Ethereum

<h2 id="header-0"><strong>The Secret Sauce of EigenLayer’s Funding Success</strong></h2><ol><li><strong>Blockchain Capital</strong></li></ol><p>One enormous problem in the crypto world has been the cost and challenge of securing a reliable set of validators to stake a new token and secure the protocol. And this goes for any Layer-1s, oracles, bridges, data storage protocols, and other verticals. But now, we have discovered a solution of re-staking with no other than EigenLayer. Re-staking involves reusing the existing ETH that already secures the Ethereum network to protect new cryptoeconomic networks. This significantly reduces the capital required to attract and maintain high-quality validators.</p><p>Historically, innovations that lower the cost of capital have been the talk of the town and have facilitated new ventures and enterprises, such as the stock market, limited liability laws, and crowdfunding. Comparing the past and present, EigenLayer is expected to create a wave of innovation, making it easier for founders to launch new cryptoeconomic networks.</p><ol><li><strong>Bixin Ventures</strong></li></ol><p>“EigenLayer is set to unlock a new innovation paradigm on both the application and middleware layer, while allowing base layer Ethereum to maintain its credible neutrality,” shares Bixin Ventures. EigenLayer’s solutions were realistic, economical and efficient enough to raise confidence amongst the investment team:</p><ul><li>Restaking: expands the slashing mechanism of Ethereum’s trust layer. It aligns the economic incentives and behaviors of the application layer and Ethereum validators.</li><li>Free-market governance: Whilst validators are free to decide whether to provide their services to an application depending on the preferred risk-benefit ratio, applications can “purchase trust at market-oriented prices, leveraging the diverse resources among validators to achieve a better balance between protocol security and performance.”</li><li>Innovating the application layer: “Applications deployed outside of Ethereum are able to utilize the modular trust layer to easily pool trust, greatly reducing the capital cost of security and increasing capital efficiency.” This allows applications to focus on protocol innovation and user experience rather than starting from scratch.</li><li>Innovating the protocol layer: “By introducing a slashing mechanism at the smart contract level, EigenLayer has the ability to implement rules for participating nodes without having to alter the existing consensus mechanism.” This allows use cases like achieving single-slot finality or managing MEV by enabling partial-block MEV-Boost.</li><li>Economic security improvement: EigenLayer provides the opportunity for additional revenue for validators, resulting in higher capital inflows, which, in turn, enhances the security of the trust layer.</li><li>Staker decentralization: applications are expected to demand participating nodes to be part of a decentralized quorum, which would further the decentralization of Ethereum’s trust layer.</li></ul><p><img src="https://gaia.hiro.so/hub/1DeR7NULC7MtxA8as66ebWdfmp44vxnYgA/photos/Lz4CVl4e4970qnW6lJo8A/VmxZM0jmBYpjnNS11gsSV-How%20EigenLayer%20works_The%20VC%20Whisperer.png" /></p><h3 id="image-eigenlayer-restaking-protocol-mechanisms-source-a-href-https-docs-eigenlayer-xyz-overview-readme-rel-noopener-noreferrer-nofollow-eigenlayer-a">Image: EigenLayer restaking protocol mechanisms. Source: <a href="https://docs.eigenlayer.xyz/overview/readme" rel="noopener noreferrer nofollow">EigenLayer</a>.</h3><ol><li><strong>WAGMI Ventures</strong></li></ol><p>“EigenLayer is the first market for decentralized trust,” writes WAGMI Ventures. The VC invited Sreeram Kannan to their podcast to discuss why EigenLayer is special. The founder’s technical background and deep understanding of computational economics, blockchain, consensus protocols and scaling brought confidence for execution success. Sreeram believes: “The future of crypto is to be the coordination super highway.”</p><p>With Eigen meaning “your own” in German, the founder built EigenLayer to create a mechanism to allow anyone to build blockchains on top of the Ethereum network. The protocol envisions more flexible and programmable Ethereum as the underlying trust layer. Its ability to accommodate multiple services is the attractive feature that caught the eyes of investors:</p><ul><li>Data availability: rollup computation built by EigenLayer</li><li>Decentralized sequencing services (e.g., Espresso)</li><li>Cross-chain bridging and messaging products for rollups</li><li>Oracle mechanisms</li><li>Proof-of-Decentralization</li><li>Proof-of-Location</li><li>Watch towers for rollups</li><li>Hack prevention protocols</li><li>Middleware</li><li>Off-chain ZKP verification protocols</li></ul><ol><li><strong>Viktor Bunin (Angel Investor)</strong></li></ol><p>“Sreeram and team are tackling an incredibly difficult problem, but one that has the potential for an enormous amount of impact,” shares Viktor. “There’s tens of billions of dollars of staked ETH. In the future, there will be trillions. Making this capital useful will be a journey that can place crypto as an industry on a better path.”</p><p>By calling himself the “EigenBull”, the angel investor has a serious track record with work token models like EigenLayer: Threshold Network, Pocket Network, and Audius, to name a few. And there is a reason why he is bullish on the simplicity of the protocol potential:</p><ul><li>Its continuance and success solely depend on whether its services have a product-market fit (PMF). Due to its modularity and extensibility, once the restaking component is battle-tested, the team and community can take multiple shots at PMF.</li><li>A sustainable fee market is an inevitable step forward. If the protocol ever launches a token, the fees generated from services must far outweigh any token incentives.</li><li>The cryptoeconomic incentive model must work properly. Balancing the scope and appropriate reward/punishment ratio will prove difficult.