Eigenlayer Q&A with Founder Sreeram Kannan

What are the biggest questions that people have about Eigenlayer? David sourced these questions from Crypto-Twitter, and will be asking Sreeram LIVE! ------ 🏹 USE PODCAST24 FOR 10% OFF https://bankless.cc/Citizen2024 ------ 🎧 Listen On Your Favorite Podcast Player: https://bankless.cc/Podcast ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2 ⁠ 🔗CELO | CEL2 COMING SOON https://bankless.cc/Celo https://bankless.com/Celo 🗣️TOKU | CRYPTO EMPLOYMENT SOLUTION https://bankless.cc/toku 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle 💸 CRYPTO TAX CALCULATOR | USE CODE BANK30 https://bankless.cc/CTC ------ TIMESTAMPS 00:00:00 Start 00:00:29 Intro 00:03:27 Sriram and Nima 00:04:41 Why Should We Care? 00:06:09 Unique Use Cases 00:14:25 AVS Rewards Payouts 00:19:07 AVS Incentives 00:24:32 AVS Awareness 00:29:24 Slashing a Delegated Validator 00:31:26 Calculating Risk 00:33:18 Ecosystem Take Rate 00:36:10 Unstaking 00:38:02 Solo Staking Premium 00:42:19 Addressing Risks 00:54:40 Healthy Slashing 01:03:36 Native Token 01:08:19 When Token? ------ RESOURCES Eigenlayer: https://www.eigenlayer.xyz/ Sreeram: https://twitter.com/sreeramkannan?lang=en Nima: https://twitter.com/nima_vaziri Risks: https://docs.eigenlayer.xyz/risk/risk-faq ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures⁠

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:18David Hoffman?

  Bankless Nation, we got a livestream for you here today. We're going to get some questions answered about, I think, something that people have the most questions about, which is restaking Eigenlayer, AVS networks, timelines, where's the yield coming from, what are we going to do? There's a lot of different questions I have, a lot of different questions that other people have had, and I have sourced questions for the past two weeks from people around the cryptosphere, around the Ethereum ecosystem, both on Twitter, in my DMs, on ForCaster as well. We are going to bang through all of these questions, one by one by one. I've got 23 questions total, some of them are redundant, so I'll ask them all at once. Some of them will be longer than others, some of them will be very short. We're going to get through all of them, we're going to get you guys some answers to the questions that you guys have about Eigenlayer.

• 1:02David Hoffman?

  So, I'm going to bring on two people out of the Eigenlayer ecosystem. One you might not be as familiar with, Nima Vaziri, who I actually met at ETH Denver 2019. He is joining the Eigenlayer ecosystem, the Eigen Labs team, and also Sriram Kannan, everyone knows Sriram. So, we're going to bring them on in just a second, but first, a moment to talk about some of these fantastic sponsors that make this show possible. Kraken knows crypto. Kraken's been in the crypto game for over a decade, and as one of the largest and most trusted exchanges in the industry, Kraken is on the journey with all of us to see what crypto can be. Human history is a story of progress. It's part of us, hardwired. We're designed to seek change everywhere, to improve, to strive, and if anything can be improved, why not finance?

• 1:46David Hoffman?

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• 2:30David Hoffman?

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• 3:14David Hoffman?

  I'm joined with Sriram Kannan, the founder of Modern Restaking. Sriram, welcome back to the show.

• 3:22Speaker 01

  Hey, hi David. Really excited to be here. Looking forward to do this together.

• 3:26David Hoffman?

  And also, next to him, we got Nima Vaziri, ecosystem research and development over at Eigenlayer. Nima, welcome to the show.

• 3:33Speaker 02

  Thanks so much for having me.

• 3:35David Hoffman?

  Nima, you're a new face for us. Maybe give us a little bit of your introduction, who you are, and what you do at Eigenlayer.

• 3:42Speaker 02

  Yeah, sure. So, I joined the Eigenlabs team a few months ago to lead the ecosystem development and AVS, you know, teams that have been interfacing with the protocol. Right before this, I was actually a research partner at PolyChain, which is how I got to know about the protocol in its early stages. And I just saw the ecosystem kind of flourishing. So, I was super excited to hit up Sriram and be like, "Hey, what do you need help with?" So, I jumped on board.

• 4:12David Hoffman?

  Beautiful. And I'm enjoying having you here, because I think I want a lot of questions answered about the AVS ecosystem specifically. So, I'll be directing some of those questions to you. Some of the higher-level, more general stuff, I'm going to throw to Sriram. And I think that's actually where we're going to start. This first question that I've got was actually, I think this is kind of a troll question, but I think it's a good place to start anyways. This is from PermaWeave. "Why should I care about it?" Sriram, why should we care about Eigenlayer?

• 4:37Speaker 01

  Different people care about Eigenlayer for different things. If you are a builder, you know, it opens up an opportunity for you to go build new things without having to secure a trust network on your own. You can build arbitrary new protocols on Eigenlayer. That's why you should care about it. If you're a staker, you're staking in Ethereum, you're already putting your ETH at risk in validating the Ethereum protocol, might as well contribute security to other protocols and earn some rewards because of that. If you're a node operator, you're already running services for Ethereum validation or some other chain validation. One of the big problems as an operator is every new chain that you validate, you have to sell to a new community of token holders.

• 5:20Speaker 01

  With Eigenlayer, what we are able to do is the same community, many, many operations. So that's the value proposition to the operators. If you are building a rollup in the Ethereum ecosystem, you may be bottlenecked by cost and bandwidth and the economics. And EigenDA, which is on Eigenlayer, is a solution that we're offering for you. That's the value proposition to the different sites.

• 5:45David Hoffman?

  Beautiful. A couple of these questions, or maybe some of them will actually be in the same spirit. And so I'll ask them both at once. And these next ones, Nima, are going to you. Yudi, Yudai Suzuki, reblock.eth, and also Niski. First question, what are some unique use cases using Eigenlayer? And then the second question, it's unclear how much need there will be for AVSs beyond the early handful of examples. Where will the demand come from? I think the spirit of this question is, what are the flavors of AVSs? What are the different types of services that can come from these things? How do we even know that there is a there there? Nima, maybe you can take this one.

• 6:21Speaker 02

  Yeah, sure. So, I mean, right off the bat, a few things that are uniquely enabled by the protocol, right? Let's just say bridging, right? The economic security that we're dealing with here can just enable much more secure protocols to enable cross-chain activities. The other thing that I'm personally really excited about is the idea of co-processors, right? Where you have some crypto-economic bond, but in terms of what the actual functionality of the co-processor ends up doing, whether it's generic or hyper-specialized, that suddenly gets enabled by any L2 or even on the L1 itself, right?

• 7:06Speaker 02

  Those are just a couple of ones. But in terms of another one that's like really interesting, I think, is what Witness Chain is doing, right, with the proof of location and the fraud proof network, right? You can have, you can tap into the power of the Ethereum network to effectively deploy a trust minimized fraud proof watcher as opposed to having each L2 itself claiming that they're providing fraud proofing service for you as well. So I think that's going to make the community of fraud proofing, any kind of optimistic system, very much more robust.

• 7:48Speaker 01

  So one thing I would add to that is, you know, a little bit of a high level response. You know, when people think of the modular paradigm, the modular paradigm is chains where integrated solutions for all the different things that need to be done on applications inside that chain. But the modular paradigm is, oh, maybe there are different modules, maybe there is a data availability module, maybe there's a consensus module and so on. And normally, when people think about the modular landscape, they think of maybe there are three modules, right? Maybe there is an ordering, maybe there is a consensus, maybe there is a settlement layer, data availability, some very few handful of modules. Our vision is a little bit different.

