Can the EigenLayer of the "secondary pledge" narrative shine in 2023?

Leo

23-01-05 11:12

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Original article author: pwIpor intern, encryption researcher

Leo, BlockBeats

When talking about the big crypto event in 2023, most crypto users will probably first think of the upcoming Ethereum Shanghai upgrade in March. One of the things that has attracted more attention is that the Shanghai upgrade may lead to the growth of ethereum collateral. Despite the bear market, Ethereum collateral is still in its early stages and can still grow in the long term. Take advantage of the coming pledge boom and you could have a big piece of the pie. There are many Ethereum pledge protocols on the market, such as Lido, Rocket Pool, Frax Finance, etc., which occupy a large part of the Ethereum pledge market share. However, in terms of innovation, the introduction of "secondary pledge" narrative.EigenLayer Potentially promising, encryption researcher pwIpor intern wrote an article about EigenLayer, which BlockBeats compiled below:

Currently, a lot of people are focusing on the "liquidity pledge" narrative, perhaps it is time to introduce the concept of "secondary pledge", why it is a financial primitive to improve the security of the cyber economy.

Like EigenLayer Such a protocol has the potential to leverage ETH's secondary pledge at the consensus layer, which involves aggregating and extending the verification use cases of pledged ETH between applications built on Ethereum to increase its economic security.

Since the early days of BTC, many complex trade-offs have been made to make the network resistant to resource-intensive attacks. This is not something that can be done overnight. It requires a sustained effort to maintain and extend its crypto economic guarantees, and this is where "secondary pledge" can come in. Unlike decentralized security designs that support cross-application ecosystems (which reduce the cost of attacking networks), secondary pledge is designed to provide an additional incentive to protect the blockchain.

This is achieved through a series of smart contracts that will take advantage of the use cases of secondary pledge ETH, and EigenLayer allows users to force validation of other applications using their locked tokens by using an opt-in mechanism that persists at the consensus layer.

The middle layer between the consensus and enforcement environment is the key to creating additional cutting conditions and facilitating extended security of the underlying chain.

Going back to the BTC example, it was conceptualized as a specific application chain for peer-to-peer payments, so any additional Dapp built on top of the network would require its own network of trust, which hindered its innovation and growth.

EVM's modular design addresses many shortcomings and allows developers to build innovative applications, rather than focusing on building cyclic trust networks over and over again, applications on Ethereum can take advantage of the underlying security.

But what about specific applications that can't be deployed to the Ethereum clearing layer? This means that such applications require their own AVS (active validation systems), such as critical infrastructure such as prophet networks and cross-chain Bridges. As you can see, EVMs also face obstacles in supporting applications that do not take advantage of the overall security of the underlying network, resulting in an ecosystem where economic security is distributed throughout the base layer chain.

Each new AVS pushes the financial guarantee to their own separate system, rather than into Ethereum's base layer. Since each verified system is responsible for its own security, it is much cheaper to attack individual protocols than Ethereum itself, which is bad for Ethereum as a clearing layer. A successful attack on the middle tier can break any protocols it supports, leaving the security of the base tier useless.

To address these issues, secondary pledge leverages the concepts of merge security and free market governance, which can then be locked into pledge ETH to provide additional verification services for other protocols.

When the user selects EigenLayer, it means that they agree to new reward incentives and cut conditions imposed on top of the consensus layer.

The concept of free market governance works by creating a competitive market determined by supply and demand forces, as validators have the ability to determine their own risk preferences and return parameters before providing services to a given agreement.

So it can be argued that EigenLayer's secondary pledge system accelerates innovation while increasing the profitability of pledge.

This is essential to eliminate market inefficiencies, as the new protocol can be purchased on the EigenLayer open market to gain security, rather than being bootled and maintained in-house. Not only that, secondary pledging reduces the marginal cost of capital for the verifier's services because the pledger can secondary pledge their initial capital over many different protocols outside the Ethereum chain and earn additional revenue in the process.

So what are the risks? There are two main issues to be aware of:

- The verifier can collude to attack a set of intermediate-tier services;

- Protocols that use EigenLayer for validation may introduce pruning conditions, resulting in unexpected pruning to other nodes.

For the industry, if successful, secondary pledge could create a more effective economic security system while promoting innovation; It is also an additional value-adding opportunity for users, which, when combined with liquid pledged derivatives, can significantly improve the capital efficiency of the network.

However, this is not without risk, and the passive reward for extending security comes at the cost of exposure to protocol-imposed reduction conditions, which may lead to cuts at the consensus level.