top of the network.&nbsp;



The EigenLayer protocol consists of stakers, who commit stake, and operators, who provide technical validation services for actively validated services (AVSs), <a href="https://twitter.com/zkBri">Brianna Montgomery</a>, head of strategy at Eigen Labs, told Blockworks.



Several AVSs are building on EigenLayer, and a handful have publicly pointed to their plans, Montgomery said.&nbsp;



Known AVSs include EigenDA, Espresso, Witness Chain, Omni and Lagrange.&nbsp;



“Others are building in private,” Montgomery said. “More details about projects building on EigenLayer will be shared as and when available.”



<h2 class="wp-block-heading">How does EigenLayer work?</h2>



Stakers can give permission to EigenLayer smart contracts, subjecting their staked ether to slashing conditions — and granting the opportunity to validate different software modules on top of the layer-1.



The design is such that additional rewards are meanwhile earned, and stakers can also delegate the validation to an operator of their choice.&nbsp;



“In both scenarios, the Restaker retains the agency over their stake and chooses which AVSs they opt-in to validate for,” Montgomery said. 



To ensure honest operators opting in do not face slashing, Montgomery said a handful of checks and balances have been baked in.&nbsp;



“For instance, we encourage AVSs deployed on EigenLayer to only have objectively attributable faults…Additionally, to prevent unintentional slashing caused by software bugs in the slashing contracts, there is a veto committee consisting of reputable members from the ecosystem,” she said.&nbsp;



Added Montgomery: “Any AVS smart contract seeking to slash a validator must submit its request to the veto committee, who can veto or approve it based on the legitimacy of the request.”



<h2 class="wp-block-heading">Initial mainnet launch</h2>



The initial mainnet launch will only include restaking, with operators and validators being part of a second launch iteration in the works. Native staking will also be available in the initial launch.&nbsp;



Usage limits of 3,200 of each asset, with a maximum of 32 token deposits for each unique user address will be set in the interest of protocol security, EigenLayer said in a statement.&nbsp;



This means there will be a cap of 9,600 liquid staking tokens, coupled with a minimum of 300 unique deposits, able to participate across the three liquid staking tokens available at mainnet.&nbsp;



Usage limits will be evaluated and raised over the coming weeks, with the goal of eventually being completely uncapped.



Native restaking will also be available through the creation of <a href="https://github.com/Layr-Labs/eigenlayer-contracts/blob/master/docs/EigenPods.md">EigenPods</a> — a smart contract that facilitates staking of the Beacon Chain layer, where stakers must direct their validator withdrawal credentials.



Although there are no restrictions on the number of validators that can link to EigenPods being placed, EigenPods will stop being created once native restaking reaches 9,600 ETH.



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EigenLayer deploys restaking protocol on Ethereum mainnet

Crypto startup funding is sailing steadily this week, with 11 different companies landing an estimated $227 million in funding this week, a <a href="https://blockworks.co/news/web3-gaming-investors">slight increase</a> from the week before, during which companies secured $190 million.



Among them, cryptocurrency hardware Ledger secured the most significant amount of funding. It landed $109 million in its series C round with investors from 10T, CapHorn Invest, Morgan Creek Capital and Cathay Innovation, just to name a few.



Following this round of capital, Ledger is said to be valued at $1.4 billion.&nbsp;



This funding announcement comes during a time when centralized exchanges have been heavily scrutinized for security concerns, and self-custody discussions are on the rise.



A focus on trust



EigenLabs, the team behind EigenLayer, a re-staking protocol on Ethereum, has raised a significant amount of money this week, securing $50 million in a Series A round led by Blockchain Capital.



Other participants which participated in the round include Electric Capital, Polychain Capital, Hack VC, Finality Capital and Coinbase Ventures, among others.



“One of the central bottlenecks to innovation in today’s crypto ecosystem is the requirement for projects to bootstrap trust or cryptoeconomic security,” Sreeram Kannan the founder of EigenLayer said in a <a href="https://twitter.com/eigenlayer/status/1640755205443829760">statement </a>posted on Twitter.&nbsp;



Adding that EigenLabs was born “in the hopes of creating a new model, in which developers can easily consume trust, instead of needing to build trust, and design powerful systems of assurance that make the cryptosystem safer and more useful.”