• 8:31Speaker 01

  You know, if you look at the cloud era, you see in on cloud, there are thousands of thriving software as a service solutions, which are basically like very hyper specialized focused services that if you're building a consumer application, for example, you know, and examples of these SaaS services include like, you know, I want to offer a database as a service. There are tens or even hundreds of databases as a service. The reason is there are different types of databases, different types of, you know, there's a SQL database, there's a NoSQL database, and all these different, some optimized for AI, some optimized for different purpose and so on. So. You have these hyper-specialized software as a service solutions.

• 9:14Speaker 01

  And what you do today when you're building an end user application is just concatenate a few of these software as a service solutions and then only build what components don't exist. That becomes a consumer application. That's our vision for what crypto applications look like. These applications consume a bunch of services that are built on Eigenlayer, say, and then tie all of them together and then offer it as a consumer application. So what might this be? And Nima gave like some of the categories we're seeing a lot of interest in traction. But the broader picture is you can think of, let's say, rollup services, right? So you know, you're a rollup, you know, Ethereum's very deeply into the rollup roadmap. What are the problems that rollups are facing?

• 9:57Speaker 01

  Can we kind of ways find ways to solve it? Can we find ways to do sequencing? Instead of having a single central sequencer, can we have decentralized sequencing? Allclear is doing its version of it. Espresso is doing a different version of it. You can have, you know, watchtowers, which is how do you know that the rollup's doing what it is saying it's doing? When you had a couple of big rollups, then of course you can just, you know, there's a lot of intrinsic incentives. Everybody's running Brock Explorers, watching the network, you know, optimism, Arbitrum. A few networks people can watch. But if there are thousands of these networks, who's going to be watching? You need actually dedicated resources to be watching and incentives to make sure that they're doing the job that they're supposed to be doing. So that's watching.

• 10:41Speaker 01

  Then you have bridging, like this fragmentation of liquidity across L2s. We, you know, you guys have discussed this a lot in the show. So how do we solve it? You know, can we have instantaneous bridging across these L2s? Can we have new kinds of finality services? I come to finality, usually the sequencer tells me like, hey, you know, it's final. Or like, hey, there is a, I promise you, but instead can you have economic finality? Can you have MEV protection solutions? Can you have an encrypted MEMP like what Chatteris building? These are all examples of the rollup adjacent services, like some services that I can just integrate in as a rollup and then I get better as a rollup. This is one category which, you know, meta category, I would say we're seeing a lot of traction.

• 11:26Speaker 01

  But there's lots of other like verticals or meta categories we're also seeing. Nima mentioned coprocessors. The idea of a coprocessor is you're sitting in Ethereum. I want to enhance the functionality beyond what like I can, functions I can call inside the EVM. Can I call an AI? And then I'm sit inside Ethereum L1, right? Call an AI and say, hey, you know, run like the previous. For example, I've run a DEX and I say that my price is now adjusted. How much price I take as on Uniswap is adjusted based on the competitive dynamic between how much sushi is charging, how much other DEXs are charging, and then I adjust my prices up and down. The intelligent DeFi, for example, can can happen if you have a processor like coprocessor like that.

• 12:11Speaker 01

  Maybe you want to run a command which is actually like, um, you know, something that normally run only on a Linux machine. So that that'd be a general purpose coprocessor. Maybe you want to run a command which is a SQL server, like I just call a thing and say that, hey, load this database, a query to the database and give me the response and I want that back on Ethereum. So these are the kinds of examples we're seeing inside coprocessors. But there are other categories like cryptography, like can I run more advanced cryptographic like solutions? Why do we need this? Because you know, blockchains are usually like transparent ledgers. They, that makes it very fiable, but you know, there's a trade off against privacy. So I want to have private but very fiable systems.

• 12:56Speaker 01

  Can I split the secret or information across the many nodes, right? So you need deep access into the distributed system, into the consensus to to change it. It would be secure multi-party systems, trusted execution environments, fully homomorphic encryption.

• 13:12Speaker 01

  These types of categories that we're seeing on on Ethereum layer. So these are some of the broad categories. The one thing which, you know, which is, we haven't seen built already, but we've seen proposals is how to modulate some commitments on Ethereum L1 itself. All these other things are outside of Ethereum L1. But I'm a block proposer on Ethereum L1. Can I promise that I can do a pre-confirmation for a transaction I include in an L2? I'm staked, so I I tell you as a kind of like a block proposer, who's going to propose the next block? I promise to you that, hey, when my slot comes, I am going to include your transaction. So the L2 can have an instant confirmation with economic security.

• 13:58Speaker 01

  So these are the kind of like range of things that we're seeing. It's, we did not invent all these categories. Most of these categories came DNO out of permissionless innovation. And that's what's really fascinating about this.

• 14:11David Hoffman?

  Yeah, one of the things that I think really gets people's imaginations going about Eigenlayer is there is pretty boundless, the design space is pretty boundless. But that also makes, that leads into my next question here from Ethan Lipman. If you have such a boundless design space, and I'm assuming that also goes into the fee structure that these AVS is charged, how will AVS rewards payouts work? If they can charge their fees in their own kind of network and their own token, and ultimately goes down to the ETH staker on the layer one, what's like the supply chain of value flows from fees charged on the AVS network while they're, while the application is being its business, going down to the ETH staker who has restaked their Ether?

• 14:55David Hoffman?

  Is that a Nima question or is that a Sriram question?

• 14:58Speaker 02

  I'll let Sriram take the first stab at this, but I'll chime in with anything he hasn't covered.

• 15:03David Hoffman?

  Cool.

• 15:04Speaker 01

  Yeah, so the the idea is that, you know, there is an AVS consumer. Like, imagine an AVS, like something concrete as an oracle, right? This is an oracle. So an AVS consumer is a DAP that is calling the oracle, right? So that's, that's where it is starting. But the DAP itself has a user, right? So I'm, I'm calling a swap, which, or a lending protocol, which needs to call an oracle. That oracle is now like triggering, you know, an Eigenlayer AVS oracle. And that, or, so there's a fee that is being paid to the oracle. So the oracle accumulates all these fees in a pot. The Oracle has a certain obligation to pay some fees to the Eigenlayer Stakers, which is specified by the AVS model.

• 15:50Speaker 01

  For example, it says that, hey, for this much amount of stake, I'm willing to pay this much amount of ETH or this much amount of my token emissions. And that is paid periodically to the stakers and operators. So essentially, it comes from either the user to the DAP, the DAP to the to the AVS, the AVS to the staker and/or operator. And it looks like it's a lot of layers and like some people complain that this could be a big problem for the this kind of a modular economy. But I think that's simply not true from our experience in the cloud. Like each consumer application in the cloud integrates 15 SaaS services in the backend.

