Devcon #8 - EigenLayer with Sreeram Kannan

Welcome to Devcon 6. The first Devcon for Bankless, the conference was a ton of fun and an amazing cultural experience in Bogota, Colombia. We’re speaking with Sreeram Kannan about EigenLayer, a platform to leverage Ethereum security through the innovative method of restaking. ------ 📣 Push | Try the Communication Protocol of Web3 https://bankless.cc/Push ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ ------ BANKLESS SPONSOR TOOLS: 👾 SEQUENCE | ALL-IN-ONE PLATFORM https://bankless.cc/Sequence ❎ ACROSS | BRIDGE TO LAYER 2 https://bankless.cc/Across 🦁 BRAVE | THE BROWSER NATIVE WALLET https://bankless.cc/Brave 🔐 LEDGER | NANO HARDWARE WALLETS https://bankless.cc/Ledger ⚡️FUEL | THE MODULAR EXECUTION LAYER https://bankless.cc/Fuelpod ------ Resources: Sreeram on Twitter: https://twitter.com/sreeramkannan EigenLayer: https://www.eigenlayer.com/ ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. 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.

• 0:03David Hoffman?

  Bankless Nation, welcome back to the DevCon 6 experience. We have a couple of alpha leaks, some debuts of some episodes about particular projects in the Ethereum ecosystem, some that I think are getting particularly strong attention out of other community leaders in this space. This one is Eigenlayer. I'm talking with Serim from Eigenlayer, the co-founder of Eigenlayer. And Eigenlayer is a unique project that I think if it is successful, it's extremely ambitious, but if it is successful, really changes the game for what it means to be an ETH staker and to provide security for many, many, many other things beside Ethereum using ETH staking. Kind of crazy. YouTube watchers will actually notice that the production quality of this video goes

• 0:47David Hoffman?

  up bigly, and that is because we happened to run into a scheduling conflict with the Infinite Garden documentary, so we just used their equipment. And so they were very generous to let us use their equipment, their video cameras and their audio. So this production quality, probably be the best production quality video that we have on Bankless. So I hope you enjoy this exploration into Eigenlayer and all of its potential consequences, right after we talk to some of these fantastic sponsors that make the show possible. TrueFi is leading DeFi into the future of on-chain, uncollateralized loans, opening up DeFi to the $8 trillion global credit market. Whether you want higher yields on your lending, or you're a fund manager who just wants access to global liquidity and the cost savings of DeFi, TrueFi is here for you.

• 1:29David Hoffman?

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• 2:11David Hoffman?

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• 2:54David Hoffman?

  built from the ground up to disrupt the social media industry. Disrupting social media takes a lot of data, and DSO's infinite state applications can finally store and index large amounts of content and data fully on-chain. With multiple crypto-native monetization mechanisms for both developers and creators, DSO wants to usher in a new relationship with our social applications. Check them out at dso.com. And now, onto the show. Back in the nation, I'm here with Sreeram Kannan from Egan Layer, and we are at DevCon, DevCon number six, which is also my first DevCon, so I'm particularly excited about it. Sreeram, are you having fun?

• 3:25Speaker 01

  Yeah, this has been awesome. Thank you so much for having me on this tankless podcast.

• 3:29David Hoffman?

  Yeah, you're Project Egan Layer. Egan Layer?

• 3:32Speaker 01

  Egan Layer.

• 3:32David Hoffman?

  Egan Layer has come on my radar recently from a number of people that I consider very informed about this space. And so I wanted to get you into the show. And thank you for the Infinite Garden documentary team for letting us use all of their equipment and to explore Egan Layer, what it's up to and why so many people are excited about it. So let's start at the very beginning. What is Egan Layer?

• 3:52Speaker 01

  Egan Layer is a mechanism that we have designed, which allows the Ethereum Trust Network to be flexibly used to build general distributed systems. So the way we think about it is, just a little bit of background about myself. I'm also an associate professor at the University of Washington, Seattle. I run the UW Blockchain Research Lab. Go Huskies. Go Huskies. Where, over the many years, we have actually worked on consensus protocols, new distributed systems, scalability. One thing we saw, which is amazing in the Ethereum ecosystem, is the amount of permissionless innovation that's available at the smart contract layer. Anybody can come and deploy a new contract, and they don't need to be trusted. They're borrowing decentralized trust from Ethereum.

