In the ever-evolving world of blockchain technology, the need for enhanced security and scalability has driven innovations that extend beyond traditional staking mechanisms. One such innovation is re-staking, a concept designed to maximize the utility of staked assets while securing multiple decentralized applications (dApps) and protocols with a single validator set. EigenLayer, a protocol built on Ethereum, leverages re-staking to create a new layer of security for Ethereum-based dApps.

This guide delves into what re-staking is, why it was developed, the problems it solves, and its current scale, before explaining how EigenLayer utilizes re-staking to enhance Ethereum’s security. Additionally, for those looking to explore and track re-staking protocols and their tokens, SoSoValue provides detailed insights and data, helping users stay informed on the latest developments in the blockchain ecosystem.

What Is Re-Staking?

Re-staking refers to the process of re-delegating or reusing staked assets (such as Ethereum’s ETH) to secure additional protocols or decentralized applications (dApps) without needing to unstake them from the original network.

In Ethereum’s Proof-of-Stake (PoS) system, validators lock up ETH as collateral to validate transactions and secure the network. Re-staking takes this existing staked ETH and extends its security to other blockchain applications or services that require a trust layer. This way, Ethereum validators don't need to spread their capital across multiple staking networks but can provide security for several protocols simultaneously.

According to the EigenLayer whitepaper, re-staking is a novel mechanism that enhances the security of decentralized applications by leveraging the already existing PoS validators from Ethereum’s network. The key benefit of this is that it doesn’t require additional capital to be locked up, while simultaneously securing and incentivizing multiple protocols.

Why Was Re-Staking Created? The Problems It Solves

Re-staking was created to address several key challenges in the blockchain ecosystem:

1. Fragmentation of Security: Many smaller dApps and protocols cannot afford to build their own validator network, making them susceptible to security vulnerabilities. By enabling these projects to tap into Ethereum’s validator set, re-staking brings much-needed security and decentralization to the entire ecosystem. 2. Underutilization of Staked Assets: In traditional staking systems, once assets are locked up, their use is limited to a single network. Re-staking solves this issue by creating a mechanism where validators’ assets can be reused for multiple purposes, allowing their staked ETH to serve as collateral for securing multiple protocols, boosting the overall efficiency of the network. 3. Incentive Alignment: Re-staking creates new opportunities for Ethereum validators to earn rewards from multiple sources, reducing the pressure on Ethereum’s native staking rewards to sustain validator incentives. Validators can secure Ethereum itself as well as other dApps, earning rewards from both while enhancing the security of these networks. 4. Scalability Issues: As Ethereum grows, scaling solutions like Layer 2 networks or new blockchain applications require scalable security models. Re-staking offers a more cost-effective and efficient approach to securing these projects without needing to replicate Ethereum’s expensive infrastructure.

How Does Re-Staking Work?

Re-staking works by allowing Ethereum validators to use their staked ETH to participate in the security of multiple networks or protocols. Here’s how the mechanism generally works:

1. Staking on Ethereum: Validators initially stake ETH to participate in Ethereum's PoS consensus mechanism. This is where they commit their ETH as collateral to help validate transactions and secure the Ethereum network. 2. Re-staking to Other Protocols: Once ETH is staked, validators can opt to re-stake a portion of their staked ETH to secure other protocols. These protocols can range from decentralized finance (DeFi) platforms to Layer 2 scaling solutions or even entirely new blockchain projects that need security but cannot afford their own validator network. 3. Validators’ Rewards: In return for securing additional protocols, validators earn rewards from the dApps or protocols they secure, along with their Ethereum staking rewards. This creates an additional stream of income for validators, making it more attractive to participate in the re-staking process. 4. Security of Multiple Protocols: Re-staking allows Ethereum to extend its security to more projects without requiring new validator networks or expensive infrastructure. Smaller protocols or dApps that integrate with re-staking can access the security of Ethereum’s PoS system, strengthening the overall decentralized ecosystem.

Why Re-Staking Matters: The Current Scale and Impact

As of now, according to the SoSoValue Charts, Ethereum's staking ecosystem holds approximately 33.89 million ETH (around 29% of the total supply) locked in staking contracts. This equates to roughly $120 billion in staked assets, making Ethereum’s staking network one of the largest in the blockchain world.