• 16:32Speaker 01

  These are all abstracted out that, you know, as an end user of a particular application, you wouldn't even know that they're using all these things in the backend. But they are and they have like, you know, different periods and settlement periods for when they pay these fees to these SaaS services. Some things are monthly subscriptions, some things are pay-as-you-go. All of these things are happening in the backend. And that's roughly why we think that it is going to be okay, that you have more complex value flows. Because our bet here, when we're talking about permissionless innovation, is really specialization. This is really what drove the SaaS economy is, you know, if you just look at the broad arc of civilization, it bends towards more specialization. We all become more and more specialized in what we produce,

• 17:17Speaker 01

  but more and more generalized in what we consume. Right? And so these AVSs are going to be exactly the same. They are going to be very specialized in what we produce, what they produce. But end users are going to consume many of these things and pass a little bit of value to all of these. And actually, this makes for a very much more efficient economy. Because, you know, if you ask the question, which is going to be the best chain? It's a very hard question to answer. If you ask the question, who's going to build the fastest NoSQL database? It's a much, much more narrow question. You can kind of zoom into like, oh, this guy has this experience, that experience. It's a B2B system and then actually they can go and build it.

• 18:01Speaker 01

  So that's why I think it is okay. Not only okay, it is actually great that, you know, you have hyper-specialization and a sharing of value across all these layers through the modular stack.

• 18:11David Hoffman?

  Nima, anything you want out there?

• 18:14Speaker 02

  I'm just fascinated by the fact that this permissionless market is going to enable all the various flavors of services. I just view it as, you know, we've seen distributed systems, these backend infra providers be able to do what they do over the past 20, 30 years, right? Except now you have this crypto economic angle attached to it, where you're building on a substrate that as long as there's a market for something, no one's going to be able to tell you, you can't kind of provide this functionality. So it's very exciting.

• 18:52David Hoffman?

  Yeah, I think maybe part of the spirit of the question is that like, one of the reasons why everyone is getting excited about restaking is because we love ether and we love staking ether and we love the yields and we get more of it this way. But then there's also a tension, I think, maybe at least I suspect in AVS networks that also have a token, where maybe a lot of the economy in that AVS network is the token, and then that AVS network is paying in that token, but then the ETH stakers want ETH, not the token. And so in order to pay restakers ETH, that token has to be sold, which goes against the incentives of the AVS network. And also then, like, are ETH restakers just collecting a bunch of tokens as the yields? Like, how, do you have any clarity that you can provide here on this one, Surya?

• 19:37Speaker 01

  Yeah, I mean, this is the power of permissionless markets is, you know, we can't say whether this is going to be the market, you know, ETH stakers demand that they get only paid in ETH. We will see that that's what happens. If we see that, yeah, actually, ETH stakers want all kinds of liquid tokens, then that's what will happen. If we see that actually ETH stakers want or willing to take even locked AVS tokens with a kind of like a vesting, that will happen. The thing is, we are very unopinionated about it. And this is a, this is an, we view this as an emergent property of what, you know, it's like, you know, you

• 20:22Speaker 01

  can dial back, you know, say, four years before the DeFi summer, and then if you go ask, you know, Justin, or Vitalik, or somebody else at Ethereum, or Tim Bako, or somebody at the Ethereum Foundation, what can ETH be used for? I don't know, it can be used for, you know, in a DeFi protocol like this, it can be used in a, in a DeFi, to provide liquidity provision, but to earn like some farm, like, you know, all of these things are possible and we'll probably see a combination of all of these things. And also stakers might segment by preferences. There may be stakers who are very purist and they just want to take ETH or they're not able to take for legal or other reasons, anything else. There will be stakers who will take all these other things.

• 21:05Speaker 01

  But going back to the kind of high level thing about, is there a conflict? I, I think there is no, like, the idea is that the ETH staking, if it is beneficial to any AVS, they're going to use it. If ETH staking is not beneficial to any AVS and their own token staking is more beneficial, they absolutely should use their own token staking. We are not taking a kind of a, any opinionated position on it. In fact, Eigenlayer itself, the contracts are written to enable dual staking and multi-quorum staking. So you can stake ETH. You know, you're building an oracle, you can have your own token and you can have ETH staking. You can say that, hey, I'm borrowing some amount of security from a neutral substrate and some amount of security from an opinionated, like, aligned substrate.

• 21:51Speaker 01

  It's actually like game theoretically very interesting and useful to actually do that because you know, the, the neutral substrate is neutral and therefore more externally verifiable. The neutral substrate can, but can only be slashed on specific violations, whereas my own token holders have exposure to just, you know, what is happening in, in my system. And that is a different kind of crypto economics. And actually promoting this is what we think is the best thing.

• 22:17David Hoffman?

  Right. Maybe the question, that question specifically is like, how to couple the income being generated from AVSs and then transfer it over to the restakers, the ETH restakers? Maybe that question is actually more appropriate to ask the LRT level of the, of the stack because they are the people actually more or less in charge of these flows. So maybe that's actually, yeah, if Eigenlayer is any opinionated, then Eigenlayer is not the actual place to target that question. Maybe, maybe this is a question for the LRTs.

• 22:46Speaker 01

  Yeah, we are also seeing interesting kind of payment management type services emerging.

• 22:52Speaker 01

  So somebody may say, hey, you know, subscribe to my, you stake, you know, you don't even have to go through an LRT and subscribe to my payment management service. I'll collect all these tokens. I'll do an R of Q auction and then later I'll give you like, you know, your tokens in ETH. So these we view as again emergent structures rather than like enshrined opinions. So absolutely the LRTs, therefore not only LRT is a liquid restaking token, it's a token that represents a position on Eigenlayer, but also represents an opinion on what set of operators should be used, what set of AVSs you should stake to, but also what rewards you want to collect and how you want to do treasury management of these rewards.

• 23:36Speaker 01

  So the dimensions of opinion of a liquid restaking token are far higher than a liquid staking token.

• 23:43David Hoffman?

  Right.

• 23:43Speaker 01

  Which is you stake, stake in Ethereum, you're complying by protocol, you have no price fixing abilities. You just take what the protocol does. So Ethereum is this rigid, solid, underlying substrate. Whereas Eigenlayer is this very, you know, anything can happen kind of a substrate or not, so.

• 24:01David Hoffman?

  It's funny that you say that because there's the variety of opinions that liquid restaking tokens could have, which is good because there's so goddamn many of them. There's like 15 of them out there. So maybe we'll, you will see all those opinions expressed. Nima, these next set of questions I want to ask to you, and these are all about the logistics of AVSs. Three questions here, kind of all in the same vibe. Can an AVS be aware about the state of other AVSs? If an AVS creates a slashing event or slashing events, how can other AVSs be aware of that? And become aware about the change in collateral for, that's being shared among AVSs?

• 24:40David Hoffman?

  And then are the scenario, are there scenarios in which one AVS, the slashing event for one AVS could trigger the slashing event of another AVS? Maybe you could take in these and however you want.

• 24:53Speaker 02

  Yeah, I'll start with the first one. So the background image that Shri Ram painted is these services talking to each other, right? These ABSs. So in the same capacity, you can imagine how an ABS talking to another ABS has the capability to read some state, right? Now, there's like on-chain contracts, there's off-chain like software being run, right? But depending on the exact nature of what is happening for an ABS, right? Sure, you can say like ABS A, their off-chain contract, whatever the operators are running, can watch for some state change on ABS B's contract, right? So there's no limitation in terms of like who is aware of what's and what's happening, right?

