What is EigenLayer (EIGEN)?

With the development of Ethereum, the layers built on this network are becoming increasingly sophisticated. One of these layers, EigenLayer, is a major technical innovation. It also offers a brand new paradigm in blockchain security and capital efficiency. This protocol, which emerged in 2021, makes it possible to provide security to multiple protocols simultaneously by re-opening the security of ETHs currently staked on Ethereum (i.e. through “restaking”). In this way, the security architecture of not only Ethereum but also the entire Web3 world becomes more flexible and efficient. So, what exactly is EigenLayer, how does it work and why is it talked about so much? Let's take a look at the details of this innovative protocol together.

Definition and Origin of EigenLayer

To answer the question of what is EigenLayer, EigenLayer is an innovative modular security and re-staking (restaking) protocol built on the Ethereum blockchain. The basic working principle of this protocol is built on the ability to transfer the security value of ETH currently staked to various protocols. So, what is restaking? The simplest definition of this is: The ability to use ETH already staked on the Ethereum network to provide security for other protocols without giving up staking rewards. This approach has the potential to significantly increase capital efficiency in the crypto ecosystem by providing security for multiple protocols with the same amount of capital. EigenLayer was started to be developed by Sreeram Kannan in 2021. In the traditional Ethereum staking model, staked ETH was used only to secure the Ethereum network. However, EigenLayer, which emerged with Kannan's visionary approach, redefined this model. Because it made it possible for the same staked ETH to provide security for multiple protocols. The main purpose of the protocol is to flexibly transfer Ethereum's strong security infrastructure to other protocols, thus creating a more robust security structure for the entire blockchain ecosystem.

When we examine the question of how Eigenlayer works in detail, we can see that the protocol has a very innovative mechanism from a technical perspective. The system enables users to copy the security value they obtain from the ETH staking process and use this value to provide security to other protocols. In this way, the security value of the staked ETH increases exponentially and can be distributed to different protocols. Designed as a modular security layer, this structure makes the security model in the Ethereum ecosystem more flexible, efficient and scalable. Users continue to receive both basic staking rewards from Ethereum and have the opportunity to earn additional income through EigenLayer via the ETH they stake.

EigenLayer's History: Important Milestones

When we examine the development process of EigenLayer, we can see that the project has been shaped by several important milestones. In 2021, the protocol was launched with the action of Sreeram Kannan. When Kannan, a relatively unknown name and a computer engineering professor at the University of Washington, came up with the concept of Ethereum restaking, the idea was met with great interest in the crypto community. The concept announcement and subsequent technical papers marked the beginning of a new era in the Ethereum ecosystem. During this period, the challenges in the field of web3 protocol security and the search for solutions to capital efficiency issues formed the basis of the EigenLayer project. By 2023, the EigenLayer project began to transition from theoretical to practical applications. The launch of the alpha version and the launch of testnet applications were critical to solidifying the technical infrastructure of the project. During this period, EigenLayer staking mechanisms began to be tested and the basic functions of the protocol were clarified. The data obtained during the testing process and user feedback provided valuable information for further development and optimization of the protocol. The EigenLayer ecosystem began to grow organically during this period, and the potential use cases of the protocol expanded.

The year 2024 was a breakthrough year for EigenLayer. With the mainnet activations, the long-awaited EIGEN token announcement and the airdrop process, the project became fully operational. The question of what EIGEN token is has become one of the most curious topics of the crypto community during this period. The EIGEN token was introduced as an important element that is at the center of the protocol's governance and incentive mechanisms, allowing users to have a say in the development process of the protocol. The Eigenlayer airdrop process was carried out as a reward for the early supporters of the protocol and those who contributed to the testing phase, and this process further increased the community's interest in the project.

EIGEN token types and uses

During this development process, the EigenLayer ecosystem also expanded rapidly. Modules with different functions such as oracles, data access layers, bridges and various defi infrastructure projects began to integrate into the EigenLayer protocol. Each new module expanded the areas of use of EigenLayer and increased the value of the protocol. By adopting the modular security approach offered by EigenLayer, projects operating in the DeFi space in particular have found the opportunity to work more securely and efficiently. This has strengthened the protocol’s position within the ecosystem and paved the way for more projects to choose EigenLayer.

