EigenLayer: Permissionless Feature Addition to Ethereum

Transcript

[Music] all right thank you all for your patience i'm sriram kanan i'm an associate professor at the university of washington seattle and founder of blockchain startup layer labs this talk is titled eigen layer the restaking collective the restaking collective restaking is a new term um we'll introduce what it is the subtitle says permission less feature addition to just set my ethereum here

okay first acknowledgements you know many collaborators on this project um some of them here the asan gotham shelby robert po and jeffrey all right so i'm going to set this talk from a little bit of a historical context bitcoin pioneered decentralized trust what do we mean by that you have a decentralized trust layer instead of having a central party intermediating your transactions

there is a consensus protocol which arranges this group of people into participating in the protocol and on top of it you have a programmability layer the bitcoin script which allowed for some programmability but limited and you can think of this as the first example of a monolithic blockchain what is a monolithic blockchain it's a blockchain built for a special purpose of course it's also the first blockchain and pioneered this whole idea but as things started evolving people wanted to build different applications and each application

like namecoin which is a domain name system needed to build its own trust network so name coin color coin metacoin many many coins which were started at the time all for different use cases each use case a new trust network a new blockchain okay so ethereum you guys pioneered modular blockchains what do i mean by that you have the ethereum trust network a fix-it consensus protocol

a fix it consensus protocol and a programmable layer and on top of the programmable layer you can build any decentralized applications so one way to think about this is ethereum enabled the decoupling of trust and innovation which is on top of the smart contract layer you can build any decentralized application you do not need to bring your own trust network for it ethereum provides a common trust network on which many people can innovate this is unleash general of open innovation where anybody can create dapps

without having to be trusted themselves because they're borrowing trust from ethereum what ethereum has done is let let us separate trust and innovation so innovation happens in a different layer and trust is provided in a common layer and this is why we see uh anons can build massive d5 protocols to build a financial service is one of the most trusted things but since the anon is not some anonymous person is not actually required to be trusted and trust is borrowed from ethereum you can actually uh they can actually go ahead and build it but there is a limitation to the extent of

open innovation that can be built on ethereum why do i say this if you go any deeper than smart contracts and dapps if you want to build if you want to build new consensus protocols if you want to build new data availability protocols if you want to build new ordering layers if you wanted to build new middleware you still need let's see so there are barriers to open innovation and suppose you want to build your own

new consensus protocol what do you do you have to go ahead and build your own blockchain and we we see the emergence of alt l1 alternative layer ones which have different feature sets different trade-offs different consensus protocols different execution machines and so on and what this is done is again history repeats itself just like bitcoin just like bitcoin um you could not build a bunch of different applications on top of bitcoin and it fractured trust into smaller communities what we're seeing here is

the alternative l ones just because you could not build these consensus protocols these ordering layers these execution engines into ethereum is fracturing trust into smaller groups again all right so you have alternative l ones they all have smaller truss sources why because you cannot change the consensus protocol and ethereum fracturing trust into smaller islands another trend we're seeing emerge is the emergence of modular blockchains so you think of ethereum you have the ethereum consensus stack comprised of various layers data availability ordering settlement execution and what's happening is we are seeing

new blockchains being built just to perform one of these different functions why why is this happening this is happening because there's no degree of freedom in controlling this inside so you can build dabs which use some arbitrary combination of these existing modules or newly built modules in order to create your dap but one thing which is left unsaid in this modular vision is where is the trust layer who is providing trust for all these different modules again fracturing of trust into small islands in each of these layers so just to put some numerical example

let's say the ethereum trust network has 200 billion dollars take not unreasonable in the near future and each of these layers have some amount staked you know maybe a 50 billion 50 billion 10 billion whatever now what is the cost of corrupting these daps which are relying on this entire chain trust is the weakest link if the execution layer is the weakest link that's the that's the trust bottleneck so the entire cost of corrupting these dapps is 10 billion dollars instead of if you had a monolithic blockchain 200 billion dollars okay film modularity fractures trust again another example all tail ones

