What is EigenLayer? Ethereum’s restaking protocol explained
2024-10-02

 EigenLayer, explained 
EigenLayer aims to eliminate a critical barrier many new DApps face by providing developers with an established security framework.
Ethereum has come a long way since its launch in 2015. It has held its position as the most influential blockchain, successfully transitioned from proof-of-work (PoW) to proof-of-stake (PoS) and is the foundation for many innovative crypto projects. 
EigenLayer is a decentralized Ethereum staking protocol that provides developers with an established security pool. This EigenLayer explanation details staking and other vital parts of the Ethereum staking protocol.
The EigenLayer protocol is an Ethereum-based project aiming to improve the network’s PoS consensus through a process called Ethereum restaking. The EigenLayer team claims to solve many existing Ethereum security inefficiencies, such as requiring every protocol to manage its own security and scalability processes.
EIGEN, the network’s token, became available for trading on Oct. 1, 2024. The token launched within a price range of $3.50 to $4.50, totaling around $6.5 billion in market capitalization. Market capitalization is a project’s assumed value if all its tokens are circulated. Think of it as a project’s total value at any given time. 
Such a launch put EigenLayer in the top 100 tokens in terms of market cap, 94th overall. Interestingly, EigenLayer technically launched its token in May via an airdrop but prevented anyone from trading it until October. 
Did you know? Ethereum launched as a PoW blockchain network. On Dec. 1, 2020, it converted into a PoS network by launching its Beacon Chain — a launch colloquially known as Ethereum consensus layer upgrade.
 What is restaking, and how does EigenLayer support it? 
Restaking is EigenLayer’s take on traditional staking. It provides new ways for users to generate passive income while increasing network security. 
Restaking, in the case of EigenLayer, is the act of taking staked Ethereum and repurposing it to increase security on other protocols — essentially creating a pool of restaked assets from which other decentralized applications (DApps) can pull. Users can opt-in to EigenLayer’s restaking smart contract through their already staked Ether (ETH) or a liquid staking token (LST). 
When a users stake funds on an Ethereum protocol, most projects offer liquid staking tokens to represent those staked assets — a sort of receipt. These tokens allow them to keep using their funds in other ways, such as restaking them through EigenLayer via a process called LST restaking without unstaking their original assets.
Alternatively, users can allow EigenLayer’s smart contracts to work with their already-staked ETH. Restaking with already-staked ETH is called native restaking. If a user participates in native restaking, the network will add those assets to the protocol’s security pool. How safe is EigenLayer? It’s about as secure as the size of its security pool.
EigenLayer supports restaking in two ways: native and LST restaking.
Applications built on EigenLayer are called actively validated services (AVSs) and can be anything from a bridge to a DApp to an oracle. Developing on EigenLayer is cheaper and more efficient than developing on a separate protocol, as EigenLayer has an established trust network in place through restakers. Developing elsewhere requires building a trust network from scratch.
That said, AVSs aren’t randomly harnessing services from EigenLayer. Instead, there’s an intermediary called a node operator, a volunteer opting to help manage the network. Much like an Ethereum validator, an operator can be a single user or an organization.
Operators can build their own AVSs or provide services to other existing AVSs while receiving rewards in return. However, operators are also subject to an AVS’s slashing requirements should they fail to perform their duties.
Moreover, operators can be restakers, or restakers can choose to delegate their restaked assets to an operator. Either way, restakers have complete control over which services their assets go toward. As a result, EigenLayer creates a sort of free-market governance system. Developers build on EigenLayer to harness its established security, while operators and restakers earn rewards for managing and providing said security.

Did you know? While Ethereum validators focus on validating transactions and securing the Ethereum network, EigenLayer operators can pick and choose which AVS they support, making them more specialized than their Ethereum-based brethren. Think of operators as IT departments with knowledge of a specific company, while validators are more general tech support.
How to trade EIGEN?
As mentioned above, EigenLayer officially launched its token, EIGEN, on Oct. 1, 2024. EIGEN is available on several exchanges, such as Binance, OKX, Coinbase, and more.
To trade EIGEN, you must set up an account/wallet with one of these exchanges, fund your wallet through your local currency or other cryptocurrencies, and buy EIGEN. To understand how to sign up for a crypto exchange, check out this guide.
 How do restakers manage their restaked assets? 
EigenLayer streamlines asset management through its EigenPod solution.
Did you know? Lido, a liquid staking solution, was the first group to introduce the concept of liquid staking. Introduced in December 2020, Lido solved the problem of stakers losing access to their assets while they’re locked up.
 Pros and cons of EigenLayer 
EigenLayer features innovative solutions, though this Ethereum network upgrade also introduces its own problems.
EigenLayer hopes to innovate on Ethereum’s tried-and-true proof-of-stake feature. In some ways, it is doing just that. However, its innovations aren’t perfect and can lead to new problems.
Pros
Cons
While the restaking model introduces higher risks and technical barriers, it also opens new avenues for value creation and network participation. For developers and users willing to navigate these complexities, EigenLayer can potentially drive the next phase of blockchain growth, especially as the ecosystem continues to evolve.