• 25:37Speaker 02

  Which I guess leads to the the second question a little bit. And that the the design for slashing, which is a feature we're going to come out with later this year,

• 25:48Speaker 02

  are still, you know, we're we're thinking very thoroughly about how that's exactly going to work mechanically to reduce the risk as much as possible. But then again, if an ABS operator can read a slashing event on another ABS, right? It can choose to react to that under whatever kind of, you know, path or like behavior like they just implement. So it's it's it's nearly like almost entirely up to the application ABS developers' discretion in terms of how they want to

• 26:28Speaker 02

  take slashing as a mechanism and as a reactionary thing into account. I guess the third thing, which is can one slashing event have an effect on others? That would probably be a function or it depends on how the slashing mechanism ends up working in its final version, right? And then the version that we're going to release, so yeah.

• 26:53Speaker 01

  Yeah, I'll just add one thing to all of these things is every, all of these events are reported back to Ethereum. Eigenlayer is an Ethereum centric system, right? So any AVS, which is actually, there may be AVS's which don't interact on a kind of like a routine basis with Ethereum, but all of the AVS state is reported back to Ethereum on a periodic basis. Whenever it's reported, it's there on Ethereum, it's on the Ethereum contracts. So now like I can write a contract which is dependent on all these other things. Like for example, whenever a slashing is triggered on any AVS, that's going to be reported to the Eigenlayer core contracts. Because it's reported to the Eigenlayer core contracts, I can read from another AVS that yes, that has actually happened.

• 27:35Speaker 01

  And so I can react to it on a much more instantaneous basis. So this is really why we think that, you know, having one coordination engine for all these services is the best architecture, rather than saying, hey, I have an L R, let's say, you know, so this is a misconception that people have. That, oh, you know, now that the Eigenlayer is there and it's allowing L S Ts to stake, somebody else can build another layer which takes L R Ts and then allows them to stake and so on. But the, the, the right architecture is actually a much more integrated architecture, which knows what's happening across all the different layers. In fact, this is one of the reasons we, we keep saying that it'll be even better in a future when Ethereum can integrate Eigenlayer more natively.

• 28:20Speaker 01

  Because the cross communication between Ethereum and Eigenlayer can be even tighter. Like how much of security is used by other things? How much of security is reserved for Ethereum? All of this communication can be much, much tighter if it's in the same system. But inside Eigenlayer, all the state is on a common Eigenlayer contract. It knows when like your slashing has been triggered on any AVS. It knows when state updates have been made on any AVS. So all of this is routed through a common contract, which is a common source of information. And like Nima said, you can pull from it as, as often as you want. But I think in the worst case, people, you know, all the AVS contracts will pull at least at, you know, something like a few days period, because you don't want to be desynchronized more than that.

• 29:04Speaker 01

  And that's the kind of challenge or fraud proof period in Eigenlayer.

• 29:10David Hoffman?

  Moving on to a question from cloudy.eth. Shout out Christie. That's our community manager at Bankless. What happens if an Eigenlayer AVS operator with delegated LSTs gets slashed? What happens with the LSTs? Where do they go?

• 29:25David Hoffman?

  Sure, I'm gonna want to take this.

• 29:26Speaker 01

  Yeah. Um, yeah, you know. So there are two types of slashing that can happen on Eigenlayer. So Nima was mentioning that we have, you know, upcoming

• 29:39Speaker 01

  designs on the full slashing mechanism, but there are two kinds of slashing. One is burning, right? You just burn, burn the stake. The other one is redistribution.

• 29:51Speaker 01

  And the simple version to burn would be to just burn the, you know, LST. This has some kind of, you know, different kinds of consequences for different people. But one could also think of the, actually, what is happening in the Eigenlayer contracts is the LST is not burnt. The LST is frozen into the contract state. So you can't touch it. You can't do anything with it. It's just stuck. It's like a stuck token. And, um, but that's what actually happens in our V1 design. But we are going through some thinking on the different slashing architectures. But the thing is, there's also redistribution. And redistribution is I take the LST and give it to the harm party, slash from the bad guy and give it to the harm party.

• 30:35Speaker 01

  So the other guy has the LST. So that's, that's what happens. So that's why when an AVS is whitelisting which LSTs to use, they should have some measure of trust on the LST. Because, you know, that's what's getting handed over across the different parties.

• 30:49Speaker 01

  There is a more sophisticated architecture on burning, which would be to like, exchange the LST for ETH and then burn ETH. But, you know, uh, we do expect that slashing is, uh, you know, a rare event. Because operators have to be malicious and they know they're going to lose their ETH. So they're not over optimizing for burning ETH in this scenario.

• 31:11David Hoffman?

  Seamus on Farcaster, orangeseamus.eth asks, how will delegators, operators and AVSs adequately be able to calculate risk? The problems here will be incredibly dynamic and involve unclear dependencies. I'm not sure it's solvable, let alone by all parties routinely. So I think it's a little bit of just the unknown unknowns about risks question. Nima, you want to take this one?

• 31:35Speaker 02

  Yeah, this is a super interesting question. A lot of us have spent quite some time thinking about. And I guess to to approach this, we can take a look at it from the perspective of each of these different stakeholders, right? For example, as an ABS developer, what does risk means to you, right? Is it the operators that are serving your ABS? Is it, you know, what LSDs they have delegated to them?

• 32:03Speaker 02

  In terms of restakers, which operators do I want to give my stake to, right? What is the distribution of the operators that look like for me to be able to assess who is riskier and who's not? And in terms of operators, they also have this duty of being able to, or wanting to rather, look at the nature of an ABS and being and saying, how complex is the logic for serving this application, right? And how much does it, how much load does it bear on, for example, my physical infrastructure that I'm running, right? Am I gonna run into, you know, bottlenecks that affect my ability to run another ABS?

• 32:46Speaker 02

  So all these, all these risks or things that the various stakeholders have to take into account essentially compound, right? And depending on how you slice and dice an exact combination of these stakeholders, you're looking at a different picture.

• 33:05David Hoffman?

  We've gone to a question from a token terminal. How do they, this might, there might be no answer here. This might be a market forces thing, but we'll see. How do they see, they as you guys, Eigenlayer, see the take rate in the ecosystem? For example, $1 paid to buy an ABS, how many cents goes to restakers? How many cents goes to operators? How many cents goes to Eigenlayer? Nima, do you have an answer here?

• 33:28Speaker 02

  This is still like being being thought out and we were taking a lot of community feedback from you know what ABS developers like to see, what operators are comfortable with, like what ranges, you know, they're they're they're they think is reasonable across what type of assets. So that's because it's such a nascent space, it's still something like we're actively figuring out. Yeah, that's that's where that's where we're at.

• 33:54Speaker 01

  Yeah, I think you know that there are dimensions of pricing and that we are thinking through the dimensions also carefully. For example, pricing need not be only for steak. Pricing should also be for the complexity of computation. So we're thinking through like of all the other systems that exist and see like how we can absorb some of the best practices from there and also failure modes. For example, one of the things that happened in Cosmos interchain security is, you know, operators are running these other services by taking a cut of the fee, other chains, by creating a cut of the fee. And if the fee volume is low, you're expending a lot of energy,

• 34:37Speaker 01

  but you're not getting like that much fee. So, you know, we should charge not only for steak, but also for computation. And so, and when you're talking about steak, there are also dimensions of steak where, you know, is my steak just going to be burnt for for this because that's a different risk versus is my steak going to be redistributed because there may be a different kind of incentive for that? Is my steak, is my entire steak burnt when I make a mistake in an ABS versus is only a portion of my steak burnt when I mistake make a mistake in those ABS? So there's lots of different dimensions here and pricing will have to reflect all of this.

• 35:17Speaker 01

  So it is still under like active design on the specifics of how the payments get distributed across all of these things.