To provide a clearer picture, here are the ETH staking APYs offered by major liquid staking platforms and centralized exchanges (CEXs):

The Ethereum staking ecosystem has seen significant adoption, with leading liquid staking platforms such as Lido and Rocket Pool offering competitive APYs. Centralized exchanges (CEXs), including Coinbase, Binance, have also joined the staking market, providing validators and individual users with varied staking options. The current APYs range between 2% and 3.3%, depending on the platform and method of staking.

EigenLayer, a prime example of how re-staking is being utilized, aims to secure multiple protocols by leveraging Ethereum’s existing staking infrastructure. According to recent data, the EigenLayer protocol has seen rapid adoption, with several dApps and protocols integrating re-staking as part of their security model. This early success demonstrates the viability of re-staking as a scalable solution for decentralized application security.

By introducing re-staking mechanisms like those provided by EigenLayer, Ethereum validators not only benefit from the APYs offered by the original staking platforms but can also unlock additional revenue streams by securing other protocols and decentralized applications. This positions EigenLayer as a complementary solution for validators looking to maximize their staking efficiency.

What Is EigenLayer?

EigenLayer is a protocol built on top of Ethereum that enhances the security of decentralized applications (dApps) and blockchain projects through a mechanism known as re-staking. By allowing Ethereum validators to extend their staked assets to other protocols, EigenLayer enables a more secure and scalable framework for dApps without requiring them to build their own validator networks.

The protocol leverages Ethereum’s existing Proof-of-Stake (PoS) system, where validators lock up their ETH to maintain the Ethereum network. With EigenLayer, these validators can now provide security to other networks, protocols, and dApps, thereby increasing the overall robustness of the blockchain ecosystem.

EigenLayer's framework allows dApps to tap into Ethereum's decentralized validator set for added security. This is particularly valuable for smaller projects or new blockchain applications that may not have the resources to establish their own validator network.

How Does EigenLayer Work?

EigenLayer enhances the existing Ethereum PoS infrastructure, making it easier and more cost-effective for projects to secure their networks by using Ethereum's validators. The process works as follows:

1. Validator Participation: Ethereum validators who have already staked their ETH can opt to "re-stake" a portion of their assets to secure other protocols integrated with EigenLayer. 2. Security Extension: By re-staking, these protocols gain access to Ethereum's validator network, thus benefiting from the trust and reliability derived from Ethereum's decentralized consensus. 3. Dual Rewards: Validators earn rewards from both Ethereum and the protocols they secure. This creates a compelling incentive for validators to participate in multiple networks, strengthening the security of the entire blockchain ecosystem. 4. Scalability: EigenLayer’s unified framework enables Ethereum validators to extend their security to multiple platforms without the need to manage separate validator sets for each dApp or protocol. This scalability makes it an ideal solution for projects looking to scale their security infrastructure without incurring additional costs.

EigenLayer’s Revenue Model: A Sustainable Ecosystem

EigenLayer has a well-defined revenue model that ensures its sustainability while benefiting validators and protocols alike. Here’s how it works:

1. Protocol Fees: Protocols that utilize EigenLayer’s re-staking mechanism pay a fee for accessing the validator network. This fee, often a percentage of the rewards distributed to validators, ensures the protocol’s financial sustainability and further supports EigenLayer’s growth. 2. Dual Reward System for Validators: Validators earn rewards from both Ethereum’s native PoS system and the protocols they help secure. This dual incentive structure increases the profitability of Ethereum staking, making it an attractive opportunity for validators. 3. Governance Token: EigenLayer plans to introduce a governance token, giving stakeholders (validators, developers, and token holders) voting power on protocol upgrades and the distribution of rewards. This governance model enhances decision-making and aligns the interests of all participants in the ecosystem.

Real-World Use Cases of EigenLayer

EigenLayer has been widely adopted by various decentralized applications and blockchain projects. Some notable use cases include:

1. Layer 2 Solutions: Ethereum-based Layer 2 scaling solutions, such as Optimistic Rollups and zk-Rollups, use EigenLayer to secure their networks with Ethereum’s validator set, providing enhanced security without needing additional validators. 2. DeFi Protocols: DeFi platforms can integrate EigenLayer to protect their smart contracts and liquidity pools. This added security helps reduce the risk of hacks and exploits in vulnerable DeFi ecosystems. 3. New Blockchain Projects: Smaller blockchain projects can leverage EigenLayer to secure their networks using Ethereum’s trusted validator set, greatly reducing the capital and infrastructure required to build their own validator network.

