What is Eigen Layer?

EigenLayer is a protocol built on Ethereum that introduces restaking, a new primitive in pooled crypto-economic security. This allows for the rehypothecation of Ethereum on the consensus layer and creates the first iteration of an on-chain decentralized trust and security validating mechanism.

EigenLayer emerges as a transformative solution for both scalability limitations and increasing transaction fees. It is a scaling paradigm built upon the robust foundation of Ethereum that lets other applications borrow the security of Ethereum validators.

In simple terms, EigenLayer leverages the following components:

  • Actively Validated Services (AVSs): These custom-built applications leverage the security of the EigenLayer validator and operator set, performing their own consensus tasks alongside securing the mainnet. An AVS includes, but is not limited to a new blockchain, data availability layers, bridges, oracle networks and keeper networks.

  • Shared Operators: These are individuals or entities running validator nodes within EigenLayer's AVSs. They contribute their validator power to secure multiple applications, earning rewards while boosting network resilience.

Existing Ethereum validators can restake their ETH while using existing hardware to validate new AVS. Each AVS comes with its own objectively verifiable set of rules that need to be followed by validators. If a validator fails to follow the predefined rules, they risk getting their ETH slashed. In return, each AVS will pay the EigenLayer fees in the denomination of their specific token issued. These fees will go to all restakers validating the AVS.

If we take a simple scenario with AAVE wanting to boost its security with EigenLayer, this is how it would work:

  • AAVE as AVS: AAVE would create its own AVS, a dedicated security layer powered by shared validators. This means anyone staking ETH on EigenLayer could contribute to AAVE's security, earning rewards in the process.

  • EigenLayer Operators as Validators: Operator nodes on EigenLayer could choose to participate in AAVE's AVS, acting as validators. They would earn rewards for validating AAVE's transactions and securing its platform while also contributing to other AVSs on EigenLayer.

EigenLayer is extremely complex and requires users to select and actively manage node operators, actively validated services, and a countless number of reward tokens while being locked in these positions for weeks/months. LYS Protocol abstracts away all these complexities while allowing users to be liquid on their position.

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