• 4:34Speaker 01

  In fact, when people talk about things like modular blockchain, I think of Ethereum as the first modular blockchain. It modularized trust so that DApps can consume it, I think, which led to the whole pseudonymous economy. You don't need, as a DApp creator, to be trusted. The blockchain platform is trusted. But this freedom of permissionless innovation does not extend all the way down into the stack. If you want to build a bridge, you want to build an oracle, you want to build a data availability layer, you need to go and find your own distributed network to validate it. And building a new distributed network to validate your own particular thing is a whole set of other things. And it is, in some sense, there is a large decentralized network with massive economic security and decentralization already existing, the Ethereum network.

• 5:19Speaker 01

  And why not use that so that anybody can actually build new distributed systems on top? So that's what Eigenlayer's core mechanism is. And the way we achieve it is by supplying the trust from the stakers. Stakers stake to commit to producing Ethereum blocks, but they can also re-stake, reuse the same stake, to do other things. For example, I can make a credible commitment that I'm storing data. I can make a credible commitment that I'm providing oracle inputs or a certain execution functionality, and I'm putting my stake at risk. The ETH that is staked in the core platform at risk to do these other things. So it is an extension protocol.

• 6:01Speaker 01

  Which extends the scope of what Ethereum can do to so that there is permissionless innovation all the way down through the stack.

• 6:08David Hoffman?

  So the way that I understand this, and I'm going to try and regurgitate this just to check my understanding, is that we have this pool of Ethereum stakers and they are doing a very good job securing Ethereum, but that doesn't scale out beyond Ethereum. There are other things out there that we need to secure. There are cross-chain bridges, there are oracles that, you know, things like Chainlink, but other oracles, any sort of input, anything that you want to be secure, actually. And so Eigenlayer is commoditizing ETH staking to make it more general purpose? Is that a fair way to describe it?

• 6:42Speaker 01

  That is a great way to describe it. If you go back to the core value proposition of blockchain, it is decentralized trust, right? And you have this massive pool of decentralized trust here that can be supplied through the Ethereum protocol, and we made it more flexible with the Layer 2 era, where you can build Layer 2 rollups which can consume this decentralized trust by writing proofs, either validity or fraud proofs, but we want to expand this even more. We want to supply the Ethereum trust from staking, which is the root of trust, to applications far beyond the core conception. If you look at any other, you know, blockchain protocol, they will have other advantages. For example, maybe the finality time is smaller, maybe there is some other advantage in, or MEV management is better.

• 7:27Speaker 01

  And what you can do is now start internalizing all of this innovation and match it with the largest pool of decentralized trust that we have. You can build a new chain on Eigenlayer, you can build a new consensus protocol, you can build data availability, you can build bridges, you can build MEV management for Ethereum L1, all on Eigenlayer.

• 7:45David Hoffman?

  And this isn't, this isn't something totally new. We've seen other flavors like this in crypto's history. We were, we were talking about this and you were explaining this to me, you used merge mining, which is something that I used to once know very well, but it's, it's escaped me now because it was just like a different era. It's a, it's proof of work. Can you, can you explain like merge mining, what the general principle is?

• 8:06Speaker 01

  Yes.

• 8:06David Hoffman?

  And how Eigenlayer is now like a kind of a new evolution and, and why it is new?

• 8:11Speaker 01

  Absolutely. So, merge mining is this principle of can I take the massive proof of work underneath Bitcoin? And then supply it to new networks that want to bootstrap. If you go back to kind of like, already Satoshi made comments about we can actually do things like this. But the thing with merge mining is the economic incentives for merge mining are not well aligned. Why? If, for example, even if we get 100% of the Bitcoin miners to run another chain, if they turned up attacking that chain, they don't lose anything. They definitely don't lose Bitcoin.

• 8:49David Hoffman?

  Right.

• 8:50Speaker 01

  They also don't lose their Bitcoin mining equipment. So, all they have at stake is very little when they're actually merge mining to provide services to some other new service.

• 9:00David Hoffman?

  So, merge mining, you're a bunch of Bitcoin miners with a ton of hash power. They already have this security layer that's doing a great job securing Bitcoin. We can secure another blockchain by merge mining, tapping into this pool of security that already exists so that this new blockchain can also become secure. But what you're saying is that this doesn't actually work too well because it doesn't put anything at stake for these miners. Because what they are really risking is really on the Bitcoin side. If they are aligned to the Bitcoin network, they're just going to burn their electricity. That's a loss for them. But that doesn't really extend to a minority blockchain. And so, it's an interesting idea, but in execution doesn't really hold up, right?

