EigenLayer (EIGEN): Introducing Liquid Restaking for Boosted Yields

The standard staking process for Ethereum tokens requires users to lock away their tokens for long periods of time. EigenLayer hopes to revolutionize the staking industry with a more convenient form of staking, a liquid restaking protocol that lets people earn yield from staked ETH while still being able to use their funds. How does this unique staking protocol work? Check out this guide to learn all the details about EigenLayer and its native restaking tokens. 

Key Takeaways:

• EigenLayer is an Ethereum restaking protocol. Compared to traditional ETH staking, EigenLayer's restaking process lets people earn additional rewards and continue to use their staked assets.

• Looking to trade EigenLayer tokens? Bybit Pre-Market Trading now offers the EIGEN/USDT Spot trading pair.

What Is EigenLayer?

EigenLayer is an Ethereum restaking protocol. Compared to traditional ETH staking, EigenLayer's restaking process lets people earn additional rewards and continue to use their staked assets, while developers can also use EigenLayer's staking to secure their own projects.

History of EigenLayer

EigenLayer was founded by Sreeram Kannan, an information sciences professor at the University of Washington. During his time researching information sciences and blockchain applications, Kannan became interested in exploring novel liquid staking platforms and methods of handling network security. In 2021, he founded EigenLayer alongside several other coworkers from the University of Washington's Blockchain Lab. 

The EigenLayer team was able to raise $150 million worth of funding from Blockchain Capital and Andreessen Horowitz for their mission.

What Does EigenLayer Aim to Achieve?

The EigenLayer protocol aims to provide more utility for all types of users in the Ethereum network. For people who hold ETH tokens, EigenLayer aims to improve the capital efficiency of their staked assets. Through its liquid restaking protocols, users can stake tokens without having their assets locked behind layers of smart contracts. EigenLayer hopes its liquid restaking token will incentivize more people to stake tokens.

Unlike some other liquid staking platforms, EigenLayer also aims to use its liquid restaking protocol as a way to enhance security. With more stakers available, developers have more opportunities to secure their networks. They can build anything they like and be confident that EigenLayer's stakers are providing robust network security. In the long run, EigenLayer hopes this will create a free and open marketplace where developers can buy pooled security and promote their projects to interested users.

How Does EigenLayer Work?

EigenLayer functions as a support layer between the Ethereum network and its users. It consists of a set of node validators, just like Ethereum has, who agree to temporarily stake tokens as collateral and then verify transactions. Users who don’t wish to run a full node can still contribute to restaking pools that will be used to operate nodes on the EigenLayer network. In exchange for their staked tokens, they get liquid restaking tokens that they can then use for other services while they wait for their staked tokens to be unlocked.

EigenLayer also has a system of actively validated services that connect to its liquid restaking token (LRT) protocols. These include all of the sidechains, oracles, bridges and other virtual machines running on EigenLayer. The actively validated services can connect to EigenLayer's node operators to obtain security for their own projects. This allows them to build fully EVM-compatible objects that benefit from EigenLayer's additional security.

Types of Staking on EigenLayer

EigenLayer's LRT protocols offer various methods for interacting with the Ethereum ecosystem. 

Native Restaking

Native restaking is the process of taking Ether (or other tokens) and redirecting them to secure nodes on a separate network. The EIgenLayer protocol provides many rewards for those who decide to participate in this form of staking. Native restakers must operate an Ethereum validator node and pay gas fees to participate in native restaking. However, they earn additional rewards because they play such an essential role in maintaining network security. 

Liquid Restaking

Liquid restaking gets its name from its ability to provide stakers with liquid assets. Instead of having all your assets locked away behind EigenLayer's smart contracts, you receive liquid restaking tokens that can still be traded. This liquid restaking ensures that you can still use your staked tokens if you need them. 

EigenLayer's liquid restaking service is fairly straightforward. Users connect their wallets, get their account approved and then choose the token they wish to stake. Stakers can delegate their tokens to specific liquid staking providers if they prefer to support a specific project within the EigenLayer ecosystem.

EigenDA

EigenDA is a data availability store built on EigenLayer. It uses rollups and bridges to create a scalable method of storing data. Any project, no matter the size, can use the EigenDA data availability layers to bundle its data into compact, easily storable segments called “blobs.” EigenDA operators use the EigenLayer staking system to store blobs and handle storage requests. Users can then submit data to the data availability layers, store it there for as long as necessary and request the data whenever they need to use it.

EIGEN Airdrop

In May 2024, EigenLayer announced its long-anticipated airdrop. EIGEN is a utility token that will be used to pay fees, handle transactions and manage staking. Users who wish to claim EIGEN will need to earn points by using the EigenLayer ecosystem for things like staking or development. They can then exchange these points for a set amount of EIGEN. All EIGEN will be non-transferable until an undisclosed time in the fall of 2024.

EigenLayer Road Map

Last year, EigenLayer began finalizing its plans for its mainnet. After successfully running a testnet, EigenLayer is now focusing on opening its full network to the general public. The team is in the process of conducting a gradual rollout that releases node operator sign-ups, user staking and actively validated service (AVS) launches on a progressive schedule.

In the latter half of 2024, EigenLayer will move to launching its economics system, which will create different payments for different features, thus ensuring the EigenLayer system collects enough funds to keep the ecosystem running. Once the entire system is self-sufficient, EigenLayer will then focus on ecosystem development and encourage more users to try out the mainnet and staking system.

EIGEN Tokenomics

The EIGEN utility token is an essential part of managing the EigenLayer network. It’s a multi-use token that people can use to pay for security features, collect staking rewards and more. There will be a total supply of 1.6 billion EIGEN tokens, locked during the first year and then gradually released over the following two years at a monthly rate of 4%. 

Tokens will be distributed as follows:

• Investors: 29.5%

• Early contributors: 25.5%

• Stakedrops: 15%

• Community initiatives: 15%

• Ecosystem development: 15%

Where to Buy EIGEN

Though EIGEN tokens aren't for sale yet, Bybit Pre-Market Trading allows you to start investing in this exciting token already. To get started, you’ll first need to create a Bybit account, then fund it with cryptocurrency and navigate to the Bybit Pre-Market Trading page and select the EIGEN tab. 

Is EIGEN a Good Investment?

EIGEN’s debut has been one of the most hotly anticipated token launches in the Ethereum community. There’s been enormous demand for liquid restaking providers, and EigenLayer's open-market system and additional rewards greatly appeal to crypto enthusiasts. EigenLayer’s Restaking Collective also has many highly reputable crypto experts on its team, and has managed to attract millions of dollars worth of funding. Overall, EIGEN is certainly likely to have a higher price than that of the average crypto startup. 

However, keep in mind that it's impossible to predict how well a crypto will perform based on its project history and technological features. Any new crypto token will feature inherent volatility, and unexpected issues (such as bad news or a poorly managed airdrop) can cause prices to drop suddenly. If you want to invest in EIGEN, make sure to use risk mitigation strategies, do your research and exercise caution before you purchase Eigen or any other crypto coin.

Closing Thoughts

Thanks to EigenLayer's smart contracts, the restaking process has become much easier for members of the Ethereum ecosystem. Being able to get a liquid restaking token in exchange for staked ETH improves users' capital efficiency. At the same time, EigenLayer's liquid restaking protocols also enhance security and make it easier for new developers to secure their personal networks. Ultimately, all of these valuable services make the EigenLayer token an exciting crypto to watch.

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