The team behind the protocol plans to launch EigenLayer in phases over the course of this year.



Other notable funding rounds this week:



<ul>
<li>Fetch.AI secures $40 million in an equity and token round. DWF Labs also invested in the startup. It is currently valued at $250 million.</li>



<li>Econia Labs, a hyper-parallelized on-chain order book on Aptos DeFi,&nbsp; secured $6.5 million from Dragonfly Capital.</li>



<li>Derivatives trading protocol <a href="https://blockworks.co/news/solana-options-protocol-cega-comes-to-ethereum">Cega</a> lands an additional $5 million in a seed extension round led by Dragonfly Capital.</li>
</ul>

Crypto Funding: Ledger and EigenLabs Lead $227 Million in Investments

Shalini Nagarajan

EigenLayer, a restaking protocol that aims to help scale Ethereum, has raised $50 million in a Series A round led by Blockchain Capital.



Other investors in the round include Electric Capital, Polychain Capital, Hack VC, Finality Capital and Coinbase Ventures.&nbsp;



The protocol’s fundraising round is noteworthy given that venture capital funding for crypto startups <a href="https://blockworks.co/news/funding-wrap-venture-funding-down-but-not-out">slowed</a> significantly during the crypto bear market. It previously raised a $14.5 million seed round last year led by Polychain Capital and Ethereal Ventures.&nbsp;



EigenLayer seeks to extend crypto-economic security to applications being built on the Ethereum network through restaking. Fragmented security is seen as one of the key issues within the blockchain ecosystem, meaning applications on Ethereum are responsible for generating their own trust mechanisms.&nbsp;



Founder Sreeram Kannan, who has been an associate professor of Artificial Intelligence and blockchain applications at the University of Washington for more than 8 years, said the mission of EigenLabs is to build protocols and infrastructure that boosts open innovation.



“One of the central bottlenecks to innovation in today’s crypto ecosystem is the requirement for projects to bootstrap trust, or crypto-economic security,” he said in a <a href="https://twitter.com/eigenlayer/status/1640755205443829760" target="_blank" rel="noreferrer noopener">statement</a>. By contrast, EigenLayer would allow developers to become consumers of trust generated by staked ether, according to its <a href="https://docs.eigenlayer.xyz/whitepaper.pdf" target="_blank" rel="noreferrer noopener">white paper</a>.



Kannan told <a href="https://fortune.com/crypto/2023/03/28/eigenlabs-eigenlayer-50m-funding-round-blockchain-capital-infrastructure/" target="_blank" rel="noreferrer noopener">Fortune</a> that blockchain infrastructure is currently blocked from supporting big ideas like Uber or social networks because it’s just not ready yet. And EigenLayer could be a fix for that.



Speaking to Blockworks’ <a href="https://youtu.be/O-uzBSevklk?t=1158" target="_blank" rel="noreferrer noopener">0xResearch podcast</a> in January, Kannan said that EigenLayer will allow staked ether to be used in a variety of cross-chain contexts.



“You can think of EigenLayer as enhancing the expressivity and flexibility of what the Ethereum trust network can do,” he said.



The protocol’s process of restaking, in which Ethereum’s security is redirected to alternative middleware, allows blockchain services to rely on itself for security rather than on the value of their own tokens. It essentially gives users an opt-in function that grants EigenLayer enforcement rights on their staked ETH, which can then be applied to other applications.



Viktor Bunin, a protocol specialist at Coinbase and an angel investor who participated in EigenLayer’s seed round, <a href="https://viktorbunin.medium.com/investing-in-eigenlayer-1020608cd69f" target="_blank" rel="noreferrer noopener">wrote</a> about why he is particularly interested in the startup.



“Sreeram and team are tackling an incredibly difficult problem, but one that has the potential for an enormous amount of impact,” he said. “There’s tens of billions of dollars of staked ETH. In the future there will be trillions. Making this capital useful will be a journey that can place crypto as an industry on a better path.”



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