• 9:39Speaker 01

  That is exactly what you're saying. And when you're merge mining a different chain, if you did anything bad on the chain, it definitely does not affect the Bitcoin to USD price, which is the major sensitivity for Bitcoin mining. And so, there is really nothing at stake in that merge mining. So, easy come, easy go.

• 9:58David Hoffman?

  Sure.

• 9:59Speaker 01

  So, you're doing something for free and you're not really getting anything from that.

• 10:03David Hoffman?

  Right. And so, you don't really have anything at risk, right?

• 10:06Speaker 01

  Absolutely.

• 10:06David Hoffman?

  So, how is Eigenlayer an evolution upon this? What's new to you?

• 10:11Speaker 01

  So, we just saw the merge and we're super happy. Ethereum did a great job, right? And with the merge, what? What we realized is proof of stake trust is much more flexible. And this goes to the root of why proof of stake is better is the ability to slash somebody when they are misbehaving.

• 10:30David Hoffman?

  Sure.

• 10:31Speaker 01

  So imagine there is a hundred billion dollar pool, which is underwriting Ethereum staking. Suppose you get only 5% of this to underwrite security on your protocol. What they do is they're actually taking their ETH stake worth that 5 billion into your protocol. What that means is now if they misbehave in your protocol and there is a concrete slashing contract, for example, if you double sign a block in your additional protocol, they will just get slashed, their ETH is getting slashed. This aligns perfectly the incentives. So from the staker's viewpoint, they are taking additional risk, the slashing risk, in return for additional yield, which is by validating this other chain, they may either

• 11:13Speaker 01

  get the new native token of that chain or the fees paid in that chain. There is an economy around it and it aligns the positive and the negative incentives, which is really what staking did, is to expand the scope of incentive design from purely positive incentives to positive and negative incentives, which is why the trust is more flexibly borrowed from Ethereum after proof of stake rather than before proof of stake.

• 11:38David Hoffman?

  Okay, so once again, I'm going to try and repeat this back just to make sure I understand and hopefully the listeners are following along. Merge mining didn't work because there wasn't really anything at risk here. If you misbehave on one chain, you didn't really lose anything on your Bitcoin chain. And so what this is different with proof of stake is this idea of slashing where I think what Eigenlayer is, is an additional commitment upon normal Ethereum proof of stake, saying, hey, I'm going to behave with proof of stake Ethereum because that's how the rules are, but I'm also going to behave with this other network and I'm going to use my Ether collateral as the collateral, as the stake. And so you are opting into additional slashing potential if you are lying on a different chain, a different consensus mechanism, a different thing, an oracle network, whatever.

• 12:22David Hoffman?

  And so you as a staker are opting into more responsibility and promising to not lie to an additional chain. And it's the slashing of proof of stake that is really the fundamental difference between merge mining of the Bitcoin world, proof of work world, and the Ethereum proof of stake world. Is this all right?

• 12:37Speaker 01

  Absolutely. The fact that slashing is programmable and Ethereum is a general-purpose programmable chain, in which right now we are seeing things like, how do you do fraud proofs for general-purpose execution engines? So the slashing layer now has become extremely powerful, both in terms of the trust that can be shared, but also in terms of the level of programmability in the slashing that we can build. So these two things converge into bringing something like Eigenlayer into reality.

• 13:04David Hoffman?

  And just the raw incentive is that maybe I just want to like sign up for every single service possible. I'll do an oracle, I'll do another proof-of-sake blockchain, and I'm just getting more and more rewards for everything I sign up for if I can like manage that as like a node operator.

• 13:19Speaker 01

  Yeah, so the two things you're doing are you're committing additional computational responsibilities, but also committing additional slashing risks, and you calculate the marginal value of these two. And if it is greater than the rewards that you're making out of that system, yes, please opt in. So one thing we've put a lot of thought into Eigenlayer is, how do we make it lightweight? How do we build services on top of Eigenlayer which do not tax the computational requirements of the stakeers? We're very much in alignment with the Ethereum ethos of, we need to have home stakeholders, solo stakeholders, as well as, you know, other liquid staking pools, so that a different category of people can participate in the staking ecosystem.

• 14:02Speaker 01

  And so we've made our services to be run even by things like home stakeholders, at least some category of services which can be yield-bearing. Even home stakeholders can opt in and obtain these yields.

• 14:15David Hoffman?