• 35:25Speaker 02

  Yeah, and to add on top of that, the the reason why I said we're still so early in how this might look is because it's a problem that I think the broader industry is thinking about, right? When you look at Solana, like, you know, fee markets or like, you know, the concept of the discussion on multi-market, multi-dimensional fees, right? Like the notion of what a fee even is around what type of resources, who is providing those resources, all of that is. Yeah, it's just being explored.

• 35:54David Hoffman?

  Yeah, yeah, yeah, right. I remember that's still, I think, an ongoing conversation, even when we talk about resource pricing inside of the EVM as well.

• 36:02Speaker 02

  Right.

• 36:03David Hoffman?

  Thady dot ETH asks, how long does it take to unstake? And then I'll add myself, why is there an unstaking waiting period at all? So you want me to take this one?

• 36:14Speaker 01

  Yeah, it takes seven days to unstake today. And why is there a seven day period is because, you know, when you stake and there are, and you provide security to services. What we don't want is you stake, you provide security to a service, attack the service, unstake, and then go swap and get out. So unstaking should have a lag greater than the lag within which any misbehavior will be detected. So that's why we have the unstaking period. But it provides a unintended, and you know, maybe not that unintended from our end, an unintended benefit, which is actually fund safety.

• 36:57Speaker 01

  So you stake a lot of funds in Eigenlayer, and you know, one of the things you have to be worried about, what if it gets hacked? What if people just like take all the ETH and go, that'd be like an absolute disaster. One of the things that protects it is to withdraw any unit of money out of the Eigenlayer contracts. It's gonna take a week. I know already you've queued the withdrawal, you have to wait a week. This slows everything down to human time scale. No monitoring, there is passing, there is a security council comprised of, you know, thirteen members who are outside the Eigenlayer core team. All of that can actually kind of come in and step in to do something in case there is a problem.

• 37:38Speaker 01

  But that's, that's a kind of like an unintended side effect of the core reason, which is for fraud proofs.

• 37:48David Hoffman?

  Elcoco.eth, he writes great songs, sometimes we put them into the rollup. He asks, "How big do we think the premium will be that AVS is put on solo stakers? Is there a good enough way to determine who is a solo staker?" He's asking because this is the one way that I can see that Eigenlayer will actually increase Ethereum's decentralization. Sriram, do you have an answer here?

• 38:13Speaker 01

  Yeah, what premium AVS will put, like I said, we are like a little bit of an open market type project, so we don't know what will happen. But there are clearly, absolutely clearly, there are places where, you know, AVS is just one more decentralization than just one more stake, right? You know, I want to sequence transactions for a private rollup. I want to do like, you know, where the, so the high-level heuristic is where I cannot attribute false and slash for them. More stake doesn't mean much, but many independent parties consistently verifying and are coming to agreement is actually the benefit.

• 38:58Speaker 01

  So services which have that structure, imagine I take a secret and then spread it on like many, many nodes. If it turns out Coinbase is all these nodes, then like, you know, I didn't like spread my secret to anybody, like the guy has all the copies of the secret. So it's useless to like, when you're doing secret sharing, when I'm doing sequencing, essentially for any non-slashable false, I want to have a decentralized committee. And, okay, so that's the types of things where like, types of AVS is where they would absolutely want more decentralized operators. The question is, how much, you know, so one question is how much premium, which I said, you know, it's emergent from the free market.

• 39:40Speaker 01

  But the other one is, how do you detect whether somebody is a solo staker? I think this is a harder question, but it's one of those questions where, you know, Nima mentioned earlier, like one of the services building, which is a proof of location. And you know, you have to be in, you know, many different locations. So there's a geographic, you know, diversity benefit, for example, that that itself, so Witness itself is an AVS, but there could be other AVSs which not only track like operative location, but do something more opinionated. It could be an oracle that is basically a decentralization oracle, which looks at all the statistics of, you know, stake distribution, you know, historic correlation

• 40:22Speaker 01

  with exchange wallets, all of these things, and then puts in like a Merkel route of these are the most likely to be decentralized. And this is not, you know, opinionated from the Eigenlayer point of view, but this is a service that somebody else can say, yeah, I know, I trust this opinion and therefore like I'm going to recruit stakers from this or operators from this. Again, emergent downstream rather than.

• 40:44Speaker 02

  Yep. Something that I think is particularly interesting on this front is

• 40:50Speaker 02

  when you have solo stakers, irrespective of the kind of hardware that they have, right? One thing that we're noticing is a lot of networks rely on this component of a keeper or a relayer, right? Where the computational bandwidth of what you're actually relaying is not super high, but depending on where you're located, you might want to have like many, many of them spread across all over the world, right? So the more of those you have within your system, maybe it's latency you care about, maybe it's like censorship resistance, whatever it is. If they can, if you can go through multiple routes from point A to point B through these, you know, lightweight, maybe not even lightweight solo stakers, that's a very emergent property as well.

• 41:33David Hoffman?

  I think maybe part of your guys' answer is that it's actually not necessarily being the binary of, oh, you are a solo staker, you are one person, but it's more about how much net decentralization do you add to the system when we measure decentralization in a variety of different ways? Because there is no good way of just like being a solo staker actually only has, is only one bit of information, like there's other bits of information there.

• 41:59David Hoffman?

  Okay, so there's four questions here. They're all about the same thing. We kind of have touched on this, but I want to dive headfirst into this. The subject. Jenny asks, how do they respond about the risks of restaking being a daisy chain of potential risks? Clairvoyant asks, what doomsday scenarios have the team simulated or envisioned? Chainlink God says, how does or should the Eigen restaking ecosystem approach risk management, particularly managing the second or third order effects of LRTs, LRT phi, cascading slashing conditions, AVS selection priorities, leverage caps, et cetera? And lastly, what's matter? CFA says, it looks like a lot of rehypothecation in TradFi. How do you quantify the risk?

• 42:40David Hoffman?

  I think this is what people's like first gut reaction goes to when somebody explains what restaking is. Like, oh, you take your ETH and then you stake it again. And then you can also keep on doing that over and over and over again. And people are like, oh, okay, great. So like, you know, cascading liquidations. What, I'm sure you guys have answered this many, many, many times. What's like the simple way to explain the scenario here? Not that this isn't a risk, but just like, how do we provide more knowledge about what's going on?

• 43:10Speaker 01

  Yeah, I think there is, and we put out a detailed risk document. So I think that's maybe a good, good place to point it. We can put it up on the YouTube link afterwards. I think that'll be awesome. But the high level thing is, number one,

• 43:33Speaker 01

  the thinking of, I think the term restaking is what throws people off. If, you know, the exact same concept, for example, already existed for many years in Cosmos called Interchain Security. Right? It's called Interchain Security. So nobody thought of exactly the same questions. But here's the, the thing that when you stake, so the, the right way to think of this is shared security. So imagine there are 1,000 protocols, each of which can have $1 million stake.

• 44:07Speaker 01

  Okay, so this is one world, another world, and you take the same fees and then now aggregate them into a one billion dollar pool, which is restaked across thousand protocols. Which world is better? Let's say in the first world, um, to attack a protocol, you need one million dollar capital. And then if you do attack it, you're probably going to lose half of that one million or something like that. In the second world, to attack any one protocol, you need one billion dollar capital. When people are comparing the two scenarios, usually what they're doing is they're, they're thinking there are one thousand protocols with one billion dollar each. And then on the right side, there is one thousand protocols with one billion dollar restake. But that's just not the right comparison.

