Why has “re-pledge” taken over social media?

24-02-29 18:10
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Original Title: "Why has 'Re-Pledging' Taken Over Social Media?"
Original Source: ZAN Team


The Restaking protocol proposed by EigenLayer has recently gained increasing attention. It provides new solutions to many problems and is an important narrative in the field of liquidity staking derivatives. This article briefly discusses "Restaking", as well as some related underlying implementations and security risks.


Pledge and Liquidity Pledge


Ethereum's Staking refers to users locking their ETH in the Ethereum network to support the network's operation and security. In Ethereum 2.0, this staking mechanism is part of the Proof of Stake (PoS) consensus algorithm, which replaces the previous Proof of Work (PoW) mechanism. By staking ETH, users become validators and participate in the creation and confirmation of blocks. As a reward, they can receive staking rewards.


Ethereum Staking and Validator Trends


This native staking method has many issues, such as requiring a significant amount of funds (32 ETH or its multiples), needing to provide hardware as a validation node and ensuring its availability, and locking the staked ETH, which is inflexible.


As a result, Liquid Staking Derivatives (LSD) have emerged in the encryption industry to solve the liquidity problem in traditional staking. It allows users to obtain liquidity tokens (such as Lido's stETH or Rocket Pool's rETH) representing their staked shares while staking tokens. These liquidity tokens can be traded, borrowed, or used for other financial activities on other platforms, allowing users to participate in staking rewards while maintaining flexibility of funds.


Liquidity collateral tokens are generally issued by the project party and maintain a fixed exchange ratio with the original collateral assets. For example, the exchange ratio between stETH issued by Lido and ETH is 1:1.


Popular liquidity collateral projects


Is liquidity the only issue with collateral?


Obviously not, currently more and more middleware, DA, cross-chain bridge, and oracle projects are adopting the node+staking method of operation. Their approach is constantly decentralizing consensus, attracting users to leave the larger consensus circle and enter their smaller circles through airdrops and higher staking rewards.


Additionally, for most initial projects, creating a PoS consensus network is difficult. Convincing users to give up other profits and liquidity and participate is not easy.


EigenLayer solves the problem


(Note: This content contains HTML tags and English characters, which should not be translated and should be returned as is.)

再质押不是指收益滚存,这是完全不同的两件事情。

"再质押" does not refer to "rolling over" the earnings. These are two completely different things.


In the Ethereum consensus protocol, the core of constraining validation nodes is its slashing mechanism, while the core of the re-staking protocol proposed by EigenLayer is to extend the forfeiture logic in some way, allowing many Actively Validated Services (AVS) to also write logic to punish malicious players, constrain behavior, and achieve consensus.


EigenLayer is an innovative protocol on Ethereum that introduces the Restaking mechanism, allowing for the reuse of Ethereum and Liquid Staking Tokens (LST) in the consensus layer. As of February 2024, the locked value on the EigenLayer protocol has reached $4.5 billion, with LST accounting for around 40%. Additionally, well-known investment firm a16z has just announced a $100 million investment, and its ecosystem projects Renzo and Puffer have received investments from Binance, OKX, and others. These developments signify significant progress in improving Ethereum's anchoring infrastructure and enhancing the security of the crypto economy.


Lock-up price exceeds 4.5 billion US dollars


EigenLayer's core function is to diversify the security of Ethereum. In the example below (taken from the whitepaper), three AVSs were able to obtain greater consensus security through the re-staking protocol, without weakening the ETH Layer1.


EigenLayer makes consensus more centralized


EigenLayer consists of three core components, each corresponding to one of the three types of users in the staking protocol:


· TokenManager: Handles the staking and withdrawal of stakers.

· DelegationManager: Register operators and track/manage their shares.

· SlasherManager: Manages the confiscation logic and provides punishment capability interfaces for AVS developers.


EigenLayer Architecture Diagram


From the picture, you can clearly see the collaborative relationship between each role:


1. Pledgers pledge their LST through TokenManager to earn additional income, and they also trust the corresponding operator (this is no different from pledging in Lido or Binance, where the operator's operation is based on trust).


2. The operator obtains LST assets after registering through DelegationManager, and provides node services to project parties that require AVS services, extracting profits from the node rewards and fees provided by the project parties.


3. AVS developers implement some general or special Slashers to run on nodes, which are provided to project parties (AVS demanders) for use. These project parties (such as cross-chain bridges, DAs, or oracles) purchase these services through EigenLayer and directly obtain consensus security.


Each role can gain profits in the EigenLayer protocol, resulting in a "triple win, zero loss" situation overall.


How to implement re-collateralization































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