How SoSoValue Helps Track EigenLayer’s Performance

1. Market Capitalization and Ranking

For blockchain enthusiasts and investors, SoSoValue offers an intuitive platform to track the performance of EigenLayer and other emerging protocols. SoSoValue provides real-time data on EigenLayer’s market performance, tokenomics, and governance structure, helping users stay informed and make data-driven decisions.

According to SoSoValue’s DeFi sector data, EigenLayer currently has a market capitalization of $1.3 billion, ranking 17th among all DeFi projects.

Within the LRTFi subsector, EigenLayer stands as the undisputed leader, showcasing its dominance in the rapidly growing re-staking ecosystem. This leadership highlights EigenLayer’s position as the go-to platform for cryptoeconomic security enhancements and decentralized applications.

2. Tokenomics of Eigenlayer

You can also view the token allocation details of EIGEN on the EigenLayer token details page.

Total Initial Supply of EIGEN

At launch, the total initial supply of EIGEN was 1,673,646,668.28466 tokens. This symbolic figure encodes the message “1. Open Innovation” when mapped onto a classic telephone keypad.

Allocation of EIGEN's Initial Supply

The initial supply is distributed across various categories to support the ecosystem, community, and operational development:

Community Allocation (45% of Initial Supply):

A total of ~251,047,000 tokens are allocated for stakedrops.

Approximately 186,582,000 EIGEN were made claimable during Seasons 1 and 2. As of September 30, 2024, ~158,774,855 EIGEN have already been claimed.

Unclaimed tokens will be reallocated to future community programs.

Community Initiatives (15%):

These include incentive programs and grants for users, developers, and contributors.

Tokens are part of the Available Supply but may be subject to vesting and lock-up conditions to ensure long-term ecosystem support.

R&D and Ecosystem Growth (15%):

Dedicated to ecosystem development, research initiatives, and operational expenses. These tokens are allocated over a multi-year timeframe.

Unlock Schedule for Early Contributors and Investors:

Tokens for early contributors, investors, and Eigen Foundation service providers are locked for one year post the EIGEN contract’s transfer restrictions removal.

Afterward, 4% unlocks monthly, starting on the one-year anniversary.

Inflation and Programmatic Rewards

EigenLayer employs an annual inflation rate of 4% on the total initial supply of EIGEN. Inflationary tokens are distributed through programmatic incentives to reward validators and node operators.

Inflation ensures continued ecosystem participation and network growth.

Programmatic rewards are designed to incentivize security providers and encourage network engagement.

The inflation mechanism is governed by the EigenLayer community, with potential adjustments made through governance proposals.

3. Fundraising History and Key Investors

Clicking on the Fundraising section on SoSoValue, you can explore EigenLayer’s past fundraising activities and detailed information about its investors. Here’s a comprehensive look at EigenLayer’s funding journey:

Seed Round - August 1, 2022: EigenLayer completed its Seed Round of funding on August 1, 2022, led by Polychain. This round laid the foundation for the development of EigenLayer's innovative re-staking platform, enabling the protocol to establish itself as a key player in Ethereum’s extended security infrastructure. Other notable participants included.

Series A Funding - March 2023: In March 2023, EigenLayer raised $50 million in a Series A funding round led by Blockchain Capital and Polychain Capital. The round also saw participation from prominent investors such as a16z (Andreessen Horowitz), Coinbase Ventures, and Electric Capital. The funds were directed toward expanding the EigenLayer team, enhancing the protocol's re-staking capabilities, and accelerating adoption by decentralized applications (dApps).

Strategic Partnerships in 2024: In early 2024, EigenLayer announced strategic partnerships with key ecosystem players, including major Ethereum Layer 2 protocols and decentralized finance (DeFi) projects. While these partnerships didn’t involve direct funding, they demonstrated significant institutional backing and showcased EigenLayer’s growing importance within the Ethereum ecosystem.

4. Tokenbar of Eigenlayer

SoSoValue provides a platform where users can share the latest information and updates about EigenLayer in real time. It also enables everyone to exchange their views and insights about the project, fostering interaction and collaboration within the community.