• 44:48Speaker 01

  At the same fee parity, if there are one thousand protocols each paying a certain fee to maintain one million dollar stake, you pay the same fee, you can actually sustain a one billion dollar in a shared security model. So security is growing as you get more protocols. It's a very like obvious thing once you stay like this, but that's what's happening. Okay, so you have much bigger security that is supporting all these things. Okay, now you do lose something in the second world. So the second world is better in the obvious sense that to attack any one protocol, you need like one billion. But there is a little bit of a deficiency in the second world, which is there is no unique attribution of this one billion to any one protocol, or you know, how much is going to each protocol, which is what is leading to all these questions about, oh, you know, I don't know how much I'm getting, there's a lot of risk and all of that.

• 45:33Speaker 01

  And the way we solve it is by principle, we call attributable security. Attributable security is the following concept, says that an AVS gets this benefit of pooling, but in addition, AVS can buy a particular ability to slash and redistribute a portion of the funds. Let's say AVS one, in order this one billion dollars slashable, AVS one buys twenty five million dollar worth of attributable security, which means if.

• 46:05Speaker 01

  Something goes wrong on that AVS. The Eigenlayer Protocol maintains this complex calculation, which is what people are thinking. How is this going to happen? This is going to be in protocol, in the Eigenlayer Protocol, maintains what we call a solvency calculation. The calculation ensures that whatever happens, how many other protocols trigger slashing simultaneously, you will be able to redistribute your 25 million, your attributable portion. Now, suddenly, all this question about like over leverage and everything else is just simply gone. Because each AVS has a unique specified attributable portion of slashing, independent of what happens in all the other AVSs. So this creates compartmentalization.

• 46:48Speaker 01

  I know exactly how much I can redistribute if I slash. And so this is actually the, you know, one of the tightest system of crypto economic security. It is not a leverage system with you don't know what leverage is happening, you know, what. It's not like that. It is pooled security. Now, so what is the benefit you're getting? The benefit you're getting is in the second world now, even though I have only an attributable security of 25 million, to attack my protocol, I still need a $1 billion capital. I'm just much, much more secure in the second world than having my own $25 million pool in the first world. So that's, that's the first picture about chat security and attributable security.

• 47:29Speaker 01

  This changes the dynamics of how people think about AVS's compartmentalization. So another like point is between Eigenlayer, so we can do this inside Eigenlayer, but to do this between Eigenlayer and Ethereum, because you know, we don't build Ethereum, so we have limited interfaces to Ethereum. But the nice thing with Ethereum is Ethereum is actually extremely high security. So there's a lot of stake in Ethereum, $70 billion or whatever today's price is there. But you know, there's a lot of stake in Ethereum. And the Ethereum's security requirement is not all of this $70 billion. And this is a whole other like discussion to understand exactly how much security is needed.

• 48:13Speaker 01

  Because staking is not fundamentally protecting all the value, all the TVL that is sitting on Ethereum. The staking is only protecting the value in flight. In Ethereum. So that's a whole detailed discussion. But what happens is Eigenlayer, as the amount of assets restaked between Ethereum and Eigenlayer increases, let's say it's 100% of Ethereum stake is restaked on Eigenlayer. Eigenlayer will not sell attributable security for this entire 100%. It will take a back off, say something like 50%, we don't touch. We're only selling insurance for the remaining 50%. So what this does is basically the, there is a buffer that's maintained to make sure that Ethereum, it's, it's an accounting for

• 48:56Speaker 01

  making sure that Ethereum security budget is at least that much and the remaining is attributed to all these AVSS. So that's the way we deal with that. And then finally, LRTs, right? Initially, when, you know, one year back, we were thinking about LRTs, we were actually worried that, you know, LRTs can have all this financialization and risk. And there is some truth to it, but there's also the other side of it, which is, imagine there are no LRTs. So that's, that's how Eigenlayer is natively. There is no liquid restaking position or like a fungible position. But what could happen is, I'm a staker, I stake in Ethereum and Eigenlayer, and then now I have

• 49:36Speaker 01

  a position. And, you know, people want to borrow against this position. So somebody could potentially build a borrowing protocol against an Eigenlayer position. This position is non-fungible and unique. And, and so the only way, if my position is now liquidated, the only thing that you can do is now you have to go and trigger a withdrawal from Eigenlayer. And Eigenlayer triggers a withdrawal from Ethereum. So what is happening is, if you did not build a layer of LRT, then anything that's happening in the financialized world has ripples that propagate down into Eigenlayer into Ethereum. You have to withdraw that money from Eigenlayer, Eigenlayer has to

• 50:17Speaker 01

  withdraw that money from Ethereum to honor that position. And suddenly the AVS security fluctuates, Ethereum security fluctuates, all of these things happen. With the liquid restaking position, what happens is, somebody has an LRT that's being lent and borrowed against. They get liquidated, the other guy just snatches the LRT, there is no impact on Eigenlayer or Ethereum. So, financialization in a smart contract system is going to happen. And if it is going to happen, how do we mitigate and buffer it against, you know, ripples through the system? I think this is the first thing that is already true is, LRTs actually create buffering for Eigenlayer and Ethereum.

• 51:00Speaker 01

  Okay, now, where is the actual risk? I think the actual risk is in what people call looping, right? You go and, you know, deposit an LRT, get ETH, and then go and, you know, or leverage restaking or leverage staking. That's where actual risks are. So, this is now going into, I stake, I borrow against an LRT. And so the first thing is, you cannot restake an LRT into Eigenlayer, like, that's not a thing. This is again like some confusion in people's model or understanding of Eigenlayer. I can't just go to, go stake in Puffer or something, get an LRT, and then stake the LRT back into Eigenlayer. Eigenlayer doesn't allow for that, so that's not a thing.

• 51:44Speaker 01

  Okay, so and people are like, oh, I'm going to restake the restake and all this stuff, like, okay, that's the first, you know, baseline thing. But this could obviously happen in a lending market, that I take an LRT and then I borrow ETH against it, and then I go and stake it and so on. And this is basically a misassignment of risk in these lending markets. And that's what we should focus on. Why is this lending market allowing you to borrow an ETH for an LRT with like, you know, only X percent collateralization, rather than like Y percent collateralization? Why am I able to loop 50 times, rather than only loop two times? So, these are the kinds of questions that, you know, we should ask lending markets.

• 52:27Speaker 01

  This is mispricing of risk in the lending market, has nothing really to do with Eigenlayer. And so, but we are going to be like putting out some of these modeling things so that people understand what is actually.

• 52:40David Hoffman?

  Ema, do you want to add anything to the the daisy chain of risk conversation?

• 52:45Speaker 02

  Those, the two points were pretty much what, yeah, what I was gonna say, so.

• 52:49David Hoffman?

  Beautiful.

• 52:50Speaker 01

  Uh, ju- just one more thing on that is smart contract risks, which we can talk about, right? Like, I I talked about earlier when talking about the withdrawal lag, that the eigenlayer core, you know, each state is one way it is protected is because of the withdrawal lag, because you know, there is a time to pass and, you know, do security council interventions and all of that. But on the AVS slashing, you know, AVS could have a bug in the slashing contracts that is really only buffered by the veto committee. And initially, we are going to have a single veto committee, but over time, you may have a marketplace of veto committees, like each each stakeholder and operator decides what kind of like veto committee they want, and AVSs can work with them only if they agree

• 53:35Speaker 01

  on the, it's like a kind of like a mutually trusted party or like a arbit- arbitration agreement, right? So that, that's.

