Eigen What? How EigenLayer Is Putting $34B in Staked Ethereum Back to Work

Crypto Twitter has been awash the previous few weeks with speak of an odd new protocol known as EigenLayer.

Some are going so far as calling it the following Ethereum Meta, whereas others are already whipping up speculative airdrop guides. And at the very least one particular person is doing God’s work, serving to us all pronounce the challenge’s title.

So, what within the hell is EigenLayer? Nicely, consider it as being like blockchain security-as-a-service.

As an alternative of getting to collect funds, {hardware}, and a sequence of validators to maintain your newly-launched crypto challenge from getting 51% attacked (or worse), EigenLayer needs to place staked Ethereum again to give you the results you want.

Right here’s the way it works.

Ethereum’s proof-of-stake consensus mechanism implies that the community is secured by financial incentives and penalties somewhat than large warehouses of mining machines. So-called validators in such a community can be part of and start incomes ETH-denominated yield as soon as they stake 32 ETH to the community. If, nonetheless, their validators go down or they behave maliciously by validating incorrect transactions, they’ll be penalized; a portion of that 32 Ethereum will get taken away.

For reference, there’s at present 19.7 million Ethereum enlisted to maintain Ethereum safe, or about $34 billion in the present day—that’s greater than 16% of all Ethereum at present in circulation. Sure, it’s rather a lot.

EigenLayer takes this a step additional by rehypothecating all that staked ETH to serve the identical safety functions however for different, newer tasks.

Rehypothecation is principally one other time period for utilizing the identical cash twice. And since that cash’s getting used twice, stakers who opt-in may even take pleasure in an excellent greater yield. And the extra tasks that construct (and acquire traction), the extra yield opted-in stakers can earn.

Provided that the asset being staked right here can be Ethereum, these different tasks would even be Ethereum-based. EigenLayer’s white paper consists of bridge applied sciences and oracle suppliers that might all use this double-dipped Ethereum.

In some ways, this may even make the builders’ deployment expertise far simpler, offering confidence that their pet challenge will in the end be backed by the market’s second-largest crypto community.

It’s an odd, very crypto-native thought, however as talked about, it’s acquired quite a lot of people fired up. ConsenSys founder Joe Lubin stated EigenLayer is “on the forefront of a few of the most enjoyable work occurring in Ethereum.”

And in March, the challenge raised $50 million in a Sequence A spherical from a bunch of notable traders.

It’s early days, after all. For now, although, all eyes are on Eigen.

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