EigenLayer review – Is this the best re-staking platform?

Consensus algorithms are an essential mechanism in blockchain operation. They enable blockchains to secure the network and reach a decentralized agreement between all validators.

This innovation has paved the way for reliable decentralized systems. Among the various consensus methods, Proof-of-Stake (POS) stands out. POS decides which users validate new blocks of transactions and earns rewards for doing so correctly. As the crypto sector continues to grow, most blockchains have adopted POS.

However, although it is more economical in practice than the Proof-of-Work (POW) used by Bitcoin (BTC), this mechanism has also demonstrated its limitations over time, particularly on the Ethereum blockchain. With this in mind, restaking was born.

It’s an exploding concept that adds new possibilities to the blockchain. Let’s look at EigenLayer, a pioneer in this field that is currently winning over crypto-enthusiasts.

What is restaking?

Before getting to the heart of the matter, let’s briefly recall what staking is and its implications. The term refers to a DeFi process that allows holders of certain cryptos to earn rewards by locking their tokens via smart contracts and participating in the operation and security of a blockchain network.

Staking

The foundations of this practice were implemented in 2012 with the Peercoin project, but it was in 2022 that the concept was massively adopted thanks to the Ethereum blockchain. The latter, which shared the Proof-of-Work consensus method with the blockchain, switched to Proof-of-Stake.

Today, several well-known exchanges, such as Binance, Coinbase, Gemini, etc., offer staking services on various crypto-currencies, such as Ethereum, Solana, Polygon, etc.

Binance

• Low fees
• One of the largest crypto exchanges
• Fee discount for using native BNB

Binance

4.2

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Similarly, traditional finance digital banks like Revolut already allow some customers to stage cryptos on their platforms.

As an example of this concept’s explosion, since the beginning of 2024, almost 26% of the total ETH supply has been staked on the Ethereum blockchain. According to Cryptoast, this represents nearly 31 million tokens locked into this ecosystem’s various protocols.

Restaking offers an improved version of current staking. University of California professor Sreeram Kannan created the concept, which the Eigen Layer project introduced to the cryptosphere in June 2023.

This innovation allows participants to stake their digital assets more than once without having to remove them from a staking pool. This allows the user to earn additional rewards and increase the efficiency of their investment by increasing the Maximal Extractable Value (MEV).

In simple terms, you stake your tokens, then receive further derivative tokens which you can restake.

The advantages of restaking over classic crypto staking

* AVS (Actively Validated Services): AVS are blockchain applications that operate outside the Ethereum Virtual Machine (EVM). They include Layer 2 chains, data availability layers, sequencers, dApps, inter-chain bridges, or virtual machines. EigenDA, for example, is an AVS and data availability store created by EigenLabs.

In classic staking, assets are immobilized and inactive for a set period of time. With re-staking, however, staked assets generate other tokens that can be used on other protocols through DeFi and Web3, thus enabling greater rewards.

This reuse often takes the form of derivative tokens known as Liquid Staking Tokens. Your staked cryptos back these assets and can be exchanged or locked in the DeFi protocols supporting them.

Similarly, restaking removes barriers to entry, such as the high minimum requirements often associated with staking on Ethereum.

On Ethereum, for example, a minimum of 32 ETH is required for staking. Restaking and liquid staking derivatives bypass the obstacle of a substantial initial investment.

By adopting restaking, stakers contribute not only to the security of the original network but also to that other protocols or platforms that use their restaked assets.

The challenges and controversies of restaking

Although restaking represents one of the major innovations in Proof-of-Stake, some players are skeptical about its actual implementation.

Ethereum founder Vitalik Buterin has already voiced his concerns about the complexity this mechanism may represent for less experienced validators. He pointed out that adding new layers of complexity and risks weakening the Ethereum blockchain.

It requires juggling different protocols and tracking multiple reward streams. The security of secondary protocols also carries an increased risk. Indeed, if their integrity is compromised, assets are vulnerable.

Furthermore, restaking can lead to unintentional centralization, concentrating assets in a few validators or protocols. This could undermine the decentralization essential to blockchain. Finally, participating in a variety of protocols increases the chances of slashing if the rules are not respected.

How does EigenLayer work?

Eigen Layer is the pioneer of restaking. It was designed on the Ethereum blockchain and currently represents the second-largest protocol in terms of TVL, with over $11.76 billion.

Note: TVL represents the total value of assets tied up in DeFi protocols. It reflects a crypto project’s size, health, and user commitment.

On EigenLayer, users’ ETH can be used to secure other protocols. EigenLayer re-commits them to the various liquidity pools.

Note: A liquidity pool is an inventory of crypto-currencies locked in a smart contract. It is designed to facilitate decentralized trading by offering the necessary liquidity.