• 53:42Speaker 02

  Yes. Actually, one, one thing I would say in this discussion is, uh, there is probably a misconception around how operators, uh, view their position in the ecosystem, right? Um, there will be a sweet spot in terms of how many AVSs they want to opt into, um, in contrast to how much risk they will, they're willing to take on, right? Because obviously, if you go beyond this threshold, beyond this like sweet spot, you're increasing your risk at the, you're at the risk of losing yields, right? Using like, if you go down, you can't really have that anymore. So, um, the whole concept of, oh yeah, each operator is gonna opt into every single AVS out there, probably not the most practical scenario, so, um, yeah.

• 54:26David Hoffman?

  On that note, that actually perfectly leads into a question that I have. So this one comes from me. I want to talk about possible design architectures for AVSs that have slashing as like are more permissible slashing. Whereas like I think we talk about many AVS networks and we the general context that we talk about them is like we want zero slashing events. For which there will be many, many services where like that is the optimum zero slashing events. But maybe there's a landscape to talk about AVS networks in which people being slashed is actually a part of the way that the system works and it functions healthily. Like I could, for example, I could imagine if we all remember the old Augur design, the old prediction market.

• 55:10David Hoffman?

  Where people would stake their Augur tokens on the particular outcome of an event. And if you staked in the minority, you were slashed for being wrong and it was an oracle service. And so if somebody needed to be slashed in order for the system to work at all. And as a result of this system, we had this oracle at prediction market and this thing would function. So I could imagine an eye and layer AVS network like that where the AVS role is an oracle. And I could imagine there are other AVS constructions in which a normal functioning, healthily, healthy operating AVS actually has frequent AVS slashing events. And why are we okay with that? Well, because the yield compensates for that and more.

• 55:54David Hoffman?

  Have we thought about sort of these constructions? Surya Ram, you want to go first?

• 55:59Speaker 01

  Yeah, this is a really, really interesting question and I should say this is out of scope for our current eye and layer design. And the reason is, you know, systems like Augur have a tyranny of majority.

• 56:18Speaker 01

  You know, you slash the minority based on a majority opinion. What if the majority was actually adversarial? And then like tried to impose their like wrong opinion on the minority and get the minority slashed. What really protects Augur? And Augur as a system itself doesn't have it. And the reason it doesn't have this problem is they had a way to fork the Augur token if something bad happened.

• 56:44David Hoffman?

  Yeah.

• 56:45Speaker 01

  And you know, this is where, this is the boundary that Vitalik has drawn for us. That, hey, don't do stuff assuming, you know, Ethereum will fork for you. And I think it's a really good design principle of like, you know, drawing a boundary. So it's one thing to consider AVSs where you could get slashed, you know, a small amount in the normal mode. It's another thing to consider an AVS which has a tyranny of majority. And I think we just simply don't go there. The AVSs should not have a way to slash a minority of people based on the majority opinion. Because if the majority colludes and tries to take down the minority, then it's kind of like a big systemic instability. Okay.

• 57:29Speaker 01

  And the other really important property, I think they, so whether AVSs or operators get slashed in a, in a normal mode is still okay. But I think the main thing that we wanna kind of like have as a property of Iconlayer is that if you're an operator and if you're honest and let's say you can even add honest and effective, then you will not get slashed, right? If you're honest, you should not get slashed as the bar. But you could even like lower that a bit and say, oh, if you're honest and effective, which means diligent and doing your stuff, then you should never get slashed. I think that is the, the, because that's what retains all the properties that we want about, let's say, an LRT. Right?

• 58:11Speaker 01

  When somebody is holding an LRT, what are they actually holding? They are saying this is, this would be equal to one ETH if I trust that the operators are honest.

• 58:22Speaker 01

  That's a really, really nice kind of a mental model that if I trust these operators are right, then this will be equal to one ETH, because you know, all these other things won't happen. But if we start loading uncalculatable risks into this layer, so this is again like a very sharp boundary. We only want to do validation services and we only want to do validation services where risks are what we call endogenous. If you are an operator, it should be under your control not to get slashed. That's a very, very, very important property because once it's like that, then all these like cascades and problems that people have about like Eigenlayer,

• 59:01Speaker 01

  they don't show up. But if you don't do it like that, then you have all kinds of problems and the system kind of like blows up in ways that you can't predict.

• 59:09David Hoffman?

  Okay, so that that sounds like a very firm line that you are drawing, that you are saying Eigenlayer will not cross that line. It will not cross the line of allowing for effective, honest operators to get slashed.

• 59:21Speaker 01

  To be slashed, absolutely. I think that is, that is what, that is what makes it all the rest of the properties of the system to actually work.

• 59:29David Hoffman?

  Okay, okay. And I think you also kind of implied that that same line is the line that Vitalik was labeling in his blog post, "Don't overload Ethereum consensus."

• 59:38Speaker 01

  That's correct. In fact, the example he gave was a USD to Brazil Oracle and something crazy happens in Brazil. And then you have Brazil North and Brazil South. And now, you know, a majority is voting with Brazil North and a minority is voting with Brazil South. But actually, they were all honest. And then suddenly, you know, you're slashing all the guys who voted on Brazil South based on the Brazil North guys. And then like, you know, it's, it's a, you know, tens of billions of dollars of ETH slashed for just being honest and doing your job, but, but just not knowing that this thing can happen. So that's the overload, that overloads Ethereum's social consensus because then what happens is now, you know, do, do we save them? Do we not save them? The shelling point is not clear and it just like confuses everybody.

• 1:00:23Speaker 01

  So that's why we draw the line there is because objective attributable slashing for malicious operators. That is what Eigenlayer is intended for.

• 1:00:34David Hoffman?

  Intended for, yes. And also Eigenlayer is also intended for permissionless innovation. And at some point, will, won't these two things collide? Like if Eigenlayer is fully permissionless, can I go build my subjective Augur layer?

• 1:00:48Speaker 01

  Yeah.

• 1:00:50Speaker 01

  Great, great question. So the way we mediate this is by the veto committee. So the, you know, if I'm a stakeholder, right, look at what I'm trusting. I'm trusting that either the AVS is correct, or the AVS contracts are correct, or the veto committee is good. This is what I'm trusting when I'm opting into the system. That's the flow of trust. And so it is up to the, the slashing veto committee to make sure that it is able to understand and like veto the slashing decisions correctly. So which means it also has an onboarding function, because it needs to know what is it gonna slash or not slash when such a decision comes up.

• 1:01:32Speaker 01

  So there is an onboarding decision which sits with the veto committee. So there is a bit of permissioning there. But over time, like I said, we are going to have not one enshrined veto committee, but intersubjective veto committees. Each of them, you know, there can be different groups that different stakeholders trust and, you know, they mediate different, you know, different AVSs. And what this does is, in, in that world, each of those veto committees still needs to onboard those AVSs. Because that's how, because they are in a, in a position of mediating this dispute, they need to know what they're mediating. That needs to be like objective and concrete.

• 1:02:09Speaker 01

  And to the users of the AVS, you need a kind of like a clear understanding when you will, you know, get slashed and when you won't get slashed. And the problem with the majority of, kind of a, so, so in a permissionless world, it's possible that some veto committee, you know, onboards services which have this kind of properties. But those committees, you know, will be less trusted and less stake will be staked through them. That's what will happen. So the, the thing is by, by. Allowing for most of the genuine use cases of, you know, Eigenlayer, which don't create these risks through the normal mode.