</li></ul><ol><li><strong>Binance Labs</strong></li></ol><p>Binance Labs was enticed by the protocol’s reach and smart decision-making aligned with market conditions and the protocol’s growth. For instance, expanding its liquid restaking cap to 100K ETH was a strategic move to sustain controlled growth, which resulted in TVL rising more than 200% in just a few hours. EigenLayer also released a series of NFTs called EigenWorlds. And although the NFT utility was not disclosed, this new feature sparked much interest and speculation in the ecosystem, with the protocol gaining significant momentum. Lastly, serious and far-going partnerships have shown commitment and knowledge of the space. Partnering with Stader and featuring its Liquid Restaked Tokens (&#34;LRTs&#34;) added yet another use case layer for staking through EigenLayer. With a developmental roadmap like this, venture capital firms tend to feel comfortable about long-term sustainability and profit-making.</p><h2 id="header-1"><strong>Key Takeaways for Fundraising Protocols and Aspiring Entrepreneurs</strong></h2><ol><li>Solving key ecosystem issues and challenges, such as decentralization, high costs, efficiency, developer-friendliness, etc, will promote the protocol in funding, user base, partnerships and collaborative aspects.</li><li>Everyone wants to save money. You have a serious chance of coming on top if you cut the costs of services and features widely used within the crypto ecosystem.</li><li>The easier the integration process, the better.</li><li>A knowledgeable founding team, especially with a technical background in similar verticals, goes a long way to convince the investors of your upside and long-term commitment.</li><li>Hard work does not finish with releasing the mainnet. Smart decision-making in all protocol-related niches post-launch may have even more weight in fulfilling the vision and attracting the right attention.</li></ol><h2 id="header-2"><strong>EigenLayer: Anything Else You Need to Know?</strong></h2><p><img src="https://academy-public.coinmarketcap.com/optimized-uploads/7d9c420099f04ae7b6a427b94b30c4dc.png" /></p><h3 id="image-early-projects-building-on-eigenlayer-aug-2023-data-source-a-href-https-twitter-com-eigenlayer-status-1696274774253846804-photo-1-rel-noopener-noreferrer-nofollow-eigenlayer-a">Image: Early Projects Building on EigenLayer (Aug 2023 data). Source: <a href="https://twitter.com/eigenlayer/status/1696274774253846804/photo/1" rel="noopener noreferrer nofollow">EigenLayer</a>.</h3><p>Eigenlayer is a system of smart contracts on Ethereum that allows for flexible transfer of trust to other networks and rewards stakers for validating them. It has created a system of checks and balances to minimize but not eliminate risks associated with it. This ecosystem is especially favourable for three target audiences:</p><ol><li>Restakers can stake their ETH across multiple protocols simultaneously. It is available for natively staked ETH and liquid staked tokens, including<br />stETH (Lido)<br />rETH (Rocket Pool)<br />cbETH (Coinbase)<br />LsETH (Liquid Collective)</li><li>Operators can reduce their marginal costs and validate more networks by optimizing node usage and maximizing capital efficiency.</li><li>Developers receive access to the decentralized validator set, and Ethereum staked capital base. This trust network enables more use cases and mechanism designs, allowing developers to experiment and innovate.</li></ol><p>Eigenlayer has the potential to make some big waves in the crypto world, and its impact could be pretty significant. Let&#39;s break it down:</p><ul><li>When it comes to restaking, it is equivalent to stumbling upon a hidden treasure, similar to when people first discovered MEV. This could open up a whole new realm for developers, founders and researchers, and the outcomes could be unpredictable.</li><li>Ethereum&#39;s block space economy is a major player in the crypto scene. The majority of crypto solutions rely on decentralized trust.</li><li>Eigenlayer has the potential to significantly boost new consensus protocols and bring them into the Ethereum ecosystem. This might create faster finality times and a more interconnected crypto world.</li><li>Developers can forget building protocols from scratch and can now focus on building what they really want without reinventing the wheel every time.</li><li>Eigenlayer might be the solution to Ethereum&#39;s data availability problem, and it could supercharge its scaling capabilities. Eigen da (decentralized data availability service) currently runs at 10 megabytes per second, with the roadmap anticipating 10 gigabytes per second. That is some serious speed!</li></ul><h2 id="header-3"><strong>Challenges &amp; Limitations Ahead</strong></h2><ol><li>Collusion by operators is a relevant risk if the combined capital secured by multiple AVS (Anonymous Validator Sets) surpasses the capital dedicated to securing those AVS. To mitigate this risk, it is essential to regularly monitor the situation and introduce incentives to maintain the integrity and security of the network.</li><li>A risk of slashing honest nodes is present until the whole code of smart contracts is battle-tested and bullet-proof.</li><li>Vitalik Buterin has also raised concerns about EigenLayer potentially overloading Ethereum’s consensus. The Ethereum founder shares: “Dual-use of validator staked ETH, while it has some risks, is fundamentally fine, but attempting to &#34;recruit&#34; Ethereum social consensus for your application&#39;s own purposes is not.”</li></ol><h2 id="header-4"><strong>Conclusion</strong></h2><p>EigenLayer is a transformative force in crypto, redefining trust and security. It promises faster finality times and a more interconnected crypto ecosystem. Developers can focus on their projects without dealing with the technicalities of starting from scratch. However, challenges exist, such as the risk of operator collusion, the need for robust smart contract code, and potential overloads on Ethereum&#39;s consensus. EigenLayer&#39;s potential is immense, and the key takeaways from its journey underscore the importance of solving ecosystem challenges, cost savings, ease of integration, and the presence of a solid team. Overall, EigenLayer incorporates trust and innovation into tomorrow&#39;s decentralized world.</p><p>Curious to explore more research articles and crypto news? Visit <a href="https://www.thevcwhisperer.io/" rel="noopener noreferrer nofollow">The VC Whisperer</a> to ensure you receive relevant and insightful Venture Capital overviews like this!</p>

EigenLayer: A Crypto Game Changer?

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