Liquidity pools will directly allocate your ETH to AVS (Actively Validated Services) applications. AVS can be various DeFi services such as oracles or bridges. Until now, such applications have had to create their own networks of validators.

Note: In crypto, an oracle is an intermediary that provides external data to smart contracts. A bridge is a platform that enables the transfer of assets between different blockchains.

With EigenLayer, developers can plug into Ethereum and access multiple validators without necessarily creating a smart contract or launching a native token. Thanks to restaking on this platform, it will soon be possible to access various services in the Ethereum ecosystem and earn various rewards.

There are many different ways of restaking on the Eigen layer, but we’ll focus on Liquid and Native Restaking.

Liquid Restaking

In Liquid Restaking, users are expected to deposit their LST (Liquid Staking Token) in the EigenLayer restaking pool. They thus receive a double reward, one from the initial Liquid Staking Pool and the other from the EigenLayer pools.

Note: The Liquid Staking Token or LST is a derivative token representing assets staked in a liquid staking protocol. This type of token can be exchanged, lent or used in other DeFi applications.

Currently, around 12 liquidity pools are supported by the platform, with more on the way. However, the project periodically limits access to these pools and does not allow users to stage their LST.

However, Liquid Staking protocols are now adding a restaking module linked to EigenLayer in an attempt to alleviate this problem.

LSTs supported by EigenLayer

• stETH (Lido)
• rETH (Rocket Pool)
• cbETH (Coinbase)
• wBETH (Binance)
• osETH (Stakewise)
• swETH (Swell)
• AnkrETH (Ankr)
• EthX (Stader)
• OETH (Origin ETH)
• sfrxETH (Frax Ether)
• lsETH (Liquid Staked ETH)
• mETH (Mantle Staked Ether)

For example, Coinbase Wrapped Staked ETH (cbETH) is an ERC-20 utility token that is a liquid representation of ETH staked on Coinbase.

Coinbase

• Regulated exchange
• An easy-to-use platform
• Free crypto training offered

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4.8

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Native Restaking

This method of restaking on EigenLayer is a process that involves launching an Ethereum validator node via smart contracts called EigenPods managed by the user.

However, this service is expensive in full bull run, requiring a full Ethereum node with 32 ETH. This secures assets while making them available for other uses in the Ethereum ecosystem, offering additional reward opportunities.

Eigen Layer’s main features

EigenLayer offers an innovative approach to blockchain security and decentralization. According to its whitepaper, three fundamental pillars form the project’s foundation.

Custom Decentralization

EigenLayer reinvents the concept of decentralization by offering participants the ability to support various services requiring a high level of decentralization.

This innovation facilitates resilience to censorship and executing distributed computations while minimizing participants’ technical requirements. In short, EigenLayer is even more accessible than other simple Liquid Staking protocols.

Custom Slashing

Eigen Layer implements a system of adaptive slashing rules to guarantee robust security. These rules, defined in specific contracts, are designed to prevent malicious behavior. This method encourages responsible participation while optimizing security. 

Delegation to network operators

Stakers can choose to delegate the management of their EigenLayer investments to trusted operators according to various criteria. This allows those who are less inclined or able to manage complex operations to contribute to network security.

How do I restake with EigenLayer?

To restake on EigenLayer, you must first ensure that deposits are available on the platform. It’s important to note that repositories are sometimes suspended. However, the procedure described below is the one you should follow when using the platform.

Prerequisites

First and foremost, you need a crypto wallet compatible with the Ethereum blockchain.

You must have enough ETH in your wallet to cover transaction fees on the Ethereum network. If you don’t have enough, buy some at an exchange like Binance.

Binance

• Low fees
• One of the largest crypto exchanges
• Fee discount for using native BNB

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4.2

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Step 1: Acquire an LST (Liquid Staking Token)

Now that everything’s ready, before you go to EigenLayer, you’ll need to acquire LSTs supported by the platform (see the list above).

These tokens can be purchased on a DEX such as Uniswap or generated via an Ethereum Liquid Staking protocol such as Lido or Rocket Pool.

Step 2: Go to the EigenLayer application

With your LSTs, go to the official Eigen Layer website. Connect your MetaMask wallet to the EigenLayer application.

Step 3: Deposit your LST for Restaking

Once your wallet is connected, select the LST you wish to restake. Click on “Deposit” for the chosen LST. Then enter the amount of the LST you wish to deposit for restaking and confirm the transaction in your wallet.

Step 4: Monitoring your investment

Once you’ve confirmed the deposit transaction, you can track the progress of your restaking directly on the EigenLayer application interface. You’ll see your “Restaked Points” increase according to your restaking participation.

In addition, to withdraw or adjust your deposit, use the options provided by the EigenLayer application. Please note that a 7-day blocking period applies.

Advantages and disadvantages of EigenLayer