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

<div id="highlights-block_1b74c1d73c9f0ad738c7fe439099684d" class="highlights">
 <ul>
 <li>Aave- and Compound-based stablecoin rates launched on Voltz earlier last month</li>
 <li>Traders can de-risk their portfolio by &#8220;locking in&#8221; a fixed interest rate</li>
 </ul>
 
</div>



With Ethereum&#8217;s anticipated transition from proof-of-work to proof-of-stake <a href="https://cms.blockworks.co/ethereum-activates-grey-glacier-hard-fork-merge-likely-in-september/">expected to occur</a> in a few months, Voltz protocol is offering traders a new way to speculate returns with interest rate swaps (IRS).



The company announced today that staked ether from Lido (stETH) and Rocket Pool (rETH) will join its growing trading pool that currently comprises Aave- and Compound-based stablecoin rates. Each pool will have a liquidity provider margin cap of $1.5 million, and the amount will gradually increase over time.&nbsp;



In traditional finance (TradFi), an IRS involves two counterparties that agree to exchange future interest payments with each other. Traders acknowledge that they prefer each other&#8217;s interest rates and enter a contract to switch future interest payments.&nbsp;



An IRS can be used to speculate, manage credit risks and hedge against losses — it is a necessary tool for many everyday financial services. Voltz aims to offer IRS services for DeFi trading, which is known to be volatile in nature.&nbsp;



“What interest rate swaps unlock at the most macro level is it provides an ability to transition from something that&#8217;s variable, to something that&#8217;s stable,” Simon Jones, CEO of Voltz, told Blockworks.



Voltz is an automated market maker (AMM) designed to simulate IRS on the blockchain, making it synthetic and adaptable to new pools and assets — this will likely allow for a wide range of financial products and trading strategies to be built on the protocol.



“When The Merge occurs, the rates of return a validator node generates are going to change, and that is going to translate into a change in the value of [ether],” Jones said. “What we’re doing by launching these pools is enabling people to take specific views and to start trading those market views in a synthetic way.”



Presently, IRS operations are limited. Other than Voltz, only a few other protocols are in the IRS space, including: Element Fi, Strips, Pendle, Tempus and Swivel, all of which are still very new to DeFi (decentralized finance).



For Jones, the relatively untapped market of IRS protocols serves as a great opportunity for his team to design a product that is “actually providing fundamental value.”



“One of the big design decisions we made was to make the protocol as composable as possible. Everything is on-chain, which enables us to be a super low-level primitive that a lot of products are built on top,” Jones said. “If you believe a portion of rates trading will go through smart contract-based markets in the future, the long-term opportunity for Voltz is to displace all of the trading activity in interest rate swaps that takes place even in traditional finance.”



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.