Blockchains are a revolutionary piece of technology because they eliminate the requirement for trust between institutions and people. We now trust a decentralised collection of nodes for our everyday interactions rather than any human, but creating such a network is frequently the most difficult aspect. Decentralised trust was introduced by Satoshi's Bitcoin whitepaper in 2009 where it enabled us to put our faith in a decentralised computer network rather than a bank. Although it is an application-specific chain, it can only be used for P2P Bitcoin transactions.
So, to build a new decentralised application developers had to create an entirely new decentralised network of computers. This issue was identified by the developers of Ethereum, who built an Ethereum Virtual Machine (EVM) Execution Layer on top of a trust module. On the application layer, this encouraged creativity.
Developers can now make use of Ethereum's base trust layer and build innovative decentralised apps upon it, all without having to bootstrap a new network.
Ethereum's trust module is comprised by the following three components:
Figure 1 - Ethereum’s Trust Flow.
Bitcoin’s security and trust layer comes through Proof of Work (PoW) mining, where anyone using the network can trust the information and state contained on the Bitcoin blockchain because they can trust that someone did the necessary computation. For Ethereum, this security and trust layer is done through Proof of Stake (PoS), where any user and application on top of the network can trust every transaction because of the security incentives that come with PoS consensus, such as slashing.
By having both middleware and alternative Layer-1s run on different trust networks, the potential innovation slows down since the capital and labor to required to create this brand new layer of trust and security increases exponentially. In addition, these protocols must accrue large amounts of value in order to have sufficient security and trust, especially for a Proof of Stake network whose security is directly tied to the value of the token. Finally, there is little incentive alignment between different networks, which paves the way for negative value extraction.
Figure 2 - Current Ethereum middleware diagram.
As it currently stands, Ethereum only provides trust around block production, but there are lots of other applications that need trust. Any other trust we must supply directly through middleware. Middleware is any software that provides a service, information or method of communication between chains. Middleware exists between chains and therefore must secure its own trust.
Middlewares like DACs, Celestia, Chainlink, Bridges, etc, need to develop their own trust networks which translates into needing billions in fresh capital and thousands of nodes to function securely. If they fail to do so, they portrait themselves as weak links because their networks are much weaker than Ethereum's. Users now have to trust them to use different Dapps, for example:
This is where EigenLayer comes in!
Through the provision of a service that allows users who have locked their ETH in staking to "restake" their ETH in a different smart contract, EigenLayer seeks to address the problems associated with fragmented trust networks. In essence, this entails using the same staked capital to earn more rewards with mitigated risk. Then, any new applications or middleware developed using EigenLayer are secured using this restaked capital. Stakeholders will have the option to pick the projects they wish to restate and offer security to, allowing them to assume the level of risk they are comfortable with while giving the projects an incentive to pay restakers for their protection.
Protocols can permissionlessly deploy on top of EigenLayer and try to incentivize these validators to opt into securing their own solution (in addition to Ethereum) using their same stake. Validators opt into whichever EigenLayer applications they choose (it’s not all-or-none). They can be slashed for acting against this application’s rules.