Why Is EigenLayer Valuable?

What does Eigenlayer do and why does it have such a valuable position in the crypto ecosystem? To understand the answer to this question, it is necessary to examine the unique advantages offered by the protocol in detail.

Increases capital efficiency

First of all, EigenLayer significantly increases capital efficiency. In traditional blockchain systems, an asset is used to secure only one protocol. However, thanks to EigenLayer's innovative retaking mechanism, staked ETH can provide security to multiple protocols. This offers greater return potential with the same amount of capital. For example, with the ETH you stake on the Ethereum network, you can continue to receive basic staking rewards from Ethereum while also earning additional income by providing security to various protocols via EigenLayer.

Modular infrastructure and security layer

Secondly, EigenLayer enables the creation of modular infrastructure protocols that share security. Designed as a modular security layer, EigenLayer enables new projects to benefit from Ethereum's strong security infrastructure without having to create their own security mechanisms from scratch. This is a huge advantage, especially for early-stage projects, as designing and implementing security systems can be both costly and time-consuming. With EigenLayer, projects can bypass these processes, directly leverage Ethereum’s security power, and focus their resources on innovation and improving the user experience.

A groundbreaking new system for generating income in the ETH ecosystem

A third important value point is that EigenLayer offers a new way to generate passive income within the ETH ecosystem. The Eigenlayer staking mechanism allows users to create multiple income streams from the ETH they stake. This presents an attractive opportunity, especially for long-term ETH investors, as they have the chance to generate additional income from the ETH they already hold and stake. Passive income strategies are important in balancing the volatility of the crypto market and creating regular income streams. EigenLayer adds a new dimension to these strategies, offering investors greater financial freedom and flexibility.

Governance with EIGEN

Fourth, governance, incentives, and network contributions are balanced with the Eigen governance system and the EIGEN token. EIGEN token holders have the right to have a say in the development process of the protocol, vote on important decisions, and shape the future of the protocol. This democratic governance model ensures the community-driven development of the protocol and increases users' commitment to the protocol. In addition, token holders are motivated to contribute to the growth and development of the protocol by offering various incentives and rewards.

Solution to scalability

Another point that provides the value of EigenLayer is its potential to provide an indirect solution to the scalability problem, which is one of the most important challenges facing blockchain technologies. The modular security approach allows different scalability solutions to be implemented more efficiently and securely. This contributes to the Ethereum ecosystem as a whole becoming faster, more efficient, and more scalable.

EigenLayer ecosystem and use cases

Finally, to understand the value of EigenLayer, it is useful to take a detailed look at its ecosystem. EigenLayer's modular security approach allows various blockchain projects and applications to become more secure, efficient, and scalable. We should examine the various components of the EigenLayer ecosystem and the potential use cases of the protocol in detail.

First, DeFi infrastructure projects can benefit significantly from the modular security structure offered by EigenLayer. DeFi protocols generally carry high risks in terms of security, and many protocols have suffered major losses due to security vulnerabilities in the past. EigenLayer allows these protocols to use Ethereum's strong security infrastructure, making them more resilient to potential attacks. This creates a more secure environment for DeFi users, while allowing protocols to focus their resources on providing innovative financial products and services instead of developing security systems. This security step of EigenLayer is known as "Actively Verified Services (AVS)".

Another area of ​​use for AVS, and therefore EigenLayer, is bridge protocols. Bridges that allow asset transfers between different blockchains are often the target of hacking attacks. EigenLayer provides an additional layer of security to these bridges, allowing cross-chain transactions to be performed more securely. This increases interoperability between blockchains, helping users manage their assets in different blockchain ecosystems more securely.

Another area of ​​use is oracle services. Oracles are critical components that transfer data outside the blockchain onto the blockchain and are vital for many DeFi applications. However, oracles also carry various security risks and can be vulnerable to manipulation. EigenLayer provides an additional layer of security to oracle services, reducing these risks and providing more reliable data flow. This is especially important for critical data providers such as price feed oracles.

The last area of ​​use that stands out is data access layers. Fast and secure access to blockchain data is of great importance to developers and applications. EigenLayer provides additional security for data access layers, enabling faster and more reliable data access. This is a significant advantage, especially for applications working with large data sets.

Who is the Founder of EigenLayer?