smaller truss networks modularity trust middlewares also fracture trust oracles bridges anything that you need a distributed validation service needs its own trust network so one way to visualize this you you think of ethereum as the base layer and it's applying trust to the dapps but only in ordering and execution using the ethereum protocol and you have middlewares they supply trust on other dimensions for example reading data from the internet or whatever other things but they need to build their own trust network

again this is the bottleneck to open innovation because if you want to build your own new oracle you need to build your own decentralized trust network which is extremely difficult i'm going to phrase this problem economically since we are at eighth economics what is the problem the problem is whenever you put down capital in any of these different middlewares because each of these are staked middleweights you incur a cost of capital suppose you're putting down 50 billion dollar at stake in a certain oracle that means you need to make a 10 annual rate of return

right you need to be making revenue of 5 billion in order to sustain a 50 billion dollar of stake in a certain middleware there is a massive cost of capital in each module in each middleware that you touch as far as the dapps are concerned dabs rely on not only dapps rely not only on ethereum but also these middleware so they suffer lower trust guarantees finally as far as ethereum is concerned or the core layer 1 is concerned what is happening is instead of ethereum being the decentralized trust network it gets fractured and the value

also gets split across all these different applications all right so now that i've set up the problem the problem is a fracture of trust across all tel ones across different modules across different middlewares same story as in the history why we had to go from bitcoin to ethereum what we are proposing is a solution to this trust fracture problem and how ethereum can internalize the economics of modularity it's called eigen layer what is eigen layer doing eigen layer

is a mechanism by which the ethereum trust can be redirected can be redirected into any new modules that are built that anybody can build the core idea of eigen layer is re-staking i'll explain what is restaking you already state as a staker or validator in the ethereum proof of stake now you can take that stake and subject yourself to additional slashing conditions and opt-in

and opt-in to provide new services new distributed validation services same validated network through eigen layer you can provide many many different validation services could be articles bridges data availability fair ordering authentication whatever you can think of instead of allowing innovation at the level only of programming a virtual machine we can allow innovation at the level of programming the distributed system you can specify what each node each staker what particular types of action they need to be taking it transforms the innovation scale

possible inside ethereum okay so how does it transform the economics of this situation as far as the middleware are concerned because you're restaking you do not take new cost of capital it is already the 200 billion dollar that staked in ethereum and earning whatever annual percentage rate for staking you do not take additional marginal capital cost you're also pooling the capital cost across all the different applications as far as the dabs are concerned if you're using middleware which are widely adopted you can expect all of the each stakers opt-in so you will get

the core ethereum trust on many many different middleware and therefore the dapps also get core ethereum trust finally ethereum itself starts growing in value not only in the short term that the stakers make additional yield by opting into these different services in the long term the value of ethereum is the total future revenue that you can derive by staking ethereum and that just takes an exponential upside that's the basic idea of eigen layer it is the restaking collective what is the restaking collective what do we do so we look at the stack of

ethereum you have the trust network consensus protocol virtual machine and you had daps which anybody could build eigen layer is a series of smart contracts on top of ethereum which lets the stakers of ethereum opt-in to provide additional services so this is called restaking particularly how it works you know all of your experts here in uh in the ethereum state protocol the way you do it is you go and you can be your own home validator for ethereum which is one of the big visions of ethereum but what you do is you go

and when you deposit stake into the east staking contracts you set the withdrawal credential to this smart contract instead of setting it to your own personal public key you set it to the eigen layer withdrawal contracts so your withdrawal credentials are given to eigen layer why is it given to eigen layer because in this series of smart contracts you opt in to provide additional services and if you did something wrong in these additional services you may not be able to withdraw the entirety of your stick you may get slashed partially so that's it it does not rely on staking derivatives it does not lead to any centralization none of those things

re-staking is a mechanism by which existing stakers opt in to provide additional services for additional yield while taking additional risk it's a risk reward trade-off operating on a free market instead of having all these segregated blockchains each of which need their own trust network their own capital cost fragmenting trust across the ecosystem you can recapture them back into the ethereum ecosystem where anybody can now innovate at the level of building new consensus at the level of building new virtual machines