• 1:02:51Speaker 01

  You prevent the risk because most of the yield is from genuine useful services, which think through these risks very carefully. And somebody is going to build these things which don't think through this carefully. And we want that to be exposed to the staker. And the way it's exposed to the staker is none of the big slashing video committees are going to onboard that Avias. Now I have to go and trust some other random video committee and like, hey, why are you doing that? So that is how we stratify risk and make sure that people understand what they're opting into.

• 1:03:22David Hoffman?

  Beautiful. That that actually has going to be a ton of clarity about about this whole system. Getting back on to the the questions here as we wrap up getting closer towards the end. I'm going to put these two questions together. Arun asks, will they eventually switch to their native token staking to secure the network? Or is it always going to be staked ETH always? And also Green Curry asks, what's the point of the token? So now we are getting into the theoretical Eigenlayer token.

• 1:03:50Speaker 01

  Theoretical Eigenlayer token doesn't exist. So we'll we'll review this question if and when it exists.

• 1:03:58David Hoffman?

  All right, so we're punting on the on this question. That brings me to my next.

• 1:04:03Speaker 01

  But just one, one important thing. The reason we have ETH staking as the kind of central thing in Eigenlayer is, you know, this is a, this is important to understand for, you know, I see a lot of people, for example, asking, hey, when you have a lot of different D A layers and fees go to all these D A layers, what is the role of ETH? And I just want to like, take a minute to answer this here. And the role of ETH in our view is ETH is the money that is programmable. You know, you have the famous phrase programmable money, right? So ETH is programmable money. And what that means is as ETH becomes programmable money, it goes into all these different rollups and layer tools and other places where it is being used.

• 1:04:47Speaker 01

  And because these are different necessarily distinct zones, when a lot of the risk is now prized in ETH, right? For example, I move value between one rollup and other roller that is prized in ETH. And then you ask, what is the right collateral to secure a bridge which moves ETH from one chain to another chain? That collateral should be like ETH or ETH pegged as closely as possible. And so the fundamental role of ETH is ETH becomes this money that goes into all these different chains and actually doing something interesting there. But then what Eigenlayer augments that is with if I want to move this risk around,

• 1:05:29Speaker 01

  you want to buy insurance or security in the same unit, right? Like if all my liabilities are denominated in USD, I might as well get credit in also USD. Like that is how I match the lowest volatility peg. If my, if I'm moving ETH around on all these rollups, but I have insurance in some other token, then there is a relative volatility of the token to ETH that I need to price. And that just makes it more expensive to have other tokens of security for moving around. But that could be other things that are happening. For example, USD, USDC becomes the dominant unit in all these different chains. It's a different world.

• 1:06:11Speaker 01

  And in that world, somebody may say, I want to stake USDC to secure, you know, a USDC to USDC transfer because that is the closest volatility peg between that. So again, we view this as emergent, you know, market dynamics. And that's why even in Eigenlayer, you know, we are initially focusing a lot on ETH staking. But you know, who knows, OP token can be staked and you know, for an OP token like sequencer, our token can be staked for an art token finality and so on. So these will all be happening also. But I think the fundamental role of ETH as money is what makes ETH as collateral ping pong each other to create this very powerful network effect.

• 1:06:55Speaker 01

  So that's, that's our vision of that.

• 1:06:57David Hoffman?

  Would you say ETH is like the boot loader for the Eigenlayer system as an asset? And then other tokens like arb for arbitrum, OP for optimism can then kind of enter the game when that is, when the system is ready for it?

• 1:07:14Speaker 01

  I I think that's that's possible because you know many of these different systems may want, for example, the way they they might start off is they say like dual staking with R and and E. But unless the the belief is that, you know, any of these other tokens acquire the moniness that ETH has been able to acquire, risks will be primarily denominated in ETH and therefore ETH as collateral still dominates in terms of utility. But there'll be other tokens taken for purely like alignment and other purpose and they they are the team that built it. They have to choose what token needs to be taken. So that that is absolutely going to be a free market.

• 1:07:53David Hoffman?

  Right. So long as ETH is the money of the metaverse, this is probably where it's going to go moving forward. If the metaverse demands something else, Eigenlayer will serve that demand.

• 1:08:04David Hoffman?

  Cool. Last couple of last questions, two more questions. Gabriel Haynes, we all love Gabe, he asks, of course, when theoretical token?

• 1:08:18Speaker 01

  That's the answer.

• 1:08:20David Hoffman?

  Okay, all right. David Me asks, when mainnet?

• 1:08:24Speaker 01

  Oh, yeah, we early Q2.

• 1:08:28David Hoffman?

  Early Q2, early Q2. All right. Is there any other questions that that's the end of my questions? Are there any questions that you guys wish that I had asked? What questions should I have asked?

• 1:08:42Speaker 01

  The the questions around risk were really good. So, you know, another time, maybe there's a there's an opportunity to dig into just like, you know, in a in a detailed discussion on some of that. Because I see a lot of people don't understand the models clearly enough to to know what is actually happening. But I think they were really good. Some of the discussion around, for example, can you have an Augur article? I think your your questions on that were really awesome.

• 1:09:11David Hoffman?

  Alright guys, well if that's all the questions, which it is, I really appreciate Nima. It's good to reconnect and now probably, am I gonna see you at East Denver?

• 1:09:19Speaker 02

  Absolutely, and a lot of the team from EigenLabs, actually.

• 1:09:23David Hoffman?

  Oh yeah, yeah, yeah, it's free, I'll definitely see you at East Denver as well. Absolutely. Yep. Bankless Nation, you guys, thank you so much for coming on and answering all of these questions from myself and the community. I feel much smarter about Eigenlayer.

• 1:09:35David Hoffman?

  Bankless Nation, you guys know the deal, crypto is risky, staking is risky, restaking is re-risky. You can lose what you put in, that was a terrible pun, but we are headed west, this is frontier, it's not for everyone, but we are glad you are with us on the Bankless journey. Thanks a lot. Mantle, formerly known as BitDow, is the first DAO-led Web3 ecosystem, all built on top of Mantle's first core product, the Mantle Network. A brand-new, high-performance Ethereum Layer 2 built using the OP stack, but uses Eigenlayer's data availability solution instead of the expensive Ethereum Layer 1. Not only does this reduce Mantle Network's gas fees by 80%, but it also reduces gas fee volatility, providing a more stable foundation for Mantle's applications. The Mantle Treasury is one of the biggest DAO-owned treasuries, which is seeding an ecosystem of projects from all around the Web3 space for Mantle.

• 1:10:20David Hoffman?

  Mantle already has sub-communities from around Web3 on-boarded, like Game7 for Web3 gaming, and Bybit for TVL, liquidity, and on-ramps. So if you want to build on the Mantle Network, Mantle is offering a grants program that provides milestone-based funding to promising projects that help expand, secure, and decentralize Mantle. If you want to get started working with the first DAO-led Layer 2 ecosystem, check out Mantle at mantle.xyz and follow them on Twitter at @zeroxmantle. Are you launching a token? Is it already live? How are you managing the legal and tax for providing token awards for your team? Toku simplifies everything about managing token grant compensation, and you can get started with them for free. You'll have access to top-notch legal and tax support to handle the distribution and management of tokens for your team.

• 1:11:04David Hoffman?

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