  Yeah, and I think one of the reasons why this project has really captured my attention lately, especially as I've learned about it more, is it really just, it fits some of the vision that we have for the crypto world. And since we are, once again, using the Infinite Gardens equipment, I'll use the Infinite Garden metaphor, where if we have more trust, then we can have, we can grow more things. And if we have more security across all these different layers of crypto, first, we can probably have fewer exploits, which is good, and we can create a garden where more and more trust comes about. And what I mean by this is there's more. Many new use cases that can now tap into Ethereum's like universe class level of trust and security because of proof of stake. And now we can extend these things to new things.

• 14:59David Hoffman?

  So what are some of these new things? What are these things out in the world of crypto that need more trust that don't have it?

• 15:05Speaker 01

  Yeah, so if you look at one of the immediate things we are actually building ourselves, we want this to be a platform that anybody can come and build, but you have to bootstrap the platform. So we're building the first service on top of Eigenlayer. We call it EigenDA. EigenDA is a data availability service run by each stakers, which can provide massive amounts of data availability throughput, so that the rollup era can come to fruition much earlier. So our vision is that there is going to be a massive number of rollups, which all can use the security from Ethereum. On top of it, if we can supply massive data availability, now these rollups write commitments, use Ethereum for censorship resistance, use Ethereum for settlement,

• 15:50Speaker 01

  but use Ethereum trust through Eigenlayer to do massive data throughputs. We are already talking about things like 15 megabytes per second throughput in our data availability layer. One example of what we think you can build on Eigenlayer. But there is a massive scope of other things that are coming up, and we expect a lot of others to participate in it. Another category of products that can be built on top of Eigenlayer is MEV management. Suppose you're a block proposer and you're participating in, say, MEV Boost. So one thing you're unable to do today is you cannot make credible commitments outside of what is the scope of Ethereum. So the way MEV Boost works is it shoehorns itself into the one slashing condition that you have,

• 16:33Speaker 01

  which is if you double sign a header, you can be penalized. So the builder sends you a header that you sign off, and you have no agency to add anything new on top of it. Instead, if you were restaked, you could opt into Eigenlayer and you could say, "Hey, I will include everything that the builder sends me, but there is always some extra space in the block because of 1559, because if all blocks are full all the time, then the price explodes." So there's always extra space. You can exert your proposer agency and include new transactions on top of the builder's block. Thus contributing to increasing the censorship resistance of Ethereum. One example of what you can do on Eigenlayer. You can start doing many other MEV management things. For example, you know, you talk a lot about DeFi.

• 17:18Speaker 01

  And one of the things that you can start doing is things like block proposers commit to doing collateral liquidations or refueling or taking atomic arbitrage and pass it back to the Uniswap and SushiSwap pools. You can start building very interesting services on top of Eigenlayer. Because the block proposers are staked. They have authority over what can be written into the block. They can even commit to things like threshold encryption. And when you send me like an encrypted transaction, I sign off that I'm going to include this. And I have to include the decrypted transaction for this. So there are a variety of things in the MEV space. But beyond that, you can think of bridges, you can run light client bridges off-chain. You can think of running new consensus protocols. One of the things that we don't have in Ethereum is fast finality yet.

• 18:03Speaker 01

  Right? And other protocols competing saying that, hey, I'm going to give you one second finality. Somebody can come and build a kind of a consensus protocol on Eigenlayer on which rollups can settle at like one second latency because you have a massive economic security underwriting the finality of this chain. So these are examples of what you can build on Eigenlayer.

• 18:21David Hoffman?

  And I think the gist here is a lot of these applications, whether it's another data availability layer, DeFi apps, MEV, all of these things, if you add more trust to these things, they become more expressive. They can do more things because we've commoditized trust in a new way and allowed that trust to work its way into parts of, you know, the Ethereum protocol at the layer one, at the DeFi apps and bridges and oracles. If we have trust, we can have expressivity in our applications. And if I really want to take this into like some cerebral stuff, when there is a lot of trust, there's a lot of culture. And so with trust, we can actually become the best versions of ourselves. And that is also true for like MEV, that's also true for DeFi apps. They become with more trust, they can become the best versions of themselves.

• 19:05David Hoffman?

  So that's what gets me really, really excited about this thing. I want to go back to the data availability layer really quick. With dank sharding, I think we get something like 1.3 megabytes a second of throughput at the Ethereum base layer, which is massively increased beyond like the kilobytes of data a second that we currently have. But 1.3 megabytes a second still is like slow. How many, how much data throughput could we get with an Eigenlayer data availability, a data availability layer? And what can be unlocked with that?

