What is Restaking on EigenLayer?

In this blog, we’ll explore restaking with EigenLayer and what it aims to offer to the Ethereum landscape.

But First: Staking Native Ethereum and Liquid Staking

Staking plays a pivotal role in securing a proof-of-stake (PoS) blockchain, and this has been Ethereum’s form of consensus since switching from proof-of-work (PoW) at the merge. Network participants today on Ethereum stake 32 ETH to a validator, which performs lightweight operations to secure the Layer-1 chain. In return for this consensus work, these validators earn a yield, often ranging between 3 - 5% APY. 

As of March 2024, nearly 32 million ETH (over $126 billion) has been staked on the Ethereum network, operated by 991,013 validators across the globe, according to https://dune.com/hildobby/eth2-staking and beaconcha.in. As far as PoS blockchain networks go, Ethereum has cemented itself as the most secure and decentralized, enabling generalized computation across the Ethereum virtual machine (EVM) and its associated networks. 

However, it comes at a cost; 32 ETH is too large of an amount for most people to afford, and staking is a technical process that is quite unreasonable for non-technical people.

Enter liquid staking, which allows anyone holding any amount of ETH, to deposit into liquid staking protocols (Rocketpool, Lido, Ether.Fi, etc…), and receive a “liquid staking token,” or LST, that earns a comparable yield to staking natively (minus a slight operator commission). The operators on those liquid staking networks take the pooled ETH from thousands of depositors and combine them into a series of validators staking 32 ETH. The yield then is generated, aggregated, and then accrued back to the users’ LST holdings automatically. 

Introduction to Restaking and EigenLayer

The Challenges of Bootstrapping Validator Sets 

Another challenge associated with staking is the concept of bootstrapping a node operator set that is decentralized, while still maintaining a network that is scalable and secure for end users. This is a difficult task that appchains, or any actively validated service, must deal with. Appchains are specialized blockchains that are purpose-built for particular use cases. For example, it may make more sense to assign a blockchain “module,” underpinned by a secure operator set, to individually support a game, decentralized AI marketplace, price oracle, or communication layer. The solution to this problem has traditionally been a multitude of solutions tied to specific layer 2 or adjacent ecosystems (e.g. the OP Stack, Arbitrum Orbit, Polygon CDK, Avalanche Hyperchains, and others). These ecosystems are often underpinned by consensus or sequencer layers that are not as secure as the Ethereum base layer. Additionally, the “Cost of Corruption,” or CoC, is fragmented across each of these module types, which means the cost to individually override discrete non-Ethereum PoS networks is less than it would be to override any individual application within the Ethereum L1 protocol itself.

But there’s a new player in town now, known as EigenLayer, which aims to balance the desired efficiency of purpose-built blockchain modules, and the native security guarantees of Ethereum PoS consensus.

Image:  From the EigenLayer whitepaper, comparing the pooled security of EigenLayer with that of traditional blockchain architectures

What is restaking?

Restaking ETH is the act of pooling Ethereum’s security to support and bootstrap new blockchain modules. Mechanically, it involves staking native Ethereum, or LSTs, into the EigenLayer protocol. EigenLayer acts as a “re-staker,” basically using a combination of ETH and other LSTs (stETH, rETH, cbETH, ETHx, etc…) as a form of “pooled security” to assure operators of the protocol are acting honestly. If operators act dishonestly on EigenLayer, they are subject to slashing conditions. Essentially, EigenLayer allows new projects to borrow Ethereum’s robust security. By incorporating restaking as a new primitive, EigenLayer empowers users and protocols to actively borrow Ethereum’s security offerings and validate new applications on the network, thereby strengthening the overall integrity and resilience of the Ethereum ecosystem alongside the protocols leveraging EigenLayer. All this also acts to further reduce the start-up cost of protocols.

Image:  From the EigenLayer whitepaper, comparing the ecosystem of actively validated services today and with EigenLayer

The full list of available LSTs that are valid for restaking into the EigenLayer protocol can be found here: https://docs.eigenlayer.xyz/eigenlayer/restaking-guides/restaking-user-guide/ 

What is an Actively Validated Service, or AVS?

To tie it all together, an AVS is a blockchain application built on top of EigenLayer. These applications, like layer-2 scaling solutions or data storage networks, can leverage the security of Ethereum's Proof-of-Stake system without needing their own complex validation process. EigenLayer allows validators to use their staked ETH to secure both Ethereum and AVSs simultaneously, which increases the overall security of the AVS and potentially offers higher returns for validators. This creates a win-win situation where AVSs benefit from strong security, and validators gain access to a wider range of earning opportunities. Operators on EigenLayer have the power to decide which Actively Validated Services that they operate for, and in turn, users can choose to delegate their restaked Ethereum to operators of their choosing.

A live view of the current Actively Validated Services on EigenLayer can be found here: https://ethrestaking.com/avs 

Staking on EigenLayer with Validation Cloud

AVS Staking-as-a-service

Validation Cloud is proud to be supporting multiple protocols building on top of EigenLayer. The current list today includes Aethos, Supermeta, and Etherfi, with many more on the way. Future blog posts will highlight these protocols in further detail, and how users can delegate their stake to them via Validation Cloud’s AVS interfaces. Once live, you can navigate to our operator dashboard by searching for “Validation Cloud” on Mainnet via https://app.eigenlayer.xyz/operator, or Holesky Testnet via https://holesky.eigenlayer.xyz/operator

While staking is the foundation to secure a PoS network, operating Ethereum and EigenLayer infrastructure requires specific hardware and software which are expensive, tedious, and quite risky to maintain for non-technical users. Aside from high operational costs, the staker must be well versed with on-chain staking mechanisms. However, staking-as-a-service enables professional node operators, like Validation Cloud, to run these validators on the staker’s behalf. 

Platforms such as Validation Cloud are launching AVS staking-as-a-service and are SOC 2 Type 2 compliant, ensuring the highest levels of security, performance, and slashing protection in staking. We worry about the infrastructure, maintenance, upgrades, and operational risks so you don’t have to.

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