Etherscan Research: Take a look at the EigenLayer ecological landscape and examine the advantages and disadvantages of Ethereum remortgage
- WBOYOriginal
- 2024-06-28 18:24:46682browse
Original title: "An Early Look at Ethereum's Restaking Landscape" Author: TY, Etherscan Blog Compiler: Elvin, ChainCatcher In the past two months, the total value locked (TVL) on EigenLayer has increased from US$1 billion on December 23 to 9.5 billion US dollars, the TVL of liquid re-hypothecation tokens (LRT) has increased from US$152 million at the beginning of the year to more than 4 billion US dollars as of February 24, and re-hypothecation has shown significant growth momentum. The community is particularly hot, anticipating possible airdrops by accumulating EigenLayer points and earning additional re-staking rewards with the same ETH. In this article, we will review Ethereum staking and compare it to restaking. We'll look at the cases and explain some of the advantages and concerns associated with remortgaging for those looking to get a piece of the action. Proof-of-Stake (PoS) Ethereum and Security Ethereum has undergone a merger, transforming its security model into a PoS consensus mechanism. To secure Ethereum under PoS, anyone can participate as a validator by depositing 32 ETH into Beacon Chain, granting them the right to certify new blocks and occasionally propose new blocks. Validators are rewarded for honest work, but dishonest work may result in some or all of the staked ETH being slashed. As of this writing, over 25% of the ETH supply (31,061,263 ETH out of 120,142,088.89 ETH) is staked. The total market cap of ETH is $400 billion, while the total value of staked ETH is $100 billion. This means that executing a 51% attack on Ethereum (where an attacker would control the majority of validators) would require the deployment of over $100 billion in capital (assuming that current network validators are honest) to successfully influence Ethereum in their favor . Additionally, validator churn limits prevent new validators from entering the network at the same time. At the current limit of 15 per cycle, an attack could take more than 6 months to execute. Additionally, the current supply of ETH on exchanges is 13,735,858.547 ETH (about 11.43%), which is less than half of the total amount of ETH pledged, making it increasingly difficult to purchase enough ETH to attack the network.
The Liquid Stake protocol allows more users to participate in PoS by allowing more users to delegate ETH to node operators instead of running validator clients themselves. In return, users receive liquid staking tokens (LST) that they can freely use in DeFi activities, unlike native staking where ETH must be locked on Beacon Chain. LST represents a commitment to exchange it back for delegated ETH and earned rewards.
The new ETH staking is mainly targeted at liquidity staking protocols and has even sparked discussions about changing pledge issuance.
Re-staking and its case
To put it in perspective, it took Ethereum over three years to build its cryptoeconomic security with over 25% of ETH staked. Staked ETH is currently worth over $100 billion, surpassing the combined market cap of the next major networks like BSC ($62 billion) and Solana ($59 billion) (both numbers at the time of writing).
New protocols seeking to build strong cryptoeconomic security will need to invest more time and resources in order to achieve similar feats. They must find new capital that has not yet secured existing blockchain protocols. This will also further dilute capital among various blockchain protocols and lead to security fragmentation.
The concept of re-staking introduced by EigenLayer involves ETH validators/stakeholders choosing to secure additional protocols (or active verification services) with their staked ETH. This approach allows developers to launch new protocols faster by leveraging Ethereum’s security.
Since launching its first phase on the Ethereum mainnet on June 23, EigenLayer has accumulated over $9.5 billion in total value locked (TVL), making it the second-largest protocol by TVL on Ethereum. Its Liquidity Re-staking Token (LRT) counterpart, similar to LST-staking ETH, currently has a TVL of over $4 billion.
According to the EigenLayer website, there are currently 13 AVS projects built in its ecosystem, utilizing re-staking ETH to enhance the security of the project. The first of these, AVS EigenDA (developed by EigenLabs), is being tested on the testnet and will land on the mainnet in the first half of 2024.
For a market overview of re-staking in February 2024, read the blog here.
What are the advantages and concerns of remortgaging?
Since the active verification service is still undergoing rigorous testing and has not yet launched on mainnet, the full range of benefits and concerns are yet to be seen.
That being said, here are the preliminary benefits and concerns of re-staking gathered from the community:
Advantages
1. Shared Security
Protocols built on EigenLayer can benefit from pooled security without incurring additional startup costs to assemble the validator base, especially in PoS networks.
EigenLayer founder Sreeram Kannan said sharing security has been massively hardened. If $1 billion of equity is recollateralized and shared across all protocols, the cost of attacking any one of them is $1 billion.
This begs the question, if EigenLayer is a permissionless protocol that anyone can build on top of, will pooling security incentivize people to take more security risks funded by others?
Upcoming changes to the shared security model may introduce vested security, allowing AVS to purchase claims against a certain amount of pooled (rehypothecated) capital. If something goes wrong with AVS, claims can be reassigned to AVS users, making them whole. This is similar to insurance.
2. Capital efficiency
The re-pledged ETH will enjoy more rewards for verifying AVS than Ethereum alone.
Concerns
1. Centralization risk
In addition to the ordinary ETH staking yield, validators utilizing AVS will be able to provide higher APY to their delegators. Validators need to understand the risks of obtaining additional AVS rather than blindly exploiting each AVS to obtain the promised yield.
Re-stakers may naturally be inclined to delegate their ETH to validators to maintain higher yields by minimizing the risk of slashing. This may develop into a feedback loop, with those validators that can provide sustainably higher returns attracting more capital in the long run, further consolidating their position, potentially creating a monopoly and risking centralization.
2. Decentralized Ethereum’s consensus
Like other blockchain communities, Ethereum’s social consensus is also fragile. If social consensus is exploited mercilessly, it is likely to lead to community division and chain rupture.
Re-staking should maintain the minimalism of Ethereum and avoid introducing unnecessary "scope" to distract from the role of Ethereum consensus. If restaking AVS becomes too large to fail, it could trigger a social consensus fork.
Conclusion
Restaking quickly became a hot topic within the community, providing additional incentives for accumulating EigenLayer points and potential airdrop opportunities. This is also a promising technology that could allow Ethereum to secure more useful protocols.
The team behind EigenLayer is also in no rush to move forward with the process, as they consider multiple perspectives from the community and core developers and gradually make smart updates to the protocol.
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