at the level of building new dapps it's open innovation all through the stack permissionless competition instead of one one protocol to rule them all one trust network to rule them all that's the core idea let me see how we are doing on time here i mean it would be lunch but i think uh let me take another few minutes to wrap this up the idea here is

reminiscent of merge mining for the many of you who are around in this area for a long time you know in provo work systems the dominant cost is not validation cost it's mining cost and that's obvious because of course mining takes up all energy and costs so merge mining was a mechanism by which you amortize mining cost into many many systems you can build many blockchains which share the same mining thereby amortize mining costs however the reason merge mining was not very successful

is that the crypto economics does not transfer from the main chain say bitcoin to any other merge mine chain what do i mean by the crypto economics does not transfer even if 100 of all the miners opt in to your additional chain the problem is if you attack the additional chain the merge mind chain you do not lose your bitcoin most definitely you do not lose your bitcoin mining equipment and bitcoin does not crash in value because it has nothing to do with this new all chain merge mining therefore has had a very bad rep however

merge staking which we defined this idea called restaking is completely different it's similar in its basic idea that the dominant cost in a proof of stake system is not validation cost it is the cost of capital it is the cost of locking up a large amount of money for a certain amount of time merge staking is the amortization of the cost of capital the same cost of capital can now be used to serve many many different chains many the the main difference though with merge

mining similar the merge the main difference is the crypto economics transfer perfectly what do i mean by that if you had 100 billion dollar in each state maybe only even 10 billion dollar restate in either layer and you did something bad in eigen layer you will get your 10 billion dollar of eth not some new eigen token so the crypto economics transfers perfectly merge taking is fundamentally different from merge mining because it has perfect crypto economic transfer we know proof of stake is different because you have slashing but because you have slashing it enables

this extremely powerful extremely powerful interface of crypto economic transfer on which you can build many many services i'm going to pass through some of these things so we've built you can build any middleware on top of eigen layer we built the first middleware which is a data availability layer which can be secured by each takers we built on all the pioneering innovation here in the ethereum community which is how do you use data availability sampling how do you use polynomial commitments multi-revealed downshotting we can actually get it working as a

restaked layer on ethereum today i'll skip through this and i'll just point out two major advantages of eigen layer before we wrap up eigen layer leverages staker heterogeneity what do i mean by that today as as users of you know these ecosystems one of the things we know is the most valuable commodity in blockchains is block space most valuable commodity how is block space priced block says block space is priced or based on how close you are to the block limit that's eap 1559

question is if you're close how is this block limit determined block limit is determined based on the resources available on the least powerful staker that you want to accommodate you want to accommodate the home validator in venezuela having a one megabyte per second connection which is an amazing decentralization goal but there are other stakers who have more resources and they cannot bring that to bear fruitfully inside the ethereum ecosystem so they stake in some other like ecosystem parallely instead you have a massive stake of heterogeneity and eigen layer lets you exploit this taker heterogeneity you can build layers

which have somewhat smaller cryptoeconomic security have very large boosts in performance on top of the same ecosystem okay i'll skip through this and finally i just want to point out a major advantage for governance of protocols like ethereum so there is a massive trade-off in protocol governance between democrat democratic governance and the agility of response you can be extremely democratic but democracy means you are taking the opinions of all kinds of stakeholders into account which is

needed leads to long-term stability but does not lead to short-term agility the ability to respond to changes in technology the changes in demands so protocols today have to make a trade-off between agility the ability to respond fast and having democratic governance ethereum plus eigen layer solves this trade off completely why you have a credibly neutral layer ethereum which is also democratically covered so it's very very stable on the core layer consensus and basic execution on top of it on agile layer

everybody competes fairly in an open to provide any other services so you have you can leverage the same trust network to create agile innovation as well as have a layer of stability that people who want long-term stability can use i'll stop with this and point out that eigen layer enables a new era of open innovation which really was pioneered by because you can build all kinds of interesting things on top of eigen layer you can build new side chains which are extremely powerful you can

build new bridges you can build keepers event driven systems you can build ordering layers which do anti-mev solutions all kinds of things modules that can be built on top of the common trust network thank you [Applause] you