• 19:33Speaker 01

  So firstly, we are building on the shoulders of giants. We are actually just taking darksharding's core cryptographic architecture and just building and engineering around it. And the degrees of freedom you have when you're innovating at an agile layer built on top of a protocol is very different from the degrees of freedom you have at the core protocol. There are various sets of constraints, as well as various sets of guarantees which are stronger in the core protocol. So what we can do is we can start taking up these core innovations and build engineering around it. For example, our estimates say that you can get gigabytes per second of throughput on the same Ethereum data layer by basically using the ideas from darksharding,

• 20:18Speaker 01

  as well as building an engineering layer around it. The fact that this layer does not have to run a whole consensus protocol and is not intermingled with it and has degrees of freedom like nodes participating in it can have different fee dynamics, different exposure of IP addresses, all these different engineering freedoms. We can exploit all of it in actually building very high-performance data availability layers where each node does not need to have one gigabytes per second. That's not what we are implying. We do not want to go the Solana route where each node needs to take a lot of bandwidth. The way we think about scaling is the net throughput of the system divided by the node requirements. And if we can maximize that, that's our... And I think it's entirely possible,

• 21:01Speaker 01

  and this is already behind the vision of Don, Crowe, and Justin and Vitalik in designing things like darksharding, is that data availability is the one thing we know how to provision scalably. And so data availability is provisioned scalably and then people can write execution proofs through the system. So that's the same vision we share.

• 21:19David Hoffman?

  Sure. And I think something that Bankless listeners should really pay attention to and take note of is that we have, with danksharding, with the beacon chain, we're going to have 1.3 megabytes a second of data throughput. Sweet, that's like a huge, huge improvement. With this Eigenlayer idea, we can get to 1.3 gigabytes a second? Is that the number?

• 21:37Speaker 01

  That is a few-year goal. We are already at 15 megabytes per second today.

• 21:42David Hoffman?

  Right, okay, yeah.

• 21:43Speaker 01

  But we will get to, you know, a hundred to a thousand X of this.

• 21:47David Hoffman?

  Right. Yeah, but also Dank Charting is also like two years out as well.

• 21:49Speaker 01

  Yeah.

• 21:50David Hoffman?

  Yeah, so many things are two years out in this industry. But the the point I want to drive home is that there's not an additional security mechanism producing that 1.3 gigabytes a second of data. This is not like Celestia with a new blockchain and new security mechanism. This is the Ethereum stakers that are helping secure this this 1.3 gigabytes a second of data. And that means that this is something like really close to the metal of what Ethereum actually is. These are the Ethereum stakers doing this, securing this Ethereum data. And so it's a little bit like Rocketpool, for example, where like it is inside of the Ethereum app layer, helping secure Ethereum as a, as a, staking as a service system. And so it's an app that is about the protocol.

• 22:31David Hoffman?

  And so there's fewer external dependencies, making it something like really, really Ethereum native. And when we have like fewer external dependencies, that's probably how you can get 1.3 gigabytes of data a second. And I'll again remind listeners that 1.3 gigabytes of data a second is that much data of expressivity, of us doing cool things in crypto that is all trustless in this trustless world that we want to want to build out. Serim, this has been an awesome exploration into Eigenlayer. Where are you in the developmental roadmap? Like what's coming up next and how might people want to get involved?

• 23:04Speaker 01

  Yep. So right now we are at a phase where we are on internal devnets, where we are actually having all of these protocols run. We will be on a public testnet in like the next three months, three to four months. And like another three to four months after, hopefully we'll hit mainnet. So we have this timeline and the way you can participate with us is if you're a staker, you can come and like talk to us on how you can actually engage in additional productive yield. If you are a builder, there is a whole bunch of cool stuff you can build on top of Eigenlayer. If you want to build a rollup and want to consume massive data bandwidth, you want to build, you know, new VMs that can actually be very, very expressive or use EVM in a very parallelized manner, all of these things you can come and build on top of EigenTA.

• 23:49Speaker 01

  If you're a community member, we will start engagement forums where we can kind of brainstorm on ideas for how to take this forward and.

• 23:57David Hoffman?

  Beautiful. Well, Serim, thank you so much for joining me today.

• 23:59Speaker 01

  Thank you so much, David. This is really awesome.

• 24:01David Hoffman?

  Cheers.