The answer to the question of who is the founder of Eigenlayer is Sreeram Kannan. So, who is Sreeram Kannan? Kannan is a name that has moved from academia to entrepreneurship. He grew up in Chennai, India, then moved to the US and received his master's and doctorate in mathematics and engineering. He previously worked in artificial intelligence and biology fields such as DNA modeling. However, he changed his direction when artificial intelligence disrupted his field of expertise. He became interested in crypto with the rise of Bitcoin in 2017. Inspired by Yuval Noah Harari's book Sapiens, he thought that humanity's greatest power was "coordination". According to him, blockchain had the potential to provide this coordination securely in the digital world.

The turning point in his career was the idea of ​​“restaking”, or reusing staked Ethereum assets to provide security on other networks. This idea gave birth to EigenLayer, which shares Ethereum’s security and allows it to be transferred to new projects.

EigenLayer quickly received over $100 million in investment and collected millions of dollars in deposits before it was officially launched. This interest was largely due to the “points system”. Because users participated early, hoping to receive an EIGEN token airdrop in the future. However, the announcement of the EIGEN token did not meet expectations. Tokens came locked, some countries were excluded, features were released slowly, and allegations of internal conflicts of interest were added to all this.

Despite all the criticism, Kannan’s academic prestige and vision of restaking turned him into an influential figure in the industry. He became one of the important names that revived the DeFi movement on Ethereum even in a bear market. However, one of Kannan’s biggest challenges was balancing his academic approach with community expectations. Unlike the homogeneous team structure in academic projects, EigenLayer realized that it needed a more diverse team of skills: communicators, community managers, product developers. Over time, Kannan began to be perceived not only as a “startup founder” but also as an “industry leader.”

In addition to Kannan’s approach and strong academic background, the EigenLayer project also received support from leading investors in the crypto world. Institutional investors such as LayerZero, Coinbase Ventures, and a16z (Andreessen Horowitz) are providing financial support to the project.

In addition to these core use cases, the EigenLayer ecosystem is constantly expanding and adding new modules. These modules are designed for different needs and use cases, expanding the scope of the protocol.

Frequently Asked Questions (FAQ)

For those who want to learn more about EigenLayer, we have compiled some frequently asked questions. Below, you can find short and clear answers to many basic topics, from the concept of restaking to the role of the EIGEN token:

• What is EigenLayer and how does it work?: EigenLayer is a modular restaking protocol built on the Ethereum network. Its main purpose is to make the security of ETH staked on Ethereum accessible not only for Ethereum but also for other protocols. In doing so, users can "restake" the ETH they stake a second time, contributing to security in other systems and earning extra rewards in return. Thus, network security is spread over a wider area, while capital efficiency is also significantly increased. Thanks to this system, projects that have to create new security pools from scratch can directly benefit from Ethereum's high level of security.
• What is Restaking and why is it important?: Restaking is the ability to use ETH already staked on the Ethereum network to provide security to other protocols. This method increases efficiency in terms of both security and return; because users can earn extra rewards, while protocols benefit from Ethereum's strong security infrastructure.
• What does the EIGEN token do?: EIGEN is the native token of the EigenLayer ecosystem and is designed to be used in the governance of the protocol. Users can participate in governance processes with EIGEN, vote on protocol parameters, and are expected to gain additional functionality in the future. However, as of the launch date, the EIGEN token is not yet fully functional.
• What projects does EigenLayer support?: EigenLayer provides infrastructure support for many projects, from DeFi protocols to oracle services, from data availability layers to rollup solutions. For example, sub-protocols such as EigenDA (data availability module) and other Layer-2 solutions can use re-staking security via EigenLayer.
• How can someone who stakes ETH benefit from this system?: A user who has already staked on Ethereum can stake their ETH to EigenLayer and earn additional rewards. This can be done directly through an EigenLayer node, or through liquid staking providers such as Lido or Rocket Pool. Thus, in addition to the staking income they receive from Ethereum, users can also benefit from the incentives offered by the protocols that are retaken. In short, users earn income from multiple systems with the same ETH in their hands, while also spreading security in a decentralized manner.

Continue to follow our JR Kripto Guide series for more about EigenLayer, which redefines the security of